Amazon is the giant of the e-commerce marketplace, with more than 300 million active users worldwide. It is a huge opportunity for sellers to utilize this vast audience of Amazon and sell their products. Like any other marketplace, Amazon has its own set of costs. Sellers must go through an account setup process and calculate the costs before joining Amazon. Let’s explain how much does it cost to sell on amazon and how to get started with this giant marketplace.
How Much Does It Cost to Sell on Amazon? The Standard Selling Fees
Standard selling fees are the fees that the sellers must pay if they want to sell on Amazon. It associates all the mandatory costs, such as referral fees and subscription fees. Standard selling fees are not associated with optional fees such as fulfillment fees.
Selling plans
While registering on Amazon, sellers need to choose a subscription plan. Currently, Amazon is offering two sets of plans:
- Individual plan – Best for small businesses selling less than 40 items a month.
- Professional plan – This is Best for medium to large businesses selling in large quantities.
Applicable features to any selling plan
- Access Seller University training and Help pages
- Get help from Seller Support
- Product listing ( no bulk listing)
- Managing inventory ( no bulk)
- Managing orders fulfilled by the seller
- Setting fixed pricing
- Access to basic tools such as revenue calculator, etc.
Exclusive features to the business plan
- Multiple user accounts
- Eligibility for restricted products ( can sell if approved)
- Use of features like enhanced product page and digital store
- Compete to be the Featured Offer
- Offering promotions and coupons
- Access to SP-API for selling app integration
- Bulk inventor and product listing
- Access to both global and local selling
- Amazon Renewed Program
- Set dynamic prices
- Shipping fee customization
- Access tools for B2B customers
- Access to business reports such as sales tracking, etc.
Features exclusive to the business plan only ( with additional fees)
- Promotion with Amazon Ads
- Flexible payment option with local currency
- Creating special offers such as 7-day deals
- Brand protection with the ‘Transparency’ feature
- Customer service provided by Amazon
- Access to special programs such as Amazon lending
- Access to Amazon Global Logistics
These features are accessible to business subscribers only with additional costs associated with each of them.
Referral fees
Amazon will charge referral fees as a sales commission after the sales happen. It is usually deducted as a percentage of the listed price of the product.
Minimum referral fee
Referral fees will go down if the price of the product is lower. To secure a minimum sales commission, Amazon has a minimum charge. Sellers will have to pay at least $0.30 as a referral fee whatever the product value is.
For example, if the listed price of a product is $1 and the commission is 10%, then the referral fees come up to $0.10 as per calculation. However, sellers have to pay $0.30 as per the minimum referral fee rule.
Product categories with fixed referral fees
Products under the below categories fall under fixed referral fees where the sellers have to pay a fixed percentage of the sales value no matter what the price is.
Products with variable referral fees
Referral fees for the below categories are variable, where the fees are dependent on the price of the product.
Fulfillment charges
Fulfillment charges at Amazon involve product storage, packing, and shipping. Amazon can give this service to the sellers at specified charges. This whole arrangement is called Amazon’s fulfillment services or FBA.
FBA fulfillment cost
Amazon determines fulfillment costs through an evaluation of product dimensions, weight, and category. Fees cover inventory processing such as picking products from inventory, packing them for shipment, shipping costs, customer service, and return handling.
The shipping weight is determined by either the package’s real weight or the size. The greater value of these two is the final fulfillment fee.
FBA storage cost
Your monthly FBA storage cost will be calculated according to the average cubic footage of inventory you use at the fulfillment centers. From January to September, the cost will be $0.78 and $0.56 per cubic foot for standard and oversized inventories, respectively. From October to December, the cost will be $2.40 and $1.40 per cubic foot.
Products identified as dangerous goods require extra storage fees.
Other FBA costs
- Aged Inventory: The fulfillment center will charge you on a monthly basis if your items remain stored for over 181 days.
- Returns Processing: Amazon will charge you the free return shipping costs if a customer avails of it.
- Removal, Disposal, and Liquidation Orders: Amazon charges per item if you request for disposal or liquidation of the inventory at the fulfillment centers.
- FBA Inbound Placement Service: The FBA Inbound Placement Service will send your inventory to the nearby fulfillment centers that are close to the buyers. This service has a fee based on the location and quantity of the items.
Fulfillment managed by the seller ( FBM)
Fulfilled by merchants (FBM) allows the sellers full control over inventory management, shipping operation, and customer service if they do not want to use Amazon’s FBA services. In the FBM program, sellers have independence over the order processing. It also allows the sellers to sell specialty products that FBA does not handle.
Costs associated with FBM
Shipping cost: After processing the order, sellers need to pay for the shipping. However, Amazon provides better shipping rates to the seller by negotiating with the major carriers. The rate Amazon negotiates is much lower than the standard retail rate.
Inventory management cost: The Seller needs to manage and control her own inventory. However, Amazon provides tools such as ‘Veeqo’ that help the seller automate her inventory management across different platforms such as eBay, Etsy, Shopify, and Walmart.
Return Handling: Sellers under FBM must manage the returns by themselves. They need to pay for the costs associated with return shipping.
Storage Costs: Sellers in the FBM program need to store their products in their own facilities or third-party warehouses. Product storage incurs costs which is dependent on the selected provider.
Other fees & charges
Amazon may charge you on specific occasions besides standard fees and fulfillment charges. These charges are applied either for using a tool or a service from Amazon. Below are a few examples of these charges:
Closing Fees
Amazon imposes a closing fee for selected media categories such as books, DVDs, music, and software products. They will charge $1.80 for each of these media items that sell. This specified fee applies to sellers who list media products, and it is separate from the referral fee.
Rental Book Service Fees
Amazon charges rental book service fees to sellers who offer textbook rental services. A separate fee ( $5 per rental) applies to each rented textbook to support the rental process plus the return and inventory management procedures.
High Volume Listing Fees
Amazon applies the high-volume listing fee to sellers who maintain active listings numbering over 100,000 in any given month. Large sellers often face this cost at $0.005 for each extra active listing.
Refund Administration Fees
Amazon imposes a refund administration fee when a seller initiates a refund. The charge is 20% of the original referral fee but will not exceed $5. Amazon charges this fee to cover processing costs.
How to Sell on Amazon?
You already know the basic costs to selling on Amazon Marketplace, so now it’s time to take the next step and start selling.
Registering on Amazon
To start selling on Amazon, you need to register first. This is a simple five-step process as like below:
Step 1: Provide your business information
Start your registration by giving your business details. You need to put information about the business location, type, business name, company registration number, and address. If you are operating as an individual, then choose the right option that specifies that you’re not yet incorporated. Finally, put your phone number with the country code.
Step 2: Provide seller information
Enter your name and other personal information that includes citizenship, date of birth, and residential location. Additionally, put your phone number and specify whether you are a legal representative or the owner of the business. All the information should match with our IDs issued by the government such as the passport.
Step 3: Provide billing information
Now, provide your bank account information. Make sure your name or the business name is the same as your bank account name. Additionally, you need to give your credit card information to adjust your expenses. Your card information does not necessarily have to be under your name.
Step 4: Provide store and product information
Now provide information about the store that you will be maintaining on Amazon. You will also provide certifications regarding your business, brand status, and product codes.
Step 5: Verify your identity
The final step is for identity verification. Here, you will need to submit your identity card issued by the government. Additionally, you need to submit proof of your residential business address. Finally, you need to take a photo of yourself along with the ID card or schedule a video call with an Amazon associate to prove your identity.
Your registration process is not complete. Before you start selling on Amazon, you need to configure your seller account.
Setting up Seller account
After you have registered on Amazon, the next step is account setup.
Choose a plan
To start selling on Amazon, you have to choose a subscription plan during the account setup process. As mentioned earlier, sellers have two options to choose from –
- Individual plan – costs $0.99 per item sold
- Business plan – costs $39.99 per month
Configuring account options
After choosing the right plan for you, configure the account. Review different options and make necessary changes. Below are a few important options that must be configured right away:
- Seller profile
- Shipping settings
- Tax information
- Login settings
- User permission
You can add users to your account to help you with different tasks. After these basic setups, your account is ready for product listing.
Brand enrollment
For brand owners, it is necessary to enroll the brand on Amazon before listing the product. Brand enrollment will provide the sellers with some added advantages such as engaging content creation and optimization tools and brand analytics to monitor brand performance and consumer behavior.
List the products
Now you have to list your product. This process includes giving an appropriate title of the product and providing information about below aspects of the product:
- Images
- Product variation
- Key features
- Product description
- Offers
Individual sellers can list one product at a time, while the business plan subscribers can upload products in bulk.
Set the price
After listing the product, you need to set the price. Below are a few points to note when setting up the price:
- Your price has to be competitive if you want to sell more. Amazon will share with the sellers the current competitive price of a similar product. Therefore, the price of the product plus shipping should be equal to or lower than the price provided by Amazon to make it competitive.
- Amazon also shares the current lowest price of the product sold by Amazon sellers. It is your opportunity to utilize this information to match the price or beat it.
Select fulfillment method
After setting up the price, sellers need to select the fulfillment method. You can choose either of the two options.
- Fulfilled by Amazon: FBA Amazon takes full responsibility for inventory, packing, and shipping the products.
- Fulfilled by Merchant, FBM – Sellers take the responsibility for inventory management, packing, and shipping.
Availing of FBA services is hassle-free, but it involves relevant charges. You have to calculate whether FBA or FBM will be beneficial for you and then choose the right one.
Start selling and monitor performance
You are all set now and can start selling. But this is not the end. Monitoring your performance is essential for your growth. Amazon will help you with several data on the dashboard to keep you updated about various performance targets. Below are a few of them:
- Order Defect Rate ( ODR ) – Data on customer service performance
- Account health dashboard – Information about your compliance with the selling policies
- Shipping performance monitoring – Tracking shipping performance for the seller fulfilling the orders by themselves.
FAQ
Do I need to be an LLC to sell on Amazon?
No, it is not mandatory. Both businesses and individuals can sell on this marketplace.
Can I sell my products in multiple countries?
Yes, Amazon allows the sellers to sell internationally. They provide the resources to expand globally.
Are there advertising costs on Amazon?
Yes, you need to pay for the ads you run on Amazon. Only business plan subscribers can avail of this ad platform, where the sellers are charged on a pay-per-click ( PPC) basis.
Do I need to pay for product listings on Amazon?
No, there is no listing fee on Amazon. You are free to list your products and price them. You have to pay after a sale happens.
How do fees for product returns work?
If you are using the FBA feature, Amazon will handle the returns with a charge based on the product size and category. However, if you are fulfilling the product yourself, then you have to manage your return orders.
Are there any hidden charges to sell on Amazon?
No, there are no hidden charges. All the fees and charges are clearly defined. However, apart from the subscription, referral, and fulfillment fees, there are some charges that are applied only to specific circumstances.
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Conclusion
Selling on Amazon is a great opportunity for sellers to utilize the huge client base of this marketplace. Apart from the subscription plan, referral, and fulfillment fees, Amazon has various other costs but they are clearly mentioned. Sellers need to understand the costs associated with selling on Amazon to plan their strategy in this marketplace and become profitable.
