Calculate FBA costs: Here’s how
Amazon FBA offers real advantages for many entrepreneurs, as internal order processing is a not inconsiderable time commitment that ties up resources and requires logistics that smaller retailers in particular cannot always boast. However, Amazon fulfillment is not without its drawbacks, as it incurs costs that should definitely find their way into your price calculations. This is the only way to make sure that an FBA business is actually a profitable one for you. In this article we explain which items make up your FBA costs.
Update as of 03.06.2021:
Amazon has increased fees for its Small & Light FBA program. You can read more about this further down in the article.
What is Amazon FBA?
FBA stands for Fulfillment by Amazon and means that the logistics processes are taken over by the corporate giant. This includes shipping, storage and all contractual obligations that come into force when a purchase contract for the dealer. Especially for small merchants who don’t have enough man power to handle their own orders, this is an interesting way to sell through Amazon. However, there are costs associated with order processing. Most of them, except for the account fee, are retained by Amazon and do not accrue until an order is placed. Nevertheless, you should take these costs into account in your price calculation, as they affect the unit price of your products.
FBA Cost types
In order to calculate your FBA costs correctly, it makes sense to know what items they are made up of in the first place. We have listed all cost types below.
Amazon FBA Basic Fee
In order for you to use Amazon FBA, a basic monthly fee is required. Although Amazon also offers a free basic rate for this, it is unlikely to be relevant for the vast majority of retailers due to many restrictions (e.g. a limit of 40 sales per month). The professional rate, on the other hand, costs €39 per month excluding VAT (€46.41 including VAT).
The corporation also charges a fee for storing your products in an Amazon fulfillment center. Here, the calculation is based on the average storage volume in cubic meters (100 x 100 x 100 cm). Therefore, to accurately determine your storage costs, it is necessary that you know the dimension of your products.
In addition, the basic price of storage is not the same throughout the year. Instead, there is a high season (October – December) and a low season (January – September). The reason for this is the increased order volume in the fourth quarter, which is characterized by Black Friday and the pre-Christmas period.
|Clothing, shoes and bags standard size
|Other products standard size
|January till September
|15,60€ per cubic meter and month
|26,00€ per cubic meter and month
|18,00€ per cubic meter and month
|October till December
|21,60€ per cubic meter and month
|36,00€ per cubic meter and month
|25,00€ per cubic meter and month
Note: In addition to these storage charges, there is also a long-term storage charge for items held at the fulfillment center for more than 365 days. You can find out more here.
As an Amazon FBA merchant, you do not ship your products yourself, as this process is also handled by the fulfillment centers. In return, Amazon retains the shipping costs incurred per order. However, this does not have to be a disadvantage, since you would also have to negotiate shipping conditions with logistics companies in the case of FBM (Fulfillment by Merchant = internal order processing) and the shipping costs usually remain within reasonable limits thanks to the very good networking of the group. As is usual for a logistics company, however, these are determined primarily by the size and weight of the goods.
Amazon specifies four different standard package sizes for its FBA service:
Small envelope: ≤ 20 x 15 x 1 cm, max. 80g
Standard envelope: ≤ 33 x 23 x 2.5 cm, max. 460g
Large envelope: ≤ 33 x 23 x 5 cm, max. 960g
Standard package: ≤ 45 x 34 x 26 cm, 11,900g
Since shipping costs fluctuate occasionally and thus there may be variations, it makes little sense to list them here. But instead, you can view this information on the official website.
Note: Your goods will be stored in Germany, Czech Republic and Poland. If you wish, you can insist on exclusive storage in Germany, in which case Amazon will charge a fee of about 0.50€ per order. Probably this option is nevertheless recommended, as otherwise you will become liable to pay tax in Poland and the Czech Republic, and further costs and increased tax expense may arise.
Amazon FBA Small & Light
For low value items, FBA would rarely be profitable at regular shipping rates. That’s why Amazon offers the Small & Light program with lower shipping costs for these items.
For an item to be included in the program, the following conditions must be met:
Value of goods: ≤ 10€
Weight: max. 225g
Dimensions: max. 33.5 x 23 x 4.6cm
Listing on Amazon.com
Important: Whether a product is eligible for Small & Light will only be decided upon an individual review by Amazon. Therefore, even if all of the above criteria are met, there is no guarantee that the discounted shipping terms will apply.
The following package sizes and prices are available for Small & Light:
Update as of 03.06.2021: The prices listed here are valid as of 08.06.2021. Amazon has increased prices for Small-&-Light with very little lead time for merchants, they are assuming a price increase of 30-40% depending on the product compared to the previous pricing model. The problem is that since the product price for Small & Light must be less than 10 euros, this cost increase cannot simply be passed on to customers.
Small envelope (80 gram; ≤ 20 x 15 x 1 cm)
Germany: 1,15 Euro
France: 1,60 Euro
Italy: 1,60 Euro
Spain: 1,52 Euro
United Kingdom (UK): £0.80
Small standard envelope (60 gram; ≤ 33 x 23 x 2.5 cm)
Germany: 1,15 Euro
France: 1,60 Euro
Italy: 1,60 Euro
Spain: 1,52 Euro
United Kingdom (UK): £0.80
Large standard envelope (210 gram; ≤ 33 x 23 x 2.5 cm)
Germany: 1,32 Euro
France: 2,10 Euro
Italy: 1,85 Euro
Spain: 1,65 Euro
United Kingdom (UK): £0.85
Large envelope (225 grams; ≤ 33 x 23 x 5 cm)
Germany: 1,95 Euro
France: 3,45 Euro
Italy: 2,60 Euro
Spain: 2,18 Euro
United Kingdom (UK): 1.42 pounds
FBA agency fee
Even though Amazon FBA is an attractive order fulfillment model for many merchants, especially smaller ones, the truth is that Amazon wants to make money from FBA. For this purpose, the marketplace operator charges an FBA brokerage fee. This varies according to category and margin and is between 7 and 15 percent of the sales price.
In some cases, there is also a sliding scale of the fee, for example, for cosmetic items. Here it is around 8 percent for products with a retail price of less than €10. If the price is over 10€, however, the full 15 percent applies.
Tip: If there are such differences for your products as well, consider setting the price lower, if it is on the threshold of a fee increase, then the savings on the brokerage fee may have a positive effect on your margin.
The so-called reimbursement fee is also based on the brokerage fee. This is 20 percent of your referral fee and is incurred whenever customers return your product to Amazon and a purchase price refund becomes necessary.
You sell via Amazon FBA an item at a price of 30€, there are 15 percent (4,50€) brokerage fees. If a refund of the purchase price becomes necessary, Amazon will charge a fee of 0.90€ for this.
Reading tip: You can avoid unnecessary refund fees by lowering your return rate. In this article, we explain how you can do that.
If no damage or signs of use can be detected on the item as a result of a return, it can go on sale again. If not, it must be disposed of or returned to you. In the process, Amazon charges return fees, the amount of which is based primarily on the weight of the product and whether it is standard or oversized.
The exact fee rates for a remission can be found here.
Calculate FBA costs with Seller Central
Due to the many different types of costs, some of which fluctuate, a manual calculation for FBA costs is complicated. You should at least use spreadsheet software if they still want to determine you with their own resources.
In addition, Amazon also offers you a free calculator in its Seller Central to determine your FBA costs.(Note: You need to log in to Seller Central to use the tool). This will give you an idea if FBA is worthwhile for your Amazon business or if you are better served with FBM.
Find FBA errors with SnapSoft’s FBA controller
Amazon has organized its processes well and offers merchants with a large reach an easy entry into e-commerce. However, given the immense volume of orders, even Amazon FBA cannot be completely free of errors. The difficulty lies in uncovering them, because although the e-commerce platform strives for transparency with various reports, manually viewing the reports is often too tedious and time-consuming.
Our FBA Controller takes this work off your hands and reveals FBA errors up to 18 months retrospectively, allowing you to see any refund claims against Amazon immediately.
As you can see, there are quite a few different FBA cost types involved in fulfillment through Amazon. Above all, the many different cost rates, some of which fluctuate, make manual calculation cumbersome. However, there are tools that can help you determine the profitability of your FBA business.