In a previous article, we discussed what Fulfilment by Amazon was, and the benefits it can bring to businesses. FBA can be a useful tool for many sellers but the fees can sting. It is useful to see if FBA provides a good return on investment or if it is just driving up the overall ordering cost for inventory in your business. In this article, we will uncover the costs of hosting your inventory stock with Amazon.
What fees do businesses need to pay?
Amazon implements a variety of fees if you want to use their FBA service. The first is the fulfilment fee. This is the charge incurred for Amazon to pick out the item from storage, pack it and send the item to the buyer. The next is the seller fee. Each time a seller makes a sale on Amazon, they will be charged for each item they sell or pay a flat monthly rate. Lastly, if a seller wants to use the storage warehouse that is part of the FBA service, then they need to pay a fee to store their inventory stock there.
Moreover, the seller fees vary even more depending on the classification of the seller. They can have a personal or professional account, the main differentiation between the two is that personal sellers pay 99 cents for every item that they sell. A professional seller is exempt from this per-item fee but they do have to pay a flat monthly rate of $40 dollars to sell with Amazon, and personal sellers do not.
Depending on the size of the business and how many items the seller plans to turn over on Amazon will dictate your account status. So, if you predict more than 40 individual Amazon sales, then it makes sense to get a professional account.
The fees do not stop there. There is also a referral fee and another charge called a variable closing fee. Referral fees are charged as a portion of the item’s sale price. A percentage is taken out and varies depending on the category it is classified into. For instance, if an item is listed in the mobile phone category, Amazon will charge an 8% referral fee percentage. If an item is listed under the kitchen category, Amazon will slice off 15% of the selling price, for the referral fee cut.
Even if the item isn’t very expensive, Amazon has still found a way to ensure that they get their portion. Minimum referral fees are set, usually to one dollar. Depending on which fee is higher, Amazon will select the more lucrative fee and charge that.
How does Amazon manage inventory stock?
Amazon also has inventory management tactics to assess their storage every six months. When they go through their storage, they identify items that have been there for more than six months. When this happens, they items gets sent to long-term storage. There are varying charges for storage fees depending on how long the item has been housed there; this is an additional charge to your normal monthly storage fee with FBA. Hence, fast-moving items are cheaper for companies to store with Amazon.
There are a lot of benefits to the FBA service, but sellers need to be aware of the fees and take it into consideration when assessing its viability.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.