For many businesses, Amazon is the place to be — for not only generating ecommerce sales, but also gaining visibility with today’s digital-savvy consumers. Consequently, companies are signing up to become sellers on Amazon in pursuit of the promising profit potential. While some of these sellers will debate the benefits of using FBA vs. FBM, many will choose the Fulfillment by Amazon (FBA) program.
Considering what FBA offers, it’s easy to see why many companies would partner with its services. The FBA program is Amazon’s warehousing and fulfillment service. If your business utilizes FBA, you likely already know that Amazon will oversee your logistics needs, including storing your inventory in its warehouses and fulfilling and shipping your orders. Yet with all the FBA fees Amazon charges, you may not know what these FBA fees are and how they’re impacting your profits.
To avoid any confusion the next time you get your bill from Amazon of FBA fees to pay (or to help you make an informed decision as to whether FBA is right for you), it’s important to understand how FBA fees work. While FBA fees are generally influenced by your product’s size, weight, and the channels through which it’s sold, let’s take a look at different types of FBA fees you can expect to pay:
One of Amazon’s main FBA fees, fulfillment fees cover the entire general fulfillment process, from picking and packing your orders and shipping them to customers to the customer service Amazon provides for delivery, returns, and payment issues. Fulfillment fees are calculated based on your product’s weight and size. In other words, if you have a larger or heavier item, you can expect to pay a higher fulfillment fee.
However, in addition to standard fulfillment fees, there are other FBA fulfillment fees for specific categories of products:
This is a different FBA fee specifically for hazardous materials, such as products with lithium batteries, magnetized materials, or chemicals. Laptops, hair dyes, headphones, and smartphones are a few real-world examples. Amazon charges a special fulfillment fee due to the specific handling and storage required to fulfill these items.
Amazon recently initiated a fulfillment fee exclusively for clothing items. To determine the actual fee, Amazon calculates the shipping weight for apparel by selecting the greater value between the dimensional weight and unit weight of the item.
If your products meet certain size, weight, and pricing criteria, you could qualify for Amazon’s FBA Small & Light program. This initiative aims to lower fulfillment costs for smaller, lightweight items so companies can sell them at more affordable prices.
With FBA, Amazon allows you to use their services to fulfill orders received from channels beyond Amazon, called Multi-Channel Fulfillment. With this service in place, you don’t have to look for other warehousing or fulfillment options for all the sales you generate through your business website, for example. As a result of this premium service, Multi-Channel Fulfillment users can expect to pay higher FBA fees, and these prices can vary based on the shipping option.
With Amazon’s large network of fulfillment centers all over the world, many businesses will prefer to keep their inventory in Amazon warehouses throughout the year and are charged a storage fee as a result. This monthly FBA fee is calculated by cubic foot and will vary based on the time of year. Amazon also charges a long-term storage fee for any products kept in the facility for more than 365 days, which means it’s important for your business to manage your inventory and keep it moving when using this service.
Essentially a commission for the privilege to sell on Amazon’s platform and access its vast customer base, a referral fee is a percentage of the product’s sale price taken after the item is purchased. This FBA fee’s percentage will vary based on the specific product category.
If you’re ever ready to move on from obsolete or poor-selling inventory items, Amazon can remove them from its warehouses. By charging a removal and disposal fee, Amazon will either return the items to you at your request or dispose of them altogether.
While using Amazon’s warehousing and fulfillment service is popular, its FBA fees can easily eat into your profits. As a result, many forward-thinking companies choose to partner with a 3PL to outsource their logistics needs instead.
At Smart Warehousing, we can manage your entire supply chain from warehousing and replenishment to fulfillment and transportation while your business continues to thrive selling on Amazon—without all those FBA fees getting in the way. Contact us today to learn more.