The Complete Guide to Amazon FBA Fees in 2021

By Laser Sight Digital
| January 27, 2021
| Amazon

When it comes to fulfillment, many brands will choose Fulfillment by Amazon (FBA) because it’s fast and easy–Amazon does most of the work. They’ll store, pick, pack, and ship your items from their own fulfillment centers. They’ll even handle the customer service and returns for you. As a new business or even a mature business, that is a task that is not only time-consuming but often costly.

There’s also another great benefit of using the FBA model. FBA merchants (those who sell on Amazon using FBA) are automatically enrolled in Amazon Prime. This is a huge advantage because when customers shop on your page, they’ll see the “Prime” badge and Amazon will ship out your product with free two-day shipping. Considering that there are more than 100 million Prime users, it will only benefit your Amazon business to be enrolled in Amazon Prime.

Amazon always strives to provide the best customer experience possible and to make money while doing so. Therefore, Merchants using FBA must pay Amazon FBA fees. By planning ahead and understanding how these fees affect your margins, you can protect your profit while using FBA.

The Different Types Of FBA Fees

You will incur some of the following fees:

Fulfillment Fees
Referral Fees
Monthly Inventory Storage Fees
Long-Term Storage Fees
Removal Fees
Disposal Fees

The three unavoidable fees are fulfillment fees, monthly inventory storage fees, and referral fees. You will have to consider these three FBA fees as the cost of doing business on Amazon while using the FBA Model, just as if you were paying the electricity bill for your house. However, long-term storage fees, removal fees, and disposal fees can be minimized or avoided entirely if you plan ahead.

Required FBA Fees

Referral Fees

These fees are charged to every seller, whether they choose FBA or FBM. It is simply the cost of selling your product on Amazon using Seller Central (3P Model). Generally, your referral fee will be 15% of the sales price, with the exception of a few categories that have higher referral fees (like Jewelry).

Fulfillment Fees

Fulfillment fees are the price you pay for the convenience and speed of allowing Amazon to pick, fill and ship your product. These fees are calculated based on the size of your item.

Standard-size and oversize items meet the following criteria:

Size is calculated based on a fully-packaged item. Anything larger than the standard sizes above is considered over-sized and is categorized with the four sizes (small, medium, large, special).

Monthly Inventory Storage Fee

Amazon charges a monthly inventory storage fee to cover the cost of storing your item in their fulfillment center (FC). These fees are based on the daily average volume of space your inventory occupies. This means more units in storage will result in higher fees, and conversely, fewer units result in lower fees. If your sales remain steady, you should be able to forecast this number from month to month.

Note: Storage fees are not equal all the time. From October to December, you’ll pay $2.40 per cubic foot for standard-size items and $1.20 per cubic foot for oversized items. From January to September, you’ll pay $0.75 per cubic foot for standard-size items and $0.48 per cubic foot for oversized items.

Avoidable FBA Fees

Long-Term Storage Fees

These fees will only go into effect if your product is stored in Amazon’s FC for more than 365 days. You can see your inventory for each ASIN by how long it has been in a fulfillment facility:

0 to 90 days
91 to 180 days
181 to 270 days
271 to 365 days
More than 365 days

Note: you’ll pay an additional $6.90 per cubic foot for items that are in a fulfillment center for more than 365 days. The inventory cleanup date is the 15th of every month, and the minimum long-term storage fee is $0.15 per unit.

For the highest efficiency, you should be forecasting inventory every three to five months. If you do find yourself in danger of paying long-term storage fees, use promotions and sales to help sell more products.

Removal Fees

If your inventory still isn’t moving, you can remove fees by having the item shipped back to you. This fee will cover the cost of picking, packing, and shipping your items. These are usually the reasons why you would choose to remove an item:

There’s a quality issue
The item has been updated with new branding or features
You no longer want to sell that item
You no longer want to have items fulfilled by Amazon
An item isn’t selling and the long-term storage fees are adding up

A removal order typically takes about two weeks, but it can take up to a month during the holiday season. However, if you forecast and plan ahead, you shouldn’t have to worry about removal orders during Q4.

Disposal Fee

We do not recommend that you pay a disposal fee and have Amazon destroy your product for you. In fact, you should avoid it at all costs. Doing this removes control of your brand, and you have no way of knowing what happens to your product after it’s marked for disposal.

Monitor Refunds And Returns

It’s important to keep a close eye on your returns. If a customer returns a product, they’ll always get a refund. And ideally, the product will be sent back to Amazon, returned to your inventory, and resold. While typical, it doesn’t always happen that way. In that case, Amazon won’t notify you of the returned product, and it’s up to the seller to ensure that you’re either credited for the sale or that the product was returned to your inventory.

We recommend reconciling your returns on a monthly basis to ensure your returns are in fact return, or that Amazon reimburses you. You’ll catch any problems early on if you reconcile your refunds regularly. Unfortunately, no one is going to have your back on this, so it’s your responsibility to make sure you get the refunds you are owed.

Is FBA Worth It?

FBA has many positives, but it does come with costs – which we’ve laid out for you above. Each Amazon Seller has to decide for themselves whether FBA is worth it. Ultimately, you should have a good understanding of your COGS and margins and calculate the potential FBA fees you will end up paying per unit sold.

Know the size and weight of your product
Calculate fees for that product before you even decide to sell
Consider your own costs, including manufacturing, shipping to Amazon, and FBA fees
Understand how promotions and advertising affect your bottom line

Once you can account for all the fees and costs, you may find that you’ll need to adjust your sales price to maintain your profit margin. To avoid problems down the road, figure it out before you start selling and be proactive about understanding your costs.

If you need help figuring out FBA fees, the Amazon experts at Laser Sight Digital are here for you.

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