Understanding Fulfillment Costs on Amazon: An Explanation of FBA Fees

If a company decides to sell on Amazon, they have three different fulfillment methods to choose from:

1. Fulfilled by Amazon (FBA): The seller ships their inventory directly to Amazon, and Amazon processes and fulfills orders on the behalf of the seller. Read more about the pros and cons of FBA here.
2. Fulfilled by Merchant (FBM): The seller ships their own inventory directly to the consumer after receiving an order via the Amazon Marketplace.
3. Seller-Fulfilled Prime (SFP): The seller ships their own products directly to the consumer based on Amazon Prime’s shipping policies, which enables them to show the Prime badge on their products in the Amazon Marketplace. The seller then fulfills and ships products on their own. You can learn more about the advantages of SFP here.

Each of these fulfillment options come with their set of pros, cons, and pricing options.

Most merchants who sell on Amazon chose FBA. Using FBA, sellers can utilize Amazon’s fulfillment centers for their inventory storage, and then have Amazon provide the picking, packing, and shipping aspects of fulfillment.

This can help make the shipping process easier, and lighter for a small company, but FBA can be difficult to understand, and costly.

Below is a breakdown of FBA and it’s costs, to help you decide if it’s the right option for your business at this time.

What are the basic Amazon FBA costs?

Amazon FBA costs are “dynamic”. This means that they can vary based on a number of factors such as type and size of products being stored and shipped, length of time they are stored, seasonality, and others.

Below is a list of the most common Amazon FBA fees, sourced from Amazon’s Seller Central as of December 26, 2018. This is based on year-round rates, seasonal rates might be more expensive.

Amazon will charge sellers a fee between 6%-20% of a product’s selling price based on each product sold, regardless of which fulfillment method is utilized. The fee, also known as the Amazon referral fee, will depend on the category of the product you’re selling. For example, a computer accessory has a referral fee of 8% while a kitchen accessory is 15% of the total sales price excluding taxes.

Aside from this seller fee, Amazon FBA will charge two main kinds of fees: inventory storage fees and fulfillment fees. The FBA inventory storage fees include all costs associated with storing a sellers products in Amazon fulfillment centers. FBA fulfillment fees include the end-to-end process of picking, packing, and shipping for each order received and shipped.

Inventory storage fees

Amazon charges a wide arrange of FBA fees for storing inventory, based on the length of time that the products are stored as well as the size. The short-term monthly storage fee can very from $0.48-$2.40 per cubic foot. The mid-term storage fee (from 181-365 days) is charged at a rate of $3.45 per cubic foot. Anything that Amazon stores longer than one year will cost the seller $6.90 per cubic foot.

FBA fulfillment fees

Most fulfillment services have pricing models that charge for picking, packing, and shipping as separate items, while Amazon FBA fulfillment fees are billed as a single cost for the end-to-end fulfillment process.

The fulfillment fees vary greatly because they are based on on the size and weight of the product being shipped. There are many factors of both size and weight that can change fulfillment costs.

Cost breakdown of size and weight fulfillment fees

Because of the many variances in fees, what a seller is charged depends greatly on what exactly they are selling via Amazon FBA. There is no one size fits all model with this service.  

The two main categories that FBA uses to determine their fulfillment fees are standard size and oversize.

Standard size: product weight is less than 20 lbs. or dimensions that are smaller than 18x14x8 in.

Fulfillment fees for standard size products can vary anywhere from $2.41 for products that weigh under 1 lb. to more than $4.71 if it is over 2 lbs. Anything over 2 lbs. is charged an additional $0.38/lb over the first 2 lbs.

Oversize: anything that does not qualify for standard size.  Oversize products (those larger than 18x14x18in) have fees that are $8.13 on the low end, for “small oversize” (over 70 lbs. or having dimensions greater than 60 inches on the longest measured size, with the same $.38/lb fee over the first 2 lbs. as the standard size products carry.

Fulfillment fees for special oversize products (categorized as weighing over 150 lbs. Or having dimensions longer than 108 inches on the longest measured side) begin at $137.32, with an additional fee of $0.91/lb. over the first 90 lbs.

Amazon uses dimensional weight, which factors a shipment’s density when calculating the shipping cost. This means that the size and weight of the products is an important factor when using FBA.

Additionally, all apparel incurs an additional $0.40/item fee.

Other FBA fees and often overlooked costs

Depending on what any individual seller might need, using Amazon FBA services might result in additional fees being charged.  

Packaging fees

Another factor to consider for a seller is packaging. While all packaging is included in the above listed FBA fees, Amazon will only ship products in their own Amazon branded boxes. This places an emphasis on the Amazon brand first and foremost, and may overshadow any company branding that might make you stand out from the crowd. This doesn’t matter to all businesses, but could be a factor if you wish to use branded shipping along with your products.

Penalty fees

Amazon has some fairly strict seller requirements, and if those requirements are not followed closely they can impose fees to penalize their seller. If a seller does not follow Amazon’s barcode label requirement, they will be charged a labeling fee for their FBA inventory. Those label requirements include having sufficient white space around the Amazon barcode and related text (0.25 inch on the sides and 0.125 inch on the top and bottom), ASIN or FNSKU, product name and item condition

An “unplanned prep” fee can be incurred by a seller who does not prepare their products in direct accordance with Amazon’s policies and guidelines. Those fees can be related to labeling, bagging, poly bagging, and taping in order to make products ready for storage and delivery.

Package prep fees

If a seller wishes to avoid many of the penalty fees they can opt to have Amazon prep and package products for an additional fee. This raises the overall cost of using Amazon’s FBA services, but also  outsources the hassle of preparing and packing shipments, which can be helpful depending on the size of a seller’s inventory.

Return fees

If a product is eligible for “free” returns via Amazon Prime, a seller will have to pay an additional fee to facilitate those returns.

Inventory removal fees

If a seller decides that they no longer want to utilize Amazon’s FBA service, they will incur costs to have all of their remaining inventory removed and returned from their fulfillment centers. It will cost between $0.50 and $0.60 per item depending on its size. If instead of having products returned, a seller wants Amazon to instead dispose of them it will cost anywhere from $0.15 to $0.30 per item.

Bottom Line

Amazon FBA is a valuable service for companies who are at the right stage of inventory and fulfillment needs, but many of these additional fees can add up. DCL customer representatives can help you figure out if Amazon FBA might be the right choice for your business. And Amazon has further information on their Seller Central site. Please refer there for any updates.

There are many benefits to working with a third party logistics company (3PL), if you are seeking logistics support we’d love to hear from you. You learn more about DCL Logistics’ Amazon Fulfillment Services, or check out the many companies we work with to ensure great logistics support. Send us a note to connect about how we can help your company grow.

Tags: Online Marketplace