Fulfillment By Amazon -- FBA Fees, Benefits & How it Works

[Pages:17]Fulfillment By Amazon --

FBA Fees, Benefits &

How it Works

Fit Small Business

Fulfillment By Amazon -- FBA Fees, Benefits & How it Works

Amazon streamlined its Ful llment by Amazon fees in 2018, and the new structure is easier for sellers to understand and manage. New FBA fees combine picking, packing, and shipping into one ful llment fee and simplify inventory storage fees. Plus, you can forecast costs using the updated FBA calculator. We'll explore new FBA fees and more in this guide.

Amazon typically only pays its sellers every two weeks, but you can get your money much faster using Payability's factoring service. They provide next-day payouts of your Amazon earnings and deposit them directly into your bank account or onto a Payability credit card?and if you opt for the card, you'll earn 2% cash back on all your purchases. Since Payability's fee is just 2% of your Amazon sales, it's essentially free!

An Overview of Amazon's FBA Fees

Ful llment by Amazon fees are based on the size and weight of products you sell, and where you sell them. For example, small items weighing under 1-lb. cost just $2.41 to ll and ship when sold on Amazon. Or, sell the same item on your website and pay just $5.95 for Amazon to ship it out for you.

As you can see, Amazon's FBA ful llment fees are extremely competitive and are particularly low for any products you sell on Amazon. In fact, you'd be hardpressed to ship items yourself at such low rates. These low fees make FBA a popular ful llment option for businesses that sell primarily on Amazon, or on Amazon and elsewhere, like a company website or another marketplace, such as eBay.

Wherever you sell your products, if you use Ful llment by Amazon to stock inventory and ll and ship your orders, you'll pay 2 primary FBA fees. These include:

Fulfillment By Amazon -- FBA Fees, Benefits & How it Works

1. Ful llment Fees ? This is your entire pick-through-shipment fee and includes order picking and packing, shipping cost, packing boxes, and inner packaging. It even covers returns processing, though not for items in categories with free customer returns.

2. Monthly Storage Fees ? This is the cost of storing your products in Amazon's warehouse. Inventory storage fees are based on the space occupied by your products in Amazon's warehouses, measured in cubic feet.

To assign ful llment and storage fees, FBA breaks products into 2 overall size categories, and sizing includes packaging such as shoe boxes, blister packs, or retail packaging.

1. Standard-size products ? Standard-size products are items that weigh less than 20 lbs. and measure less 18x 14x 8 or less, fully packaged. Within the standard-size category, there are also 4 size subcategories that affect fees.

2. Oversize products ? Oversize products include items that weigh over 20 pounds or are larger than 18x 14x 8" including packaging. Within the oversize category, there are also 4 size subcategories that affect fees.

Now you know the factors that affect Ful llment by Amazon fees, next let's look at a sampling of FBA fees for the 2 different ways you can use the service. We'll start with FBA fees for products sold on Amazon, and then examine ful llment fees for goods sold through other websites or marketplaces.

1. Amazon FBA Fees for Products Sold on Amazon

Low fees and other perks, which we cover below, make FBA a top ful llment choice for Amazon sellers. Here's a sampling of FBA fees to ship various items sold on Amazon, and pay particular attention to the October-December holiday season storage rates listed below. Storage fees increase dramatically during these three months.

Fulfillment By Amazon -- FBA Fees, Benefits & How it Works

Amazon FBA rolls pick, pack, and shipping costs up under its Ful llment Fee . This also covers the basic customer service that Amazon provides in dealing with questions about shipping, payments, and so on. The ful llment fee also covers return processing for certain categories. Although, for categories that offer free returns, you'll pay a return processing fee that matches your ful llment fee when customers return an item. As you can see above, FBA storage fees increase dramatically in OctoberDecember. This is something to watch closely if you use FBA, and is a major reason that volume sellers rarely use FBA as their sole storage option. Instead, power sellers often store the bulk of their inventory themselves in cheap storage units or a company warehouse. Then they periodically ship just enough stock to FBA to cover a range of forecasted sales. We've mentioned several times that your product's size also impacts your FBA ful llment fees. Here are some examples of how fees are applied based on product size. You can accurately estimate the FBA fees for your own products' size and weight using Amazon's FBA fee calculator.

Source: Amazon

Fulfillment By Amazon -- FBA Fees, Benefits & How it Works

Amazon Sellers! Don't Forget the Seller Fee Amazon sellers also have a separate fee to factor in, that's the Seller Fee. This fee isn't part of your FBA fees. Amazon seller fees are charged whether you use FBA to store and ship your products or not. On average, this fee runs 15% of a product's selling price, which can seem like a lot to pay to be on Amazon. But, many Amazon sellers nd that FBA's ultra-low ful llment fees help to offset their seller fees, and makes selling on Amazon viable.

"Look at the big picture when selling on Amazon and using FBA. Don't get hung up on the fact that you're not going to see your normal retail margins on Amazon sales. FBA gets you the Prime listings and that means more sales for your brand. As long as you're still seeing profits, that's what matters."

-- Russ & Danielle, Founders, Outlaw Soaps

Next let's look at ful llment fees for products not sold on Amazon, but shipped using Amazon's fulfillment services.

2. Amazon Fulfillment Fees for Non-Amazon Products

If you sell on several channels other than Amazon, such as your own website and other marketplaces like eBay, you can use FBA to ll those orders, too. Amazon calls this service Multi-Channel Ful llment, or MCF. Your inventory storage fees are the same, but the MCF fulfillment fees are higher.

With MCF, you can select different shipping methods: Standard, Expedited 2Day, and Priority 1-Day . This is helpful if you offer a range of shipping options on your own website. If you compare the MCF fees to the shipping rates you'd pay shipping products yourself, you'll likely nd MCF is quite a deal in many cases. Even top ful llment centers that receive deep shipping discounts might be hard-pressed to beat Amazon's new MCF fees.

Fulfillment By Amazon -- FBA Fees, Benefits & How it Works

Here's a look at Amazon's 2018 MCF ful llment fees across a wide range of product sizes and shipping methods. Remember, the product sizes breakdown is the same as FBA, as are storage fees. Ful llment fees are the only cost differences between FBA and MCF.

Here are the 3 noteworthy differences between FBA fees and MCF fees:

1. MCF fees only apply to products that you sell on your own website or other marketplaces

2. You don't pay an added Amazon seller fee since these products weren't sold on Amazon

3. Storage costs are the same as FBA, so storage costs increase in OctoberDecember

FBA Fees vs MCF Fees ? A Quick Comparison Let's look at a comparison of the overall fees you'll pay on a product you sell on both Amazon and your own website, and ful ll using FBA or MCF, depending on where it's sold. This gives you an idea of the fees related to each ful llment method, plus shows how the costs impact your profit margins.

As you can see, Amazon's Seller Fees make our set of mixing bowls less pro table when sold on Amazon compared to on our own website. However, in both cases, we're more than doubling our $7 cost, which is considered a decent return, especially on Amazon sales where the seller fees heavily impact profits.

When running your own pro t calculations, be sure to gure estimates using multi-unit orders and include other factors, such as any shipping fees you charge for orders placed on your website. Every penny counts in FBA and MCF fee and profit calculations.

Fulfillment By Amazon -- FBA Fees, Benefits & How it Works

"Our Amazon sales are typically single-unit purchases, whereas purchases made directly from our website are typically multi-unit purchases. Looking closer, our average order value on Amazon is less than $25.00, but over $55.00 on our website. With FBA, we can let Amazon orders tick through at high volume and with minimal effort, while we concentrate on the highervalue orders ourselves. It's a great benefit to our operations."

-- Craig Boyd, President of Furniture Clinic

3. Other Costs that Factor Into the FBA & MCF Equation

As we covered above, FBA and MCF fees include standard ful llment services such as picking, packing, and shipping orders, and inventory storage fees. These mirror the types of fees that any ful llment company would charge for these services. However, these may not be the only fees you end up paying to Amazon. Other fees you may encounter include:

Labeling Fee -- Amazon has strict barcode label speci cations for all stock you ship to FBA. If not labeled properly, you can be assessed a labeling fee.

FBA Prep Service & FBA Unplanned Prep Service -- FBA has strict product packaging and prep guidelines. You can opt to have Amazon package and prep products for a fee, or if you send improperly prepped products, you'll be assessed an unplanned prep fee

Returns Processing ? Basic returns processing is free for many categories, but not for categories with free customer returns. In these, FBA bills a return processing fee equal to your original ful llment fee. Plus, if returned products need repackaging for resale, Amazon charges a repackaging fee

Long-term storage ? if your stock sits unsold for longer than 6 months, Amazon charges a long-term storage fee

Stock Removal Fee ? FBA charges a removal fee if you want to pull inventory from Amazon or dispose of unsold stock.

Fulfillment By Amazon -- FBA Fees, Benefits & How it Works

If you're considering FBA, you need to be aware of these fees to ensure they don't unknowingly creep into your bill. If you don't stay on top of these, your pro ts can slip away. So be sure to understand the FBA ful llment and storage fees, and how they apply to your products, before taking the plunge.

Now that we've covered FBA pricing let's explore other factors that make FBA a top fulfillment choice among Amazon sellers.

5 Reasons why FBA is the Best Ful llment Service for Amazon Sellers

Amazon wants its marketplace sellers to use Ful llment by Amazon for inventory storage and ful llment. Their reasoning is twofold. First, they make more money, and second, FBA helps all sellers uphold Amazon's high delivery standards. So, along with the highly competitive FBA fees and versatile MCF options covered above, Amazon throws in many sales-driving perks for FBA users. These include:

1. Prime Free Shipping Eligibility

As shown below, FBA product listings prominently feature the Amazon Prime logo, signaling to Prime members that your product can be purchased with free Prime 2-day Shipping or other Prime shipping offers. Prime boasts nearly 85 million subscribers who look for the Prime logo while shopping. So, FBA products can attract far more buyers than non-Prime products.

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