The hidden costs of selling on Amazon
Selling your products on Amazon can be a great way to increase sales and grow your business. But people often forget that it isn’t free, which leads to unrealistic profit expectations.
Before you start selling on Amazon, there are hidden costs to be aware of. They take the form of various seller and subscription fees and these costs can add soon add up to a substantial amount for your business.
To give you an overview, Khaos Cloud have summed up the most important Amazon Selling Fees. These fees differ from seller to seller, and product to product. Therefore, you’ll need to make your own calculations and evaluate your personal situation to decide if selling on Amazon will be profitable for you.
Amazon Selling Plans
The two ways to sell on Amazon are Basic and Pro. The basic selling plan is generally for individuals, who are wanting to sell occasionally, or fewer than 35 items per month. There is no subscription fee, but per-item fees apply.
The Pro plan is the preferred option for professional sellers. There is a monthly subscription fee, but no per-item fees. The Pro selling plan starts to pay off from 35 items per month upwards.
Basic selling plan
It provides you with more flexibility and comes without any commitment. You simply sell whenever you want and only pay when you sell something.
Basic selling fees are made up of three components:
Per-item fees- This simply means £0.75 per item sold gets deducted from your credit.
Referral fees- You will also have to pay a referral fee for each item sold. This depends on the items category, which is usually between 7% and 15%. The fee is calculated based on the total sum paid for the item by the buyer, which includes all applicable taxes and customs fees. There is also a per-item minimum referral fee of £0.40 in most categories.
Variable closing fees- This fee is charged per item for music books, videos & DVDs. But from August 2017 onwards, this will be changed to a fixed closing fee of £0.50 for all Media products
While the Basic Plan can be great if you’re just dipping your toes into Amazon, fees can add up quickly. If you’ll be selling 35+ items per month, you should have a look at the Pro Selling Plan instead.
Pro Selling Plan
As an ambitious retailer looking to sell hundreds of items per month, the Pro selling plan pays off. It also comes with many advantages, like order reports, eligibility for 1-click purchase, automation tools, and access to more categories. You’re also entitled to compete for the Buy Box, which can take your Amazon sales to a whole new level.
Pro selling fees are also made up of three components:
Monthly subscription free- There is a monthly subscription fee of £25 (excl. VAT) per month. This fee must be paid regardless of if you’re selling or not. The subscription fee is assessed every month and listed in your 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, or deducted from your credit card. VAT applies to the subscription fee but if you are a VAT registered seller, you could be eligible for VAT-exclusive seller fees.
Referral fees- The referral fees are similar to the Basic plan, between 7% and 15%. This depends on the category, with a minimum fee of £0.40 for most.
Variable closing fees -These are also the same as with the Basic plan, with £0.50 per Media item, starting from August 2017.
You can also 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, there are considerably high costs involved, especially true for large, bulky, or heavy items and ones that stay in stock for a longer time.
Fees depend on factors, like size, weight, marketplace, and item categories. FBA fees usually always consist of a fulfilment and storage fees.
Fulfilment fee-This is a flat fee per unit, based on the item’s dimensions and weight.
Storage fee – This is calculated per cubic foot per month, pro-rata.
Increased fees are effective from June 2017, so check for any fee updates on the website.
Don’t Let Amazon Selling Fees Swallow Up Your Profits
When adding up the above-mentioned costs, it’s obvious that selling on Amazon is not cheap. If the item you’re selling is positioned in a highly competitive market, selling fees can quickly swallow up what’s left of your profits.
However, if your item is in a niche-market or can bring in a good margin, Amazon can be a great place to make money. And the more you sell, the more money you can make!