A lot of people I know that selling on Amazon do not know how much profit they are working for, because they rushed to get their online store set up and did know that Amazon was going to charge them for many kinds of fees.
Seller fees is the first and the most important cost you should know, because Amazon takes a cut from every unit of products you sell on their platform. The more you sell, the more you are going to pay them. So it is very important for you to determine price properly.
Except the seller fees, there are still many other fees that might get you confused. To help you with the calculating, we will give you a step by step guide in this article. By the end of the article, you will know how much you are going to give to Amazon, and how much profit you will be working for.
1. Amazon Selling Fees
Amazon charges seller for the selling fees according to the various categories, they will be taking a minimum referral fee or a fee equals to certain percentages of the products’ price (depends on which is more).
You can check on the chart below that given by Amazon for the exact fees you will be charged for your products. And do remember that these values may change from time to time, you can get an update from here.
Let’s say that you sold a kitchen knife for $40 which is in the kitchen category , you would be charged a 15% referral fee which is $6, because 15% of $40 is more than the $1 minimum referral fee. But if you sold a kitchen knife for $2, you will be charged a $1 minimum referral fee, because the minimum referral fee is more than 15% of $3 ($0.3).
But there is something you should know, the minimum referral fee does not apply to all categories. Some categories such as: game console and video games, only charge you for a percentage of the sale price.
Usually, Amazon only charge you for a percentage of your sale price, unless your products’ prices under $6 or $5.
2. Amazon Fulfillment Fees
I would recommend you to use Fulfillment by Amazon, if you are going to start your business on Amazon. Yes, it is going to cost you more, but it is going to bring you more as well. You can outsource the shipping and customer service to Amazon, and focus on expanding your business.
When you are using Amazon FBA service, Amazon will remove the FBA fee from your sales every 2 weeks.
Here, we are calculating FBA fee according to the rates in United States. If you are selling outside U.S., you should go check on the rates on the Amazon websites in other countries.
Are you selling media items or not?
Media items refers to books, music, videos, video games and game consoles, DVDs, and software and computer games. If your products are not mentioned above, then your produces are mot media items.
If your product is weights 20 lbs or under , and its size is not over 18’’ in length, 14” on median side, and 8” on its shortest side, it will be considered as standard size. If products exceed those dimensions, then it will be considered as oversize.
Small Stander or Large Stander?
You also need to find you if your product is small stander or large stander. Here is the chart will help you with that.
Products that exceed the small standard row of any measurements will be considered as large standard.
And there are three fees will be charged when you are using FBA.
- Order Handling Fee ($0 for media and $1 per unit for non-media)
- Pick and Pack Service Fee ($1.06 per unit)
- Weight Handling Fee (charge according to weight and size)
To calculate FBA weight handling fees, apply the information of your products to the chart to find out:
|Small Standard (1 lb. or less)||$0.50||$0.50|
|Large Standard (1 lb. or less)||$0.85||$0.96|
|Large Standard (1 lb. to 2 lbs.)||$1.24||$1.96|
|Large Standard (over 2 lbs.)||$1.24+ $0.41/lb. above|
the first 2 lbs.
|$1.95 + $0.39/lb. above|
the first 2 lbs.
Weight handling fees are calculated based on the total weight of your products and packaging. Check Amazon’s fee guidelines if you want to know how to calculate outbound shipping weight.
Use What We Learn to Calculate FBA Fees
Now it is time to get into the real fight.
Let’s take kitchen knife for example, if you have joined FBA program and selling a $40 kitchen knife.
Check the referral percentage fee chart, it is 15% of your sale price will be charged for using Amazon to establish your business.
Referral Fee will be:
$40 – 40*15% = $34
Then, let’s check if your product is media item or not. Obviously, kitchen knife is not media item, so you only need to pay for order handling fee and pick and pack fee.
Here is what you are going to pay:
$34 – Order Handling Fee ($1) – Pick and Pack Fee ($1.06) = $31.94
At last, you need to find out if your product will be over weight or not. Because the length of knife has exceed the measurement of height, so it will be considered as large standard size. And the knife weights 1lb. Apply these information to the charts above, we should know that the weight handling fee is $0.96.
Again, deduct $0.96 from $31.94
$31.94 – Weight Handling Fee ($0.96) = $30.98
Now you should know what Amazon fees will be and how to calculate FBA fees.No matter what your product is, you can always use the formula below to calculate your Amazon profit:
Amazon profit = Sale Price – Referral Percentage – Order Handling – Pick and Pack – Weight Handling
You should always calculate your cost of goods sold and overhead costs from your sale price before your start selling products. When it comes to Amazon, the overhead costs could be Amazon fees.
I hope this article will walk you through the overwhelming and confusing of calculating FBA fees, and the formula above will make the work of determine your sale price easy.