If you an MF seller and haven’t made the transition over to being an FBA (professional seller according to Amazon) seller, then before you do… you’ll want to read this article in its entirety to understand some of the calculations that go into the pricing structure, fees and advantages of the FBA (Fulfillment by Amazon) program.
We break down the fees associated with selling via the Amazon FBA platform and help underscore the importance of good work-flows and having the right tools as an FBA Seller.
The $20 book example with Amazon FBA fees
We think the best way to explain Amazon’s FBA fees is to use their own calculator and walk you through a real-life example. A lot of sellers start out selling books on Amazon because it’s easy to understand and the profit margins can be really great.
For our example we’re going to use a book that you have chosen to sell for $20 on Amazon in the FBA program.Chances are, you sourced this book from some retail arbitrage either at Craigslist, Goodwill, thrift stores, a Yard Sale or an Estate Sale for around a $1.00. It’s important to keep in mind your buy costs when considering this example we’re going to use.
We’ve taken a screenshot and highlighted all of the fees associated with the sale of your $10 book. We also are going to break down those fees one-by-one so you get a full understanding of where your money is going and why.
Amazon Referral Fee
The Amazon referral fee is otherwise known as their “commission” for helping you sell the book on their marketplace. Amazon is one of the largest online destinations for shoppers in the world with millions of visits each second. Amazon helps bring those potential customers to your product listing and they charge a 15% commission fee for that privilege. This is a fixed cost and there is no way around it.
Variable Closing Fee
The variable closing fee can sometimes be a mystery to FBA sellers. Variable Closing Fees apply strictly to books, music, videos, DVDs, video games, consoles and software (BMVD products), and they will vary according to category, shipping destination, and the type of shipping service used. Again, this is a fee that you can’t avoid if you’re selling in these categories.
Pick and Pack Fee
The Pick and pack fee is the fee that is charged by Amazon to go into their warehouse and retrieve your item for the customer after a sale has been made.
It seems like a very low fee considering that they have to pay a human being to walk to the area of their warehouse and manually grab your item and prep it for shipment but these days Amazon has deployed robots to retrieve these items, thus reducing their costs. Another fixed fee that is out of your control.
This is an estimated fee based on the weight of the book and refers to how much you’ll be charged by the carrier to send your item into Amazon’s fulfillment center warehouse. This is one of the first variable fees that you will encounter when selling on Amazon and should be considered in any revenue calculator you might choose to use in your workflows. There is an art to keeping your shipping costs low and we’ve seen a range of $0.10 to $1.00 paid per pound by different sellers.
30 Day Storage
The last fee you’re likely to face is the 30-day storage fee. Amazon’s storage fees are really low if your only housing one item of each product and in this example the fee is $0.01 (or a penny) each month for them to store your book in their warehouse as it awaits a sale.
MF vs. FBA (or Merchant Fulfilled vs. Fulfillment by Amazon)
According to Caleb Roth over at The Book Flipper some of the reasons you would want to run your Amazon business as an FBA seller is:
FBA allows you to price a bit higher and outsource customer service, fulfillment, and you get to attract new customers.
I would do it even if I didn’t get a price premium… it allows me to travel the world while the business continues without me shipping orders every night.
So if you’re an MF seller, then you can be really trapped in your business at home and end up being an employee if you don’t set yourself up in a smart way. FBA sellers sacrifice a lot more in profit but also gain a lot more in freedom.
That’s what we all ultimately want.