Selling some of your products on Amazon can be a great way to increase your sales and grow your business. However, it is not free. People often forget about that, leading to unrealistic profit expectations.
Before you start selling on Amazon, be aware of the hidden costs. These take the form of various seller and subscription fees and can add up to a substantial amount. To give you an overview, we are going to sum up the most important Amazon Selling Fees in this blog post. However, be aware that these differ from seller to seller and from product to product. You will, therefore, need to make your own calculations and evaluate for your personal situation whether selling on Amazon is profitable enough for you or not.
Amazon Selling Plans
Amazon offers two ways to sell on its platform: Basic and Pro.
The Basic selling plan is generally for individuals, who wish to sell only occasionally (fewer than 35 items per month). It comes without a subscription fee but with per-item fees instead. The Pro plan, on the other hand, is the preferred option for professional sellers. You have to pay a monthly subscription fee, but no per-item fees. The Pro selling plan starts to pay off from 35 items per month upwards.
See the following table from Amazon for a detailed comparison of the two options:
Basic Selling Plan
When you expect to only occasionally sell on Amazon, it might be worth looking into the Basic Selling Plan. It provides you with more flexibility and comes without any commitment. You simply sell whenever you want and pay only when you sell something.
The fees of Basic selling are made up of three components:
- Per-item fees
- Referral fees
- Variable closing fees
The per-item fee is simply £0.75 per item sold and gets deducted from your credit.
You will also have to pay a referral fee for each item sold, which depends on the item category. For most categories, the fee is between 7% and 15%. This fee is calculated based on the total sum paid for the item by the buyer, including all applicable taxes and customs fees. There is also a per-item minimum referral fee of £0.40 in most categories. You can find a detailed list of referral fees per category here. In addition, there is also a variable closing fee that is charged per item for books, music, videos & DVDs. However, this will be changed to a fixed closing fee of £0.50 for all Media products from August 2017 onwards.
Amazon provides the following example of a Basic selling plan in use:
The per-item fees can add up quickly. So whilst the Basic Plan can be great if you’re proving a concept and just dipping your toes into the Amazon, if you want to sell more than 35 items per month, it might not be the right option. If that’s the case, you should have a look at the Pro Selling Plan instead.
Pro Selling Plan
As a retailer with ambitions to sell hundreds of items per month, the Pro selling plan pays off for you. It also comes with some other advantages, like eligibility for 1-click purchase, order reports, automation tools, and access to more categories. Plus, it entitles you to compete for the Buy Box, which can take your Amazon sales to a whole new level.
The fees of Pro selling are also made up of three components:
- Monthly subscription free
- Referral fees
- Variable closing fees
There are no per-item fees in the Pro selling plan. Instead, there is a monthly subscription fee of £25 (excl. VAT) per month. You will have to pay this fee no matter if you sell something or not. The subscription fee is assessed every month and listed in your Seller Account payments summary. It will be charged against any sales you have made. If your account balance is more than £25, it will be taken from there. Otherwise, it will be deducted from your credit card. Be aware that VAT applies to the subscription fee. However, if you are a VAT registered seller, you may be eligible to VAT-exclusive seller fees.
The referral fees are generally the same as with the Basic plan, so between 7% and 15%, depending on the category with a minimum referral fee of £0.40 for most categories. The closing fees are also the same as with the Basic plan: £0.50 per Media item, starting from August 2017. You can find a detailed table of the current fees here.
Again, there is a practical example available to make those figures more relatable:
If you realise that Amazon isn’t for you, then you can cancel your Pro subscription at any time.
Fulfilment by Amazon
As an Amazon seller, you can either handle fulfilment yourself or use Amazon’s own fulfilment service, Fulfilment by Amazon (FBA). For the latter, you need to be aware that there are considerably high costs involved. This is especially true for large, bulky or heavy items and items that stay in stock relatively long. Generally speaking, FBA fees always consist of a fulfilment fee and a storage fee. The fulfilment fee is a flat fee per unit and is based on the item’s dimensions and weight. The storage fee is calculated per cubic foot per month, pro-rata.
Don’t Let Amazon Selling Fees Swallow Up Your Profits
By adding up the above-mentioned costs, it becomes obvious that selling on Amazon is not exactly cheap. If the item you are selling is positioned in a highly competitive market, the Amazon selling fees can quickly swallow up what’s left of your profits.
However, if your item is located in a niche-market or can bring in a good margin, Amazon can still be a great place to make money.
In order to sell more, however, you will need to be able to handle your orders efficiently and effectively, in order to delight your customers. A mobile ERP solution with an Amazon integration can help you with that and will manage your orders for you. It also supports your business in many other areas, such as; CRM, accounting, stock control and many more.
This will allow you to focus on growing your business and soon Amazon fees won’t even bother you anymore. Get in touch and find out what Khaos Control Cloud can do for your business, or check out our 2020 guide to selling on Amazon.