Moving to an FBA model has so many benefits for all brands, large or small. Amazon offers a comprehensive list of services including free 2-day shipping for your customers, trusted customer service and return management, inventory management tools, access to PPC campaigns, and so much more.
But as you probably know there is no such thing as a free lunch and Amazon FBA is no exception. Fees are a common aspect of the
FBA program and help to guarantee its many
benefits, but are they worth it?
Let's dig into the fees you might encounter below.
FBA Fees Overview
The below are some fees you can expect to incur when you sell through the FBA model:
Fulfillment Fees
Referral Fees
Monthly Inventory Storage Fees
Long-Term Storage Fees
Removal Fees
Disposal Fees
This might seem like a lot of fees to be paying to sell your products through Amazon but it's important to remember that not all of these fees need to be incurred. Some fees such as Fulfillment Fees, Referral Fees, and Monthly Inventory Storage Fees will always occur. However, with careful planning and attention to detail, you can greatly reduce or even eliminate Long-Term Storage Fees, Removal Fees, and Disposal Fees.
Unavoidable FBA Fees
Fulfillment fees are charged by Amazon to help cover the cost of picking and packing your orders, shipping and handling, customer service, and product returns. This fee is dependent on the overall size and weight of your product. The price you pay in fees is well worth it.
Referral fees are charged as a percentage of each sale, based on the category of that product. Whether you sell FBA or FBM you will incur this charge. Most categories are charged a 15% fee but it does differ. More more information see the official Amazon Fee Schedule.
Monthly storage fees are charged for the storage of your units at Amazon fulfillment centers. Amazon values products that move quickly and storage fees can add if you store too many units at Amazon for too long. Amazon also charges long-term storage fees which will be cover below.
The below charts show the fulfillment and storage fees to be expected for standard size units in 2019.
Above: Screenshot from Amazon
Above: Screenshot from Amazon
Avoidable FBA Fees
Long-term storage rates will also experience a change in 2019. Going forward only units that have been at Amazon for over 365 days will incur a fee of $6.90 per cubic foot. However, with proper inventory planning, there is no reason you should ever reach the 365-day mark.
Best practices for inventory management involve forecasting two to four months of inventory at Amazon. Doing so will help keep down Monthly Storage Fees while ensuring you have plenty of inventory to meet demand. For more on this subject see our Fulfillment by Amazon: Inventory Management post.
Above: Screenshot from Amazon
Removal fees are applied when you request Amazon ships all or a partial amount of your inventory back to you. This fee will cover the cost of picking, packing and shipping your items. Typically, removal orders are filled within 10-14 business days. However, removal order processing may take up to 30 days or more during the holiday season and peak removal periods (February, March, August, and September). Removal fees are charged per item removed.
Amazon also offers the ability to destroy your products resulting in a disposal fee. This is a cheaper alternative to removing your items but it is not recommended. Many times Amazon will simply begin selling these items effectively taking away your brand control. Teal Management recommends to never dispose of your items.
Below is a breakdown of the removal and disposal fees.
Above: Screenshot from Amazon
Return Management
FBA offers a great service that covers customer service and returns for your customers. However, this is is for the convenience of the customer and Amazon does not always ensure your product is properly returned to your inventory. It’s important to make sure you monitor your returns and refunds to ensure you are getting reimbursed for any products that do not make it back to your inventory.
Properly managing your returns is a key aspect of maintaining your profit margins. Failure to do so could result in loses. If you feel this might be too much of a hassle Teal Management would love to help you through it.
So, is FBA worth the cost?
Making the decision to sell through FBA is a big one and it shouldn’t be taken lightly. There is a cost to doing business through Amazon but in our opinion, it is worth every penny. Some things you may need to consider before selling through Amazon are:
Will your product still turn a profit? Some items are hard to sell through FBA and knowing your cost before listing your products is crucial. Contact Teal Management for a free consultation and see if going FBA is right for you.
Understand how the size and weight of your product will impact its fee schedule.
Learn how advertising and promotional cost will impact your bottom line.
It’s important to know your total cost before you decide to take control of your brand and sell for yourself. Doing so will ensure you realize the true profits of your products and realize the success you deserve. If you would like to continue reading our blog please see our next post - Fulfillment by Amazon: Item Prep and Shipping Requirements.
If you feel that you would like guidance during this process, Teal Management is here for you.