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10 Hidden Fees on Amazon You Did Not Know About
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Many brands are signing up to sell on Amazon.com to capitalize on the retailer’s massive reach and overall e-commerce success. Amazon’s marketplace currently has 1.9 million active sellers worldwide, with a remarkable 330,000 sellers joining this year so far.
According to Feedvisor’s 2021 brand survey, brands on Amazon agree that the greatest benefits of selling on the platform are acquiring new customers (91%), increasing sales volume (91%), and expanding market share (90%).
While selling on Amazon’s marketplace may be fruitful for your business, there are numerous fees you are required to pay for, some of which are not widely known.
Whether you are considering selling on Amazon or you are already selling on the platform, being aware of the hidden fees below will help you develop an efficient e-commerce strategy and calculate your true profitability.
Amazon Referral Fee
Amazon charges its sellers a referral fee, which is a percentage deducted from the price of a product. The referral fee varies by product category, typically ranging between 6% (personal computers) to 20% (gift cards). Most product categories, however, have a 15% referral fee. The referral fees usually increase on a yearly basis. Make sure to check Amazon’s referral fee webpage for updated rates.
The closing fee is also known as the Variable Closing Fee (VCF), which is a fee applied to products in the media category. VCF is generally a flat fee of $1.80. The qualifying media products include books, music, DVDs, videos, software and computer/video games, as well as video game consoles. VCF is a separate fee to Amazon’s referral fee, which ranges between 8% to 15% for the media category.
Fulfillment by Amazon (FBA) Storage Fees
FBA is a widely-used service that packages, stores, and ships products on behalf of Amazon sellers. However, what brands may not be aware of is that storage fees are not included in the FBA service. There are monthly and long-term storage fees for FBA. Monthly fees are $0.69 per cubic foot between Jan.–Sep. and $2.40 between Oct.–Dec. Long-term fees are $6.90 per cubic foot beyond 180 days and $0.15 per unit over 365 days.
High-Volume Listing Fee
A high-volume listing fee is applicable for sellers who have over 100,000 ASINs. Amazon sellers who meet the criteria are required to pay a monthly flat rate of $0.005 for each eligible product. This particular fee typically applies to large retailers. The high-volume listing fee and the FBA monthly storage fee are processed at the same time. The fee is deducted from a sellers’ Amazon account balance and will retrieve the remaining amount from the card on file if there are insufficient funds.
Shipping Items to FBA Warehouse Fee
Brands are required to pay to ship their products to Amazon’s warehouse for the FBA service. This is a cost that is often overlooked but can impact sellers’ profit margins if it is not handled strategically — especially since Amazon may ask brands to send their items to warehouses in multiple locations, such as California, Texas, and New York City. To limit these fees, brands should ship full containers directly to the warehouses instead of using a courier service.
FBA Label Service Fee
Amazon’s fulfillment centers require a barcode on each item it stores to keep track of the fulfillment process. The FBA Label Service is utilized by brands who want Amazon to apply barcode labels on their products at their warehouses instead of including the barcodes themselves. Brands who use the label service are charged $0.30 per unit. Product eligibility is provided on the FBA label service webpage.
FBA Return Processing Fee
Amazon sellers who use FBA are charged a return processing fee if a customer returns a product in a category that offers free return shipping. The product categories on Amazon that qualify for free return shipping are apparel, jewelry, shoes, handbags, and sunglasses, watches, and luggage. The amount that brands are charged is the same as the total fulfillment fee for any product.
Refund Administration Fee
When a brand issues a customer a full refund for a product in the media category, such as books, DVDs, or music, Amazon will refund all of the fees related to the order. However, if a brand issues a refund for a non-media category product, Amazon keeps 20% of fees related to the order, up to a maximum of $5 for each line item. The amount deducted is considered the refund administration fee.
Coupon Redemption Fee
Amazon sellers are required to have a Professional seller account and the account must be in good standing in order to offer shoppers a coupon. Brands are completely responsible for funding the discount and covering costs incurred from the use of the coupon. Additionally, sellers will be charged a redemption fee for every coupon redeemed by a shopper.
Amazon Seller Account Fees
Amazon offers two seller account options, individual and Professional. The individual account limits brands’ capabilities, such as not being able to run promotions, only having the authorization to sell on one Amazon website, and not having access to the Buy Box. Since the Buy Box is critical to a brand’s success on Amazon, sellers should opt for the Professional account. The individual account charges sellers a $0.99 fee for every product sold but there is no monthly fee. The Professional account is $39.99 per month but sellers are not charged a fee for the sale of each product, other than the referral fee.
Although Amazon offers a valuable growth opportunity for brands, the partnership requires a significant investment. There are many more hidden fees apart from the ones mentioned. Nevertheless, brands interested in selling on Amazon and those currently selling on the marketplace can benefit from being aware of the retailer’s multiple fees in order to create business strategies that maximize revenue.
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