How Much Does It Cost to Sell on Amazon Marketplace?

Selling on Amazon Marketplace has become a lucrative opportunity for many businesses, from small startups to large enterprises. However, it's essential to understand the costs involved in selling on this platform to ensure that it aligns with your business model. This article will explore the various costs associated with selling on Amazon Marketplace, including subscription fees, referral fees, fulfillment fees, and other potential charges.

1. Subscription Fees

Amazon offers two main types of selling plans: the Individual Plan and the Professional Plan.

• Individual Plan: This plan costs $0.99 per item sold. It's ideal for those who plan to sell fewer than 40 items per month. There's no monthly subscription fee, making it a cost-effective choice for small sellers or those testing the waters.

• Professional Plan: This plan requires a $39.99 monthly subscription fee but doesn't charge a per-item fee. It's better suited for businesses that expect to sell more than 40 items per month, offering access to advanced selling tools and eligibility for top placements in product detail pages.

2. Referral Fees

Amazon charges a referral fee on each sale, which varies depending on the product category. This fee is calculated as a percentage of the total sale price, including the item price, shipping, and any gift-wrapping charges. The percentage typically ranges from 6% to 45%, with most categories falling between 8% to 15%.

For example:

• Books, Music, Video, and DVDs (BMVD): 15%
• Consumer Electronics: 8%
• Fashion (Clothing, Shoes, Jewelry): 17%

It's crucial to factor in these fees when pricing your products to ensure profitability.

3. Fulfillment Fees

If you choose to use Fulfillment by Amazon (FBA), you'll incur additional fulfillment fees. FBA allows Amazon to store, pack, and ship your products, which can significantly reduce your workload but comes at a cost.

Fulfillment Fees Breakdown:

• Standard-size items: Fees range from $2.50 to $5.68 per unit, depending on weight and size.
• Oversize items: Fees range from $8.26 to $137.32 or more, depending on size and weight.

FBA also includes storage fees, which are calculated based on the volume of your products stored in Amazon’s fulfillment centers.

Storage Fees:

• Standard Storage Fee: Charged monthly, it's $0.83 per cubic foot from January to September and $2.40 per cubic foot from October to December.
• Long-term Storage Fees: Items stored for more than 365 days incur additional fees of $6.90 per cubic foot or $0.15 per unit, whichever is greater.

4. Other Potential Costs

Beyond the primary fees mentioned above, sellers may encounter additional costs, depending on their business model and the services they choose to use:

• Closing Fees: For specific categories like media products (e.g., books, DVDs, music), Amazon charges a $1.80 closing fee per item sold.

• High-Volume Listing Fees: If you have a large catalog with more than 100,000 active SKUs, Amazon may charge a fee of $0.005 per listing per month for each listing over the 100,000 threshold.

• Advertising Costs: Amazon offers several advertising options, such as Sponsored Products, Sponsored Brands, and Sponsored Display. While optional, these ads can help boost your product visibility but add to your overall cost.

• Refund Administration Fee: If a customer returns a product, Amazon retains 20% of the referral fee or $5, whichever is less, as a refund administration fee.

5. Example Cost Breakdown

Let’s look at an example to understand how these fees add up. Suppose you sell a standard-size electronic gadget for $50 using the Professional Plan and FBA.

• Referral Fee (8%): $4.00
• FBA Fulfillment Fee: $3.07
• Monthly Subscription (Professional Plan): $39.99/month (spread across all sales)
• Total Cost Per Sale: $7.07 + prorated subscription fee.

If you sell 100 units per month, the subscription fee per unit would be $0.40. Therefore, your total cost per unit sold would be $7.47.

6. Profitability Considerations

When calculating profitability, it's essential to consider all costs associated with selling on Amazon, including the cost of goods sold (COGS), shipping to Amazon (if using FBA), packaging, and any promotional discounts you may offer.

A simple formula to estimate your profit per item would be: Profit = Sale Price - (Referral Fee + Fulfillment Fee + Subscription Fee per unit + COGS + Other Costs)

Example:

• Sale Price: $50
• Referral Fee: $4.00
• FBA Fulfillment Fee: $3.07
• Subscription Fee per unit: $0.40
• COGS: $25
• Total Cost: $32.47

Profit Per Unit: $17.53

7. Conclusion

Selling on Amazon Marketplace offers access to a vast customer base, but it comes with various costs that can impact your profit margins. By understanding these costs and strategically planning your pricing, you can make informed decisions that contribute to your business’s success.

It's crucial to keep track of all expenses and continuously evaluate your profitability, especially as your business grows or as Amazon updates its fee structure. In some cases, using a third-party fee calculator can help you get a more accurate estimate of your costs and profits.