Amazon Basics
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Amazon Marketplace and FBA Fees

Lesson 9 Chapter 1 Module 2

LET'S LOOK AT THIS IN CONTEXT

Before we dive into the costs associated with running an online business through Amazon, I'd like to remind you that everything costs money. 

It's Amazing how we accept that we have to pay when we do shopping, we have to pay taxes when we receive our salaries and we have to pay for... well, pretty much anything! BUT I have seen, for some reason, when people want to start legit online businesses, they expect to pay nothing. All of a sudden they want to break free from the 'rules' and receive something for nothing. My fellow South African, it does not work that way.

It takes money to make money. In context, considering what you could earn in the long-term, it takes surprisingly little money to make a lot of money.

Never forget that.

AMAZON MARKETPLACE FEES

At ecomMEMBER we focus on the Amazon UK (and greater Europe) Market. All fees we look at are in British Pounds (£).

When joining the Amazon Marketplace, you have two options:

  • sign up for the Basic Sell plan or
  • sign up for the Professional Sell plan

Here's a screenshot from the Amazon.co.uk website showing the two plans:

You can ignore the Basic plan as everything we teach on ecomMEMBER revolves around the Professional Sell plan. The Basic Sell plan will not meet your needs with the amount of sales you are going to make. Also, we teach you how to establish a real business and for that you don't have any other choice but to use the Pro Sell plan.

Looking at the Professional Sell plan, you can see that your basic monthly fee for using the Amazon UK Marketplace will be £25 (excluding VAT).

Apart from the monthly fee, Amazon notes on the last line (of the screenshot above) that additional selling fees apply. Additional selling fees include:

Referral Fees

Note: All fees discussed below are excluding VAT.

  • Sellers pay a referral fee on each item sold.
  • For all products, Amazon deducts the applicable referral fee percentage calculated on the total sales price. The total sales price is the total amount paid by the buyer, including the item price and any delivery or gift wrapping charges.

Referral fees vary by category. A category refers to the main "area" of Amazon you will sell in. 

For example:

All things related to babies go under the "Baby" category. On the other hand, let's say you want to sell kitchen gadgets - that would fall under the "Home and Kitchen" category.

To illustrate the examples further:

Whether you sell baby pacifiers or nursery equipment, you will be charged referral fees under the "Baby" category (because both pacifiers and nursery equipment has to do with babies).

Likewise, whether you sell kitchen gadgets or a funky range of pots and pans, you will be charged referral fees under the "Home and Kitchen" category (because both kitchen gadgets and pots and pans has to do with the kitchen).

The referral fee is calculated as a percentage of your total sales price and (as mentioned above) varies by category. 

For example:

If you sell baby products, your referral fees will be:

  • 8% for products with a total sales price up to £10.00
  • 15% for products with a total sales price greater than £10.00
  • EXAMPLE: You sell a pacifier for £8.00, packaging and shipping included. That means Amazon will deduct £0.64 and pay you £7.36 (8 - 8% = 0.64). 

If you sell kitchen products, your referral fees will be:

  • 15%
  • EXAMPLE: You sell a revolutionary kitchen knife for £25.00, packaging and shipping included. That means Amazon will deduct £3.75 and pay you £21.25 (25 - 15% = 21.25).

Below is Amazon's full Referral Fee Schedule as at 05/06/2019.

Note: You don't have to be concerned about the last column ("per-item minimum referral fee") as you will be using the Pro Sell plan and not the Basic Sell plan.

amazon uk referral fee schedule
amazon uk referral fee schedule

CLOSING FEES

Closing fees are only applicable to media categories. These categories are Books, Music, DVD, Video, Video Games (Games, Accessories and Consoles) and Software.

If you sell in the media category you will pay a closing fee of £0.50 per item.

HIGH-VOLUME LISTING FEES

This is only applicable to sellers who keep more than 2 million stock items at Amazon warehouses. We won't talk about it now as it's not relevant for someone who is just starting with their Amazon business.

REFUND ADMINISTRATION FEE

If you refund a customer for an order for which you have already received payment, Amazon will refund you the amount of the referral fee you paid for the item(s), minus the applicable Refund Administration Fee, which is the lesser of £5.00 or 20% of the applicable referral fee.

For example, if you refund a customer the £10.00 total sales price of an item in a category with a 15% referral fee, your Refund Administration Fee will be £0.30 (£10.00 x 15% Referral Fee - 20% Refund Administration Fee).

TOTAL MARKETPLACE FEES

To sum it up, your monthly fees for using the Amazon UK Marketplace will be:

  • £25.00 plus
  • total referral fees plus
  • total closing fees (if applicable) plus
  • total refund administration fees (if applicable)

FULFILMENT BY AMAZON (FBA) FEES

As discussed in the two previous lessons, FBA is the Amazon service you will use to store and deliver your products to your customers. 

With FBA you pay: 

  • Fulfilment Fees (a flat fee per unit, based on the product type, dimensions and weight) and 
  • Storage Fees (Charged per cubic foot per month).

FULFILMENT FEES

You can use the Fulfilment Fee Calculator to determine how cost-effective it will be to use FBA. You can only use it if you know which product(s) you are going to (or at least want to) sell because the product dimensions and weight will affect the fulfilment fee(s).

Example:

In the above example, I had a hypothetical product in mind. Nothing specific... I would sell it for more than £10.00, it would be big enough to fit in a standard-size parcel (less than 45 x 34 x 26cm) and it would weigh somewhere between 1.4 and 1.9kg. According to the Fulfillment Fee Calculator, I would pay a £2.68 fulfilment fee in the UK Marketplace or a €3.88 filfilment fee to sell in the greater Europe Marketplace.

Please note: this calculator was designed to give you an estimate fulfilment fee. It's accurate, but not perfect. So don't rely on it too heavily.

The fulfilment fee(s) you pay covers:

  • Warehouse staff picking your item once it sells.
  • Packaging the item to prepare it for shipment.
  • The cost of shipping the item to the customer.

Download Amazon's latest FBA Rate Card for the UK here. It will give you a detailed breakdown of the latest FBA fees.

STORAGE FEES

Pay for the space you use to store your items in an Amazon Fulfilment Centre. 

The storage fee is based on the daily average volume in cubic feet per month and varies between low season (January to September) and high season (October to December).

Header

Jan - Sep

Oct - Dec

Standard Size (Clothing, Shoes and Bags)

£0.39

per cubic foot per month

​£0.55
per cubic foot per month

Standard Size (all other Categories

​£0.65
per cubic foot per month

​£0.91
per cubic foot per month

Oversized (all Categories)

£0.45
per cubic foot per month

​£0.63
per cubic foot per month

We recommend selling standard-size products only. There are many risks involved with selling oversized products which we discuss in the Advanced Training Programme.

Here are examples of standard-size products with their associated fees.

TOTAL FBA FEES

To sum it up, your monthly fees for using the FBA service will be:

  • Total fulfilment fees for picking, packing and shipping your products.
  • Total storage fees for keeping your inventory in an Amazon warehouse (fulfilment centre).

OTHER FEES INVOLVED IN RUNNING YOUR ONLINE BUSINESS

Since this Crash Course focuses on explaining FBA, we will not discuss other costs in detail. However, you should be aware that Amazon Marketplace and FBA service fees are not the only costs involved in running your online business.

Other costs involve product sourcing and/or development, brand development and registration, VAT, etc. We break all the costs down in detail in the Advanced Training Programme.

Next we'll consider the benefits and disadvantages of using FBA to run your online business. Head over to the next lesson.

(End of Day 3)

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