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.
Table of Contents
The Different Types Of FBA 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
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
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
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
Disposal Fee
Monitor Refunds And Returns
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
