Keeping up with the incredible variety of rule changes, success tactics, and competitor strategies as an Amazon seller is a full-time job in and of itself. To add to your list of items to keep up on, Amazon has just announced upcoming changes to their fee schedules in three critical areas.
Their goal each year is to take a look at the current fee structures and assess if they are an accurate reflection of the ever-changing dynamics within the industry. Amazon has just announced several changes to their referral fees, FBA fulfillment fees, and Long-Term Storage fees which will inevitably impact every seller, the question is how big of an impact will it have on yours!
Lower Referral Fees for Specific Categories
Amazon’s referral fee is the amount charged for each item sold on their 3rd party marketplace.
Beginning on February 19th, 2019 Amazon is implementing reductions in the referral fees for several categories. This is likely being done with the intent of expanding the products sellers are offering on the marketplace by creating more opportunity for greater margin.
Let’s highlight some of the most impactful changes in the reduction of fees:
For items in the furniture category (excluding mattresses), the fee percentage will decrease from 15% to 10% on any portion of your total sales price above $200. Example, for a couch priced at $350, you would be charged a 15% fee for the first $200 and 10% on the remaining $150. That’s a savings of $7.50 per unit. Imagine if you are selling 500 units per month of that product, that’s an extra $3,750 per month in profit with no additional effort!
Amazon is lowering the per item minimum fees from $1.00 to $.30 across all categories where fees apply. However, the minimum fee for Jewelry and watches have a more significant decrease, from $2.00 down to $.30.
For products $10 or under in the Baby (except baby apparel), Beauty, and Health & Personal Care categories, the referral fee will be reduced from 15% to 8%. This reduction does not apply to products with a total sales price that exceeds $10.00. We are very interested to see if Amazon is taking into account the listed price, or the purchase price in the $10 threshold. This could give a slight break to those that run external promotions that price their product under the $10 limit.
(Important to note that the total sales price includes the item price PLUS any shipping and gift wrap charges.)
This was new to us, but Amazon is offering potential referral fee reductions:
Temporary referral fee discounts of up to 70% for lowering your product price.
60% referral fee discount when a non-Prime ASIN is added to Seller Fulfilled Prime.
You can get full details on all referral fees here. For the Referral fees with discount opportunities, click here.
Annual Increase In FBA Fulfillment Fees
On par with previous years, Amazon has announced increases to their FBA fulfillment fees. If your products fall in the small standard or large standard-size category and are under 10 oz, then you get a free pass on fee increases (enjoy!) . All changes, are highlighted in the image below, including fulfillment cost changes.
You can get full details on all changes to fulfillment fees here.
Amazon Long-Term Storage Fee Change
One of the biggest changes Amazon has made is with their sneaky long-term storage fees. Effective February 15, 2019, Amazon will no longer charge long-term storage fees for items in storage 181 to 365 days. However, long-term storage fees will still apply for items in storage over a year, at a rate of $6.90 per cubic foot, billed the 15th of every month.
You can get full details on all changes to long-term storage fees here.
If you’ve had a hard time moving inventory or have been using Amazon as an inventory storage option for the last six months, this is a major break! If you’re struggling to rank, we’d be happy to talk through our 2019 ranking strategies. To get notified when we release our brand new 2019 Amazon ranking strategies, text “RANK2019” to 44222! If you’re using Amazon as a storage facility, there are many cheaper alternatives that we’d love to bring to your attention! Shoot us a text with “STORAGE” to 44222 and we will send you more information.
In all, it’s important to stay connected to sources that are keeping you abreast of the changes within the Amazon industry as they come fast and often.
Viral Launch’s Take On These Amazon Fee Changes
If you sell higher end furniture products this could be a game changer for your margin, however, it could also be a quick race to a new bottom now that sellers have more room for margin.
The interest in reducing fees in furniture is also likely a play to steal business away from sites like Wayfair and Walmart which have more traditional businesses in the furniture vertical. It will be interesting to see how this impacts those other retailers. In general this type of competition is great for sellers!
I absolutely expect to see sellers looking to game these new price thresholds by bundling items together to see an aggregated discount on the referral fee (not to mention the savings on shipping).
One trend we continue to see picking up steam among our Amazon customers selling $10m+/year is a move to Seller Fulfilled Prime through the use of 3rd Party Logistics (3PL) providers. This is a topic we will be covering more and more in the new year as we see it as an inevitable next step for many sellers. Seller Fulfilled Prime offers incredible flexibility, opportunity to fulfill to other marketplaces such as Walmart, and in a lot of cases reduced costs while still being able to support same day and two day Prime shipping.
Changes are inevitable and pervasive in the world of selling on Amazon. These fee changes should come as no real surprise as they have become a staple to the start of each new year. Amazon is simply passing along the general fees of operating their massive logistics empire, which makes complete sense. If these minor fulfilment fee increases are any cause for major concern, then you likely have bigger issues around your unit economics than anything.
Staying up to date on Amazon’s latest changes is imperative to making smart informed business decisions. Make sure to subscribe to our newsletter to make sure we can help you stay ahead of such a dynamic and ever changing market! And if you’re determined to make 2019 your best sales year yet, you can pre-register for our free event, “How to Rank in 2019” by texting “RANK2019” to 44222!
We know figuring out the cost to sell on Amazon can be overwhelming. It may even be what’s been holding you back. This breakdown of common Amazon selling costs will help new sellers get a basic understanding of the main costs you’ll incur and some of the other charges you may face. Because when it comes to managing your money, you never can be too informed.
There are countless reasons why people choose to start selling on Amazon. Some just want to supplement their income, while others are looking to become their own boss and build a full-time business. Part of Amazon’s incredible appeal is that it gives every seller the opportunity to make money in a highly profitable marketplace. Just look at the graph below to see how far Amazon’s yearly sales have come. You can imagine all the possibilities for profit!
While it’s free to list products on the Amazon marketplace, all sellers incur fees. Keeping up with Amazon’s varying seller fees is crucial for the success of your business. The difference in profit and loss can be very slim, especially when you’re just starting out. If you’re not making more than you’re spending on startup, selling fees and other costs, your business will quickly be in trouble.
We encourage you to understand the following Amazon selling plans and seller fees to be a successful, well-informed seller.
The Two Amazon Selling Plans
The first cost to sell on Amazon may come sooner for some. Amazon offers two types of account plans for third-party sellers: Individual and Professional.
Available for a $39.99 monthly subscription fee, the Professional selling plan is designed for those who plan on selling more than 40 items per month.
The Individual plan has no monthly fee and is intended for people planning on selling fewer than 40 items per month. Keep in mind that this isn’t the number of listings, but the number of actual products sold. This free plan requires very little setup, and all fees will be taken out of your final payout once your product sells.
On the other hand, inventory management, bulk uploads and gift wrap options aren’t offered to Individual sellers. Both selling plans allow you to list products in more than20 different product categories, with another 10 categories available only to Professional sellers who apply for and meet the requirements for them.
Choose the selling plan that’s best for you and your selling aspirations. Established eCommerce sellers with other online storefronts and driven individuals looking to start a venture that pulls in significant income are ideally suited for Professional selling plans. But if you’re just looking to get your feet wet, you can always set up a free Individual account and switch to a Professional account later.
The Main Amazon Selling Fees
Amazon selling fees will vary based upon the seller program you sign up for, the size and weight of your product, and the time of year. Because the cost to sell on Amazon is dependent upon your unique situation, this is often a source of confusion for new sellers.
That being said, there are 5 main types of fees for third-party sellers who self-fulfill orders that you need to know about:
Monthly subscription fee
Variable closing fees
Individual sellers are held responsible for per-item fees as well as referral fees and any applicable variable closing fees. Pro merchant sellers will incur referral fees and variable closing fees when applicable.
Monthly Subscription Fees
As we previously mentioned, monthly subscription fees only apply to Professional selling accounts. Warranting any special circumstance, you will first be charged during the registration process.
Similarly, only Individual sellers will be charged a $0.99 per-item item fee for each product sold.
All items sold by Individuals will face shipping and handling fees. When you ship an order, you’ll receive a standardized shipping credit from Amazon. Shipping credits for Individual sellers will vary depending on the product category and the shipping method selected by the buyer.
Keep in mind you must ship the order even if the shipping credit received is less than your total shipping cost. You may need to adjust your shipping and/or product price to offset the difference.
Only media products sold by professionals will incur shipping costs and use the same fixed rates. Media products, commonly called BMVD, include the following:
Video Game Consoles
Understanding shipping and handling fees will help make sure you don’t spend most (or even all of) your profit simply getting the product to the buyer.
Another main cost to sell on Amazon is a referral fee, which all sellers must pay for each item sold. Some categories are set up with a per-item minimum referral fee, so you’ll either pay the referral fee or the per-item minimum fee, whichever one is greater. Take a look at Amazon’s fee schedule here.
Most categories have a 15% referral fee, but it can go as low as 6% (personal computers) to a high of 45% (Amazon device accessories). Minimum referral fees are either $1 or $2, with jewelry and watch categories having the higher cost.
The referral fee for media products is based upon the item price and doesn’t include shipping and handling. All other referral fees are calculated using the total price charged to the customer with shipping and handling included.
Make sure to research your referral fees as this could impact which category you choose to sell in!
How much money do you really need to sell on Amazon?
Check out this video for a closer inspection with more detailed cost examples. Don’t forget to like, comment or subscribe:
Variable Closing Fees
Both Individual and Pro sellers have to pay a variable closing fee for each media/BMVD item sold. A flat rate of $1.80 will be added on top of your referral fee.
For third-party sellers who don’t self fulfill orders, the cost to sell on Amazon will also include FBA fees. Being a part of the Fulfillment by Amazon program means all of your orders will be picked, packed and shipped by Amazon instead of by you or your business. They’ll also provide basic customer service for your products.
FBA fees are paid in addition to all account, referral and closing fees that you meet the criteria for.
There are 2 primary types of FBA fees:
Fulfillment Fees: Charged per unit and include picking and packing your orders along with shipping and handling, basic customer service and return processing unless your product is in a category with free returns
Monthly Storage: Priced per cubic foot and is the cost of storing units in Amazon’s fulfillment centers
Order fulfillment fees are based upon the overall size and weight of your product, which is separated into 2 tiers: standard and oversize. This includes all inner and outer packaging materials like shoe boxes, blister packs and other types of retail packaging.
Monthly storage fees will depend on the product size and calendar month. You’ll pay based upon your daily average volume. Note that prices go up significantly around the holidays, October thru December. See the chart below for a full breakdown. You can find specific FBA fee examples here.
It’s important to take these standard FBA costs into consideration as they may impact your business plan.
There are many benefits of FBA, including Prime eligibility and being eligible for Free Super Saver Shipping on orders over $25. Both will lead to better product placement on Amazon. So while there are extra costs involved with FBA, for many sellers, the increased product visibility and less hands-on inventory management make it worthwhile. Ultimately, this is up to you.
You may face additional FBA fees on top of the 2 primary fees. Some are optional and others only apply to certain sellers and situations. They include:
Inventory Removal: Charged per item removed if you pull inventory or remove unsold stock
Return Processing: Charged to products with free customer returns and will be the same amount as fulfillment fees
Repackaging: Charged to repackage eligible items following a return in order for resale
Labeling Service: Charged per item when you have Amazon apply barcodes to your products for you
Long Term Storage: Charged if inventory sits unsold for 6 months to 1 year
FBA Prep Service: Charged per unit to items you have Amazon package and prep for fulfillment
Unplanned Prep Service: Charged if a product isn’t packaged or prepared for storage to Amazon’s standards
Multi-Channel Fulfillment: Charged when you have Amazon fill orders for any products you sell on other eCommerce websites
Inventory Placement: Charged when you send all of your inventory to one fulfillment center and Amazon distributes it to other fulfillment centers for you
These aren’t all of the additional FBA fees you could incur. Be aware there may be extra costs involved. Pay attention to your monthly invoice to see what you’re being charged for! You can typically rectify the situation to avoid being charged in the future.
Other Costs to Consider
While fees will be a considerable part of your total costs, don’t forget there are initial startup and other optional charges to consider, especially for private label sellers, that can help you get ahead of the game.
When it comes down to it, your main cost to sell on Amazon depends upon the product you choose as fulfillment and shipping fees will vary from there. You need to make smart product choices, but with so many items out there, how are you supposed to choose? And how do you even know if it’ll be profitable?
Sure, you can search manually, but automated product finders will streamline and simplify the process. The Viral Launch Product Discovery tool can help you quickly find high-potential products that meet your unique wants and needs. After inputting criteria like your desired monthly sales, selling price, review count, and monthly revenue, it provides you with a comprehensive list of products, keywords, brands and categories that match your search parameters.
Sourcing and Manufacturing
When ordering samples, keep in mind that you’ll likely be paying a much higher price for manufacturing and air shipment. This can usually be negotiated into the cost of the initial order, but it’s an additional expense to be prepared for. Samples typically cost $100-200 with shipping, but this will depend on the size, weight, and type of product.
Once you have your first product figured out, you need to place a larger order. During this phase, you’ll also want to determine packaging options from the supplier and obtain a UPC for the product to get an FNSKU from Amazon. You can purchase a new barcode from GS1 as a GS1 Barcode can typically be linked to an FNSKU.
Since shoppers can’t see your product in person like they would at a store, your listing copy and photos need to convey all pertinent information about your product. A great listing gives you a competitive edge and helps persuade a shopper into purchasing.
At its core Amazon is a search engine, and you need to optimize written content to work within this search engine. Relevant, high-volume keywords bring shoppers to your listing. Using a Keyword Research tool helps you find valuable keywords with high search volumes or opportunity, which will increase the ranking of your listing and allow it to be seen by more shoppers.
Putting your listing copy and photos in the hands of experts like those at Viral Launch not only minimizes the work for you, it ensures your listing will be optimized in a way that maximizes your ranking and purchasing potential.
Marketing and Giveaways
Amazon is a crowded marketplace that’s all-too easy to get lost in. When shoppers visit your category, you want to be the first product they see. Organic sales and keyword ranking are crucial, and marketing and giveaways can help accomplish this.
Giveaways, called Launches at Viral Launch, are targeted giveaways to project your listing to Page 1 for a major keyword, with the goal of increasing your organic sales. We typically recommend running a giveaway for a period of 7-10 days. This period of time is long enough for Amazon to recognize the sales but short enough to limit the number of products being given away.
PPC, short for for Pay Per Click, is another way to drive visibility to your Amazon listing through paying for sponsored ad content. Set a daily budget and bid on a click price. Amazon will post your listing as an ad for targeted keywords. You won’t pay anything unless the ad is clicked on by a shopper.
These optional, though very beneficial, costs can help you in the long run and should be taken into consideration as you develop and grow your Amazon business.
New sellers need to be aware of the following costs:
Purchasing and/or manufacturing products
Packaging, shipping and handling
Other business fees
Although these may not be applicable to all sellers, it’s important to know they exist and could come into play in the future.
Amazon seller fees hinge upon your account plan, product, product category and type of fulfillment. Barring any special circumstance, sellers are paid every 2 weeks. Make sure your profit margin can cover your expenses—doing so right from the start will boost your ability to become a successful Amazon seller.
Subscribe to the blog for more advice on how to start your Amazon FBA business!