Approximately 197 million people shop on Amazon every month. With the constant flow of traffic, more and more retailers choose to sign on as Amazon Sellers.
It is pretty easy to get started selling on Amazon: you create an account, choose a membership plan, then start listing and selling your products. However, it is easy to overlook some of the Amazon seller fees that apply and not consider how they impact your profit margin
Besides the two selling plans Amazon offers, there are quite a few additional selling fees to be aware of when starting out.
ONE: The Amazon Selling Plans
Just about on any marketplace page on Amazon, one of the first things you see is this call-to-action:
Amazon actually offers two selling plans for you to choose from: Professional and Individual. What you choose depends on your expected sales volume. For example, if you think you’ll sell 100 or more items a month, then the Professional selling plan is the better deal. This plan is a recurring subscription and costs $39.99 a month.
The Individual selling plan caters to smaller retailers that sell less than 40 items a month. It costs $0.99 per item sold. There isn’t a monthly fee with this plan, so it’s a good place to start if you’re new to ecommerce and not yet sure of your sales volume.
Both of these plans include additional selling fees that vary depending on the types of products you sell. We’ll get into what these fees are in a minute.
Comparing these two plans side by side, here’s a summary of what each one offers:
Note that the Professional plan gives you access to reports and inventory tracking. Since you’re managing large, multiple bulk orders every month, it’s helpful to have insights into what types of products customers are buying and your inventory levels.
Because selling on the Professional plan means you are probably shipping a lot of product each month, Amazon gives you more access to features that help you track and optimize your sales and promotional strategies. For example, the Professional plan gets you access to the Buy Box feature. This is the box that appears when customers add products to their cart:
You compete with other retailers selling the same product in new condition. If you stand out to customers, then they will choose your product and increase your sales. You don’t have access to the Buy Box feature with the Individual plan.
Keep in mind that if you choose the Professional plan, you pay the monthly subscription fee regardless of whether or not you sell anything in a given month. So if you’re a business that thrives on seasonal sales, do a cost analysis to decide whether the Individual or Professional plan is right for you.
Run the numbers based on your historical monthly sales to figure out which plan is the most cost-effective and gives you the features you need.
If you aren’t a seasonal business and start off with the Individual plan to test the waters, you can switch to the Professional plan if you start selling more than 40 items a month.
TWO: Fulfillment by Amazon – FBA
The Fulfillment by Amazon program was first launched in 2006. Starting then, sellers no longer had to worry about the logistics and cost of storing and shipping their inventory. Sellers were able to leverage the experience and network of a large marketplace to help them manage this one aspect of their business.
For large retailers shipping thousands of items across the U.S. and globally, it makes sense to use FBA to save on storage and fulfillment costs for their products. For a fee, Amazon will store, pack, and ship products on your company’s behalf. The cost of this feature varies based on factors like product weight and quantity.
With the advent of Amazon Prime 2-day free shipping, being able to send customers their products as quickly as possible is incredibly important and valuable to your business. It allows you to meet customer expectations, which is huge considering most of them say their decision to buy is based on how quickly products can ship.
Here’s a summary of FBA seller fees:
Additional Fulfillment By Amazon Options
If you are like the 75% of Amazon sellers that also sell on other platforms — like you’re own ecommerce site — you might qualify to use Multi-Channel Fulfillment. Regardless of where you sell your products online, Amazon will store and ship your products for you. Here’s how much it costs to send standard-size products via standard, expedited, and priority shipping:
If you sell small products like jewelry or certain clothing, Amazon also offers an FBA Small and Light option. This allows you to save even more on shipping since it costs less to store, pack, and ship these items. To access this option, you have to sell qualifying products and enroll.
Here’s a summary of these FBA seller fees:
FBA Comparison Calculator
To figure out whether FBA is right for you, Amazon has an FBA Revenue Calculator to help you compare how much it costs you to fulfill your orders on your own vs. Amazon.
To get started, enter one of the 12 million products Amazon sells:
Then plug in fulfillment details and calculate the difference:
Part of the FBA fee also pays for Amazon to manage returns and customer support for you. This feature offers considerable cost- and time-savings for you since you don’t have to hire a larger support team or manage the cost of receiving returns and sending replacements.
Non-FBA Shipping Costs
Shipping costs vary depending on which base plan you choose. For example, if you choose to ship products on your own without FBA, regular Amazon shipping rates apply to books, music, videos, DVDs, software, and video games if you’re on the Professional plan.
If you’re on the Individual plan, Amazon shipping rates apply to all products and vary depending on the category. Based on which shipping option shoppers select at checkout, Amazon charges that back to you.
In the shipping fee summary above, the first several rows pertain to sellers on the Professional plan while the last row pertains to sellers on the Individual plan. Again, the Professional plan offers more perks and flexibility than the Individual plan.
THREE: Amazon Advertising fees
With over 5 million marketplace sellers on Amazon, it’s possible to get drowned out by all of the competition for shoppers’ attention. One way to stand out and get noticed by more customers is to advertise using Amazon Sponsored Ads. With Amazon, you don’t have to leave the Amazon marketplace to drive traffic to your product pages. Amazon offers advertising services within its marketplace.
There are three main types of ads to choose from:
- Sponsored Products
- Sponsored Brands
These advertising options are only available to you if you’re on the Professional plan.
Amazon Sponsored Products
You use this ad format to promote specific products. If you want to sell off excess inventory or boost sales for a new product, use Sponsored Products ads, so these products show up in search results as shoppers browse. The ‘Sponsored’ tag appears at the top of Sponsored Products listings.
These ads are similar to the pay-per-click (PPC) ads you see on Google — you only pay when shoppers click on your ads.
What’s great about Sponsored Products ads is you control the cost. You set the bid amount per click and can decide to increase it to attract more traffic or lower it to save money.
Amazon Sponsored Brands
Use Sponsored Brands ads if you’re new to Amazon and want to increase your brand exposure. Like Sponsored Products, Sponsored Brands ads also appear in search results, but the difference is:
- Your brand name is visible
- Three of your products are displayed
- You get to include a custom headline
When shoppers click on these types of ads, they’re taken to your product page where they can browse and find more items.
Ads are pay per click – you set your ad budget depending on how much Ad exposure you want.
Most customers like to research before they buy something, so make it easy for them to find the information they need. One way to do that is with Amazon Stores ads. This ad format lets you promote products using a custom Amazon storefront:
This option is great because creating a Store is free when you’re a vendor.
To get started, create multiple pages using Amazon’s drag-and-drop tool. Once complete, share your custom Amazon URL in all of your advertising campaigns — both on and off of Amazon. Use the Stores analytics feature to review traffic to your storefront, products clicked, sales made, and more.
Additional Amazon Sponsored Ad Types
There are an additional types of ads to choose from:
- Display ads – Advertise on or off of Amazon and drive traffic back to your product pages.
- Custom ads – Meant to engage shoppers with innovative ads. Price depends on a consultation with an ad consultant.
- Video ads – Take advantage of the power and influence of video to spread your brand message.
- Amazon DSP – Short for ‘demand-side platform’ and lets you buy ad placement on and off of Amazon.
Pricing for all ad types — except custom ads — depends on the placement and formats you choose.
With so many options and flexible budgets, experiment with the different ad types to find the ones that help you increase exposure and sales. It is advisable to split your ad budget across the types you choose until you find which ones are the best fit for your product types and audience.
FOUR: Amazon Referral fees
You have to pay a referral fee for every product you sell on the Amazon marketplace. This Amazon seller fee is for the customer traffic that Amazon drives to your product and the traffic being driven to your product pages. The referral fee varies by product category and ranges from 6% – 96% of the sale price.
Amazon last adjusted Referral fees in February 2019:
Besides the referral fee, you also have to pay a variable closing fee of $1.80 for any products that are part of the media category. These products include:
- Software and computers
- Video games
- Video game consoles
- Video game accessories
You have to pay the variable closing fee regardless of which selling plan you’re on – Professional or Individual.
LASTLY: Review Amazon Fees To Estimate Your Bottom Line
There are a lot of Amazon seller fees to be aware of. This article gives you some of the fees that you can expect when selling on Amazon. Amazon gives you great flexibility in creating an experience that’s unique to you and engaging for your customers.
From FBA referral fees to Amazon Sponsored Ad advertising fees, you can choose which features to use and which plan to start with. The more you know about Amazon seller fees, the less likely there are to be surprises that negatively affect your bottom line!
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Philip A Covington