For anyone considering launching an Amazon selling venture, one of the most critical questions is: How much does it cost to sell on Amazon? The cost to sell on Amazon can vary significantly depending on a range of factors, such as the product category, selling plan, shipping and fulfillment choices, and whether you’re selling as an Individual or Professional. This comprehensive guide breaks down every cost component, helping you make informed decisions when selling on Amazon. Let’s dive into a detailed overview of Amazon’s fees, starting with different selling plans and extending to optional costs like Amazon Ads.
Selling on Amazon: The Basics
Before we get into specific costs, it’s important to understand that selling on Amazon starts with choosing a selling plan. Amazon offers two primary selling plans: the Individual Plan and the Professional Selling Plan.
- Individual Plan: This plan is best suited for sellers who plan on selling fewer than 40 items per month. Instead of a monthly subscription fee, there is a fee per item sold—a $0.99 fee per item sold. This plan does not offer access to advanced selling tools.
- Professional Selling Plan: For those who expect to sell more than 40 items monthly, the Professional Plan is the better option. It costs $39.99 per month, plus additional fees depending on product sales. This plan gives access to tools such as bulk listing, Amazon Advertising, and premium reporting.
Choosing between these plans depends on your expected sales volume and your long-term strategy.
Understanding Amazon Seller Fees
Amazon charges a variety of fees for sellers to list, store, and sell products. Let’s explore these in more detail.
1. Referral Fees
A significant part of the cost to sell on Amazon is the referral fee. Amazon takes a percentage of each sale as a referral fee, which typically ranges between 6% to 45% of the item price, depending on the product category. For most products, the referral fee percentage falls between 8% and 15%.
- Some categories, such as Consumer Electronics, have a lower referral fee (around 8%), while categories like Amazon Device Accessories can attract higher referral fees.
- Additionally, there is a minimum referral fee that Amazon charges, which is generally around $0.30 per item.
2. Fulfillment Fees
Fulfillment fees depend on whether you choose Fulfillment by Amazon (FBA) or handle fulfillment yourself (Fulfilled by Merchant, FBM). Each option has different implications for costs.
- Fulfillment by Amazon (FBA): With FBA, you use Amazon’s fulfillment network to store, pack, and ship your items. The fulfillment fee depends on the size and weight of the product. For example, the cost to fulfill standard-sized items starts at $3.22 per unit for products up to 0.5 lbs. FBA also includes monthly storage fees, which depend on the season.
- Monthly storage fees: From January to September, it costs $0.75 per cubic foot, and from October to December, the cost increases to $2.40 per cubic foot to account for the busy holiday season.
- Fulfilled by Merchant (FBM): If you choose to handle your fulfillment, you are responsible for shipping costs, which can vary based on your choice of shipping rate, carrier, and shipping speed. While FBM might save on fulfillment fees, you’ll need to consider shipping software and other logistics expenses.
3. Monthly Subscription Fees
If you’re on the Professional Plan, there’s a $39.99 monthly subscription fee. This is a fixed cost, irrespective of how many units you sell. For individual sellers, there is no subscription fee, but they pay $0.99 per item sold.
4. Storage Fees
Amazon charges inventory storage fees based on the volume of space occupied by your products in Amazon’s warehouses. There are two types of storage fees:
- Monthly Inventory Storage Fee: As mentioned earlier, this is a per-cubic-foot fee based on how much warehouse space your inventory occupies.
- Long-Term Storage Fees: For items that remain unsold for more than 365 days, a $0.15 per-unit long-term storage fee is applied. This hefty storage fee is intended to motivate sellers to maintain healthy inventory levels.
5. Shipping Costs
If you’re using FBA, your products need to be shipped to Amazon’s fulfillment centers. You will be responsible for covering the shipping costs to these centers, though Amazon offers discounted rates through partnered carriers. Sellers using FBM must also consider shipping expenses for getting items directly to the customer.
- Choosing affordable 2-day shipping or even 1-day shipping can impact your costs significantly, and it’s crucial to factor in the money on shipping costs when pricing your products.
6. Closing Fees and Other Costs
In some product categories, such as Media (including books, DVDs, music), Amazon charges a closing fee in addition to the referral fee. This variable closing fee is usually around $1.80 per unit.
- Refund Administration Fee: When a customer returns an item, Amazon provides a refund and charges a refund administration fee equivalent to 20% of the referral fee.
- Optional Programs and Services: Sellers can also opt for additional services like Amazon PPC advertising, Amazon Ads, or premium customer service, which incur extra costs but can boost visibility and sales.
Optional Programs and Costs
1. Amazon Advertising and PPC Costs
Advertising is a crucial aspect of gaining visibility in the competitive Amazon marketplace. Amazon provides Pay-Per-Click (PPC) advertising solutions where you pay a fee each time a potential customer clicks on your ad. The cost of PPC depends on how competitive your product’s keywords are. Many sellers allocate at least $300 – $500 monthly to advertising as they build momentum for their listings.
- Amazon Ads can also involve Amazon Sponsored Products or Sponsored Brands.
- Advertising costs vary, but understanding your PPC advertising can help you optimize your campaigns and reduce costs in the long run.
2. Labeling Fees
If you opt for FBA, Amazon requires products to have a specific barcode to ensure proper tracking. If your products don’t come labeled, Amazon can do it for you at a cost of $0.30 per unit. This fee per label is manageable but adds up quickly if you have thousands of units in inventory.
3. Inventory Removal Fees
To avoid long-term storage fees, you may want to remove slow-moving inventory. Amazon charges removal fees to return or dispose of your inventory, typically $0.50 per item for standard items. Proper inventory management and monitoring of sales trends can help minimize these removal fees.
4. Multichannel Fulfillment Fees
If you are a multichannel seller and want Amazon to fulfill orders placed on other platforms like Wix eCommerce or your own website, Amazon offers multichannel fulfillment services. These fees differ slightly from standard FBA fees but can be a convenient solution for managing all your inventory in one place.
Cost Example for a Selling Scenario
To better illustrate the cost structure, let’s look at an example of selling 100 units of a standard product priced at $20 each using the Professional Selling Plan and FBA:
- Selling Price: $20 x 100 = $2000
- Referral Fees (15%): 15% x $2000 = $300
- Fulfillment Fees (Standard-Sized Item): Assume $3.50 per item = $350
- Monthly Storage Fee: Assume 2 cubic feet at $0.75/cubic foot = $1.50
- Monthly Subscription Fee: $39.99
Total Costs: $300 (referral) + $350 (fulfillment) + $1.50 (storage) + $39.99 (subscription) = $691.49
Net Revenue: $2000 – $691.49 = $1308.51
This example highlights how various fees stack up, emphasizing the need to factor in all relevant fees before pricing your products.
Ways to Lower Your Selling Costs on Amazon
While the costs may seem overwhelming at first, there are ways to optimize and reduce expenses:
- Source Products with Low Fulfillment Costs: Choose products that are small and lightweight to minimize fulfillment fees.
- Optimize Inventory: Avoid long-term storage fees by keeping a close watch on inventory turnover. Tools like Jungle Scout can help estimate demand and manage inventory efficiently.
- Use Amazon’s Shipping Partners: If you’re using FBA, leveraging Amazon’s shipping discounts can save money on shipping costs to fulfillment centers.
- Limit Refunds: Providing accurate product descriptions and high-quality images can reduce the likelihood of returns, helping you avoid refund administration fees.
Conclusion
The question, how much does it cost to sell on Amazon, is complex, as there are multiple layers of fees to consider—from referral fees and fulfillment fees to optional costs like advertising. Your total costs depend on your selling strategy, product category, and whether you choose FBA or FBM. Understanding these costs helps you make informed decisions, manage your budget effectively, and maximize profit.
While the costs can add up, Amazon offers a huge, ever-growing marketplace with millions of potential customers. Sellers who strategically manage inventory, leverage cost-saving opportunities, and utilize Amazon’s resources effectively can thrive and achieve profitable margins.
Also Read: Where Can I Sell My Gaming Laptop?
FAQs
The main costs include referral fees, fulfillment fees, monthly subscription fees, and storage fees. There are also optional costs for advertising and additional services.
The referral fee typically ranges from 6% to 15% of the sales price, depending on the product category.
FBM can be more cost-effective for sellers who have efficient logistics, while FBA provides convenience but adds storage and fulfillment costs.
The monthly storage fee is $0.75 per cubic foot from January to September and $2.40 per cubic foot from October to December.
Fees like labeling fees, removal fees, and refund administration fees are often overlooked. It’s important to account for these when calculating potential profit margins.
