amazon fba fees

Table of Content

Chapter 1 Choose the profitable products to sell on Amazon FBA

Chapter 2 Understand the corresponding fees and marketplace rules of Amazon FBA

Chapter 3 Make sure that the quality and packaging of your products meet Amazon’s requirements

Chapter 4 Always check your stock

Chapter 5 Be flexible with Amazon rules

Before starting selling on Amazon FAB, many sellers don’t know what is Amazon FBA, in this article, we will explain everything you need to know about it from where to start, what are the profitable products, Understand the corresponding fees and marketplace rules of Amazon FBA, to how to make sure that the quality and packaging of your products.

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Amazon FBA brings so much convenience and eases to sellers. Not only because they do not need to worry about logistics, but also they could have more time to manage their stores and other business-related management. Due to the extensive benefits of Amazon FBA, more and more people desire to join it, but there are also some risks of selling on Amazon FBA, which are as follows:

The return policy of Amazon is simple, and many customers often do that so that you can get a higher return rate.

If your business is tiny, then you might not be able to keep up with the pace of Amazon and its storage fee.

You can face some product handling issues as well by Amazon due to the tremendous amount of merchandise they get from all over the world.

If you manage to overcome these risks, you can successfully sell your business on Amazon FBA. To help you avoid these risks, we have put up a list of five important key points to understand and consider before selling on Amazon FBA.

pros cons of selling on amazon fba

Amazon is made up of a lot of people, brands, and companies selling products for profit. Being a third-party seller, if you want to sell your products on Amazon through FBA, the following are some essential things to understand and keep in mind beforehand:

Chapter 1: Choose the profitable products for selling on Amazon FBA

It is very important to keep in mind that the profitable product does not mean a perfect product which will provide your business without effort or hard work. There is no such thing as a “perfect product.” In the pursuit of a perfect product, most people get stuck and do not start at all.

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Products right for selling on Amazon FBA:

The specific patterns of products selling on Amazon indicate the most popular types of products, and we are providing you with the inside scoop regarding that.

Niche or hobbyist products

Niche or hobbyist products are specific to the unique needs of a particular type of user that makes it different from the rest of the market. These kinds of products are less likely to be carried or fulfilled by Amazon itself. Thus, you may have a better chance of grabbing the Amazon marketplace.

Used or refurbished products

The used or refurbished products are an entire industry, and it is recognized as a separate department. There are plenty of advantages of selling used or refurbished products on Amazon FBA. Not all people afford high-quality products, and they look for refurbished or used products.
This is a great way to earn customers’ trust as well as the seller’s performance, which will not only improve your overall metrics, but it also provides you to recognize the used and refurbished products with more need, such as mobile, laptops, other electronics devices, etc.

Unique or original products

Some items on Amazon sell more frequently than others, and by far, the most successful sellers are the people who sell such things that are only unique to their brands, and no other sellers offer the same kind of product. This could be either your own developed product or you possess the sole selling rights of it. If you think you have a unique idea or product, then Amazon FBA will be a perfect platform for you, and your product sale will take off.

Products wrong for Amazon FBA:

Some products will increase your sales; on the other hand, there are also some of the products which are wrong for Amazon FBA, as mentioned below.

Small sales volume

We don’t advise you to sell products with small sales volumes on Amazon FBA because they may have low demand of customers and the profit margin is small. Therefore, before you start selling on Amazon FBA, you need to make sure that the products you sell have certain sales volumes.

Small profit margin

Cheap products always have a low-profit margin, and they are only valuable when you sell them in abundance. If the profit margin of your product is ordinary, then cheap products will not do much good for your business. For example, if the retail price is less than 7$, it is not suitable for FBA because of certain charges amount of basic fee for each trade which adds too much cost to the seller and makes it completely unprofitable.

Oversize products

Big and bulky products such as big generators and machinery are usually costly, and there are multiple disadvantages involved in selling them, such as a small number of sales, higher fees, high risk, etc. Moreover, people want to buy an oversize item by going to outlets physically. There is a lesser chance of selling oversize, too heavy, or big products than the normal ones. Amazon often adjusts FBA fees, and some sellers will find that the prices for oversize products are increasing. If your product is too large or too heavy, then it is not suitable for FBA.

Seasonal products

There are several downsides to go for seasonal products on Amazon FBA because it is based on the sales forecast. If a product is specific to the season, then it can cause a couple of difficulties.
If you receive a large number of orders but the inventory is not enough to suffice, then your product will go out of stock.

If you have a large number of products in your inventory and you receive an insufficient quantity of orders, then you will experience dull of sale.

Extremely functional products

Products with a lot of moving parts and mechanics involved are risky to be chosen for selling on Amazon FBA. The return policy and process of Amazon are straightforward. Thus, a high return rate will occur. These functional products are generally delicate, and they are not an excellent choice to sell on Amazon FBA.

Prohibited products

Some products are officially forbidden from Amazon management, such as alcoholic beverages (include non-alcoholic beer), gift certificates, gift cards, vehicle tires, Kongming lanterns, etc.

Chapter 2: Understand the corresponding fees and marketplace rules of Amazon FBA

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If you want to work with Amazon FBA, you will have to pay a flat fee per unit, which depends on the weight and the size of your product. Amazon is the world’s most famous and biggest e-commerce platform; you will have to pay them for their services because you know that your business will grow.

FBA Fees

Total FBA fee consists of three further categorized fees which are as follows:

FBA Fees Equation = (Execution Fee) + (Storage Fee) + (Storage Inventory Placing Service Fee);

Execution Fee: Execution fee as names suggest is for the execution purposes of the whole process, and it further divides into three parts.

Execution Fees Equation = (order processing fee) + (sorting and packing fee) + (weighing and handling fee);

Order Processing Fee

Sorting and Packing Fee

Weighing and Handling Fee

Storage Fee: Amazon stores your inventory in its fulfillment centers and charges its clients the storage fee. There are two types of storage fee, which are as followed:

Monthly Storage Fee: It is further divided into three factors which times with one another to finally calculate the monthly storage fee.

Monthly Storage Fees Equation = (quantity of goods requiring 6 months ‘long-term storage fee)×(unit quantity of goods)×(monthly storage fee per cubic meter)

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Long-term Storage Fee: It is also further divided into three factors, which times with one another to finally calculate the long-term storage fee.

Long-term Storage Fee Equation = (quantity of goods required to pay long-term storage fee at a particular time) × (quantity of products per unit) × (long-term storage fee per cubic meter during the same period)

Storage Inventory Placing Service Fee: Amazon handles your inventory in the best possible way, and the Storage Inventory Placing Service fee is charged because Amazon sends your inventory to multiple fulfillment centers. For example, you gave Amazon 30 laptops, so now Amazon will send ten to Europe, ten to China, ten to America, etc. This approach helps customers across the globe because they get your product quicker.

The fee structure of storage inventory placing service fee is as follows:

– Standard Size Items

$0.30 on 1 lb. or less weighing products

$0.40 on 1-2 lb. weighing products

$0.40 + $0.10/lb. above the first 2 lb. over 2 lb. weighing products

– Oversize Size Items

$1.30 on 5 lb. or less weighing products

$1.30 + $0.20/lb. above the first 5 lb. over 5 lb. weighing products

-Marketplace Rules

Just like every other market place Amazon FBA market place comes with its own rules, and if you are interested in selling your products through Amazon FBA, then you should thoroughly go through the following rules:

A-Buy Box:
-Definition: When customers start the purchasing process, they come across a box on the Amazon product detail page on the top right corner. A section with a dark yellow button with the title ‘Add to Cart,’ that is Amazon’s buy box.

-Function: From Amazon Buy Box, customers can add products to their shopping cart directly. As many sellers can sell the same product, that is the reason, sellers have to compete to win Amazon Buy Box.

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-70%—80% sales on Amazon are generated by “Buy Box”: When customers decide to purchase an item on the product page, 70%—80% of the customers will buy from the seller who has won the “Buy Box”. Instead of clicking on the “newer or used offers” available at the bottom of the page to see more prices and offers, most buyers simply click on the yellow “Add to Cart” button. That’s why all sellers want to win “Buy Box”.

– Sellers will take turns winning “Buy Box” through Amazon’s algorithm: Amazon will rotate among all eligible Buy Box sellers. This rotation will depend on Amazon’s algorithm, but it will typically turn among all sellers with competitive prices based on price, usually within a percentage of the current Buy Box price.

-A low price doesn’t necessarily win “Buy Box”: The amount of Buy Box is not always the most economical on Amazon. Most customers will naturally think that Buy Box is the lowest price, so most of the new sellers have to place their prices to the lowest to match the Buy Box price. But sometimes, Buy Box’s price will be higher than the most economical price $1 to 2, on certain commodities, even higher than the rate for $5.

In fact, they may get the same results when their prices are higher or lower than the Buy Box price because Buy Box rotates all the time, and the lowest price doesn’t always guarantee Buy Box.

– Sometimes Amazon decides who gets “Buy Box” based on the location of the inventory: This feature is a bit tricky. Where Amazon tracks seller performance and reasonable rates for Buy Box, but sometimes it also depends upon the location of your inventory. For instance, if the customer is a Prime member on the west coast, Amazon may show him a product in the west coast warehouse in a Buy Box, because it is easier for Amazon to meet Prime’s two-day delivery promise than a $1 cheaper product on the east coast.

Another customer may be sitting in an office in Texas and looking at the same product page at the same time. But he may see a different seller in the Buy Box because Amazon wants to ship directly from a warehouse in Texas.

– New products are more likely to win “Buy Box”: If you sell a used or recycled product, it is not eligible for a Buy Box. The exception to this rule is that for some media products. Amazon displays two Buy Boxes, one new and one used. Therefore, it is better to sell completely new products on Amazon FBA if you want to win “Buy Box”.

-Amazon’s self-support products always dominate “Buy Box”: Most of the time, if Amazon is the seller of an item, it will grab the Buy Box. But sometimes Amazon will cede the Buy Box to a much cheaper seller because Amazon has sold out of inventory and then a third-party seller can get a Buy Box and start selling the product.

B- No Customer Relationship:

When you work for selling on Amazon FBA, each sale is managed as a one-time transaction, and sellers are not allowed to market/re-market to customers once the deal is done. Moreover, Amazon handles the orders and product shipping, so the customers build a relationship with the Amazon but not with the seller.

C- Sellers are required to respond to customer inquiries within 24 hours:

It is one of the most essential requirements of Amazon and sellers need to answer the messages of customers within 24 hours. If you are late and do not respond within 24 hours, you will get a penalty as an inadequate response mark on your metrics.

You have to keep in mind that automated response or auto-reply do not count as a legit response and if your metrics increase over 10% with late answers and your account will be suspended.

D- Sellers need to respond to a return request within 48 hours:

Amazon expects sellers to respond to legit and eligible return requests within 48 hours, and if a seller does not respond with the provided time frame then he will be held responsible, and if the buyer files an A-Z claim buyer will be penalized to an immediate debt.

Chapter 3: Make sure that the quality and packaging of your products meet Amazon’s requirements

Amazon warehouse packing

Ensure product safety and comply with EU relations:

If your products meet the requirements of EU rules which make sure the safety of products, then you will have no trouble. EU legislation ensures and allows to detect the unsafe products. If the product safety team of Amazon finds any product out of EU laws, then they notify the seller, and these products are not shipped. You need to ensure the safety of your products, and you must comply with EU relations.

Product validity period and quality assurance:

You have to make sure that the products you sell on Amazon must have a handsome period before they expire. If a customer complains about you, then Amazon will not provide you with the information of the customer, but you can get penalized.

Your products need to have at least 6 months until the expiration date. Moreover, you need to ensure that your products meet the quality standards of the Amazon market place.

Package products cannot be separated:

If your product falls into many categories, then it must be prepared according to its applicable preparation type. For example: If you have shampoo bottles and conditioners bottles and by following the liquid preparation requirements of Amazon, you can make up their sets, and you paste a sticker on it with the label “Sold as a Set”; so they cannot be separated and will be sold and shipped as a set.

Ensure the safety of packaging and tightness and strength:
The fulfillment centers of Amazon are located in different regions around the globe. When any product is to be shipped somewhere, it might have to travel thousands of miles to reach the customer. For the safety of products as they can be delicate, you must have to ensure Amazon’s standard of strength and tightness of packages for their complete safety.

Elastic tapes or packing tapes are not allowed:
Amazon does not allow you to use plastic straps or tapes on the boxes. You can use straps or tapes to make sure the safety of flaps but on the boxes, you can use water-based gummed tape, which is not only more durable than tape but also recyclable.

Products shall be placed in hexahedron cartons with labels:

Before you send your inventory to Amazon’s fulfillment centers, you need to prepare them with all the required standards, like you have to place them in hexahedron cartons with the help of labels you have to provide information about weight and safety warnings.

For example, electrostatic sensitive products with safety warning labels as “do not open or handle except at a static-free work station” and heavy products containing weight labels with cautions as “use correct lifting techniques.” If you do not prepare your products that way, then Amazon will charge you the preparation fee.

Chapter 4: Always check your stock

To keep track of your inventory and to manage it, you have to keep an eye on your existing stock at the fulfillment centers of Amazon.

amazon warehouse checking

Why do you need to check stock?

There can be multiple reasons why you should check your stock. First of all, consider it as a good practice and a part of the business to continually monitor your inventory to avoid any trouble. Moreover, Amazon handles a massive array of multiple lists of countless vendors around the world. Some products from your stock may go missing mistakenly from Amazon. Checking your inventory continuously will allow you to maintain it by sending more products to Amazon’s fulfillment center when it is required. If your inventory is in bulk, the cost of logistics and warehouse rental cost will increase; if there is a shortage of stock, it will lead to out of stock, and your product ranking on Amazon will fall.

How to check your stock?

Amazon provides you with the services of maintaining and checking your stock by requesting the inventory report. Inventory reports give you the current picture of your capital on Amazon.

You can request your inventory report from the request report button available on your inventory page. Once you have applied for your stock information, it will take 15 to 45 minutes to generate.

How to manage your stock?

Amazon provides its users with manage inventory page, and you can use efficient tools there for your inventory or stock management tasks. You can set many filters available there to display customized stock information to understand and manage your stock better.

Amazon provides FBA intelligent replenishment for its sellers. Through inventory days, shelf time, sales volume, and other multidimensional analyses it will remind the seller whether to replenish the goods and the number of replaced products to avoid out of stock.

Chapter 5: Be flexible with Amazon rules

There are many detailed rules and regulations that you have to know before selling on Amazon FBA, and if you want your business to grow there, then you must need to be sufficiently flexible with them.

Calculate the cost and the potential profit margin

To calculate the cost and the potential profit margin, Amazon provides its customers with an excellent tool known as an FBA calculator. It derives a possible profit margin, and it very clearly breaks down the fee that will be associated with FBA and the products you are selling.

Follow the terms of service and keep an eye on policy updates

We often neglect the terms and conditions of services, but it is not a healthy practice for your business. You must know and understand all the terms of services, and you continuously need to keep an eye on these terms. Amazon changes its terms and sends everyone emails and notifications about it, and you must read them to change your strategy accordingly.

Keep up to date with price inquiries to ensure appropriate pricing

There can be variation and fluctuation in the rates of Amazon FBA services, and you need to stay connected and updated with price inquiries. If Amazon gives you more relief from somewhere with lower fees, then you can also drop the rates of a particular product to gain better customer care experience rewards.

Improve product ranking and win “Buy Box”

When you start selling via Amazon FBA, your first priority and milestone of your business must be to win the “Buy Box”. You should improve the quality of your services and products and provide exceptions standards of customer experience to promote your product rankings. Amazon only offers “Buy Box” to vendors with a high ranking of products. Winning Amazon buy box is like having a certificate that increases the reliability and integrity of your product.

Timely reply to customer emails to improve customer satisfaction

It is one of the critical factors in the success of any business. Customer satisfaction, by far is the most vital factor that must be catered carefully and efficiently. You must reply to all the queries of your customers to satisfy them completely and win their trust. It will not only enhance your sales but also help you build customer loyalty.

Conclusion

If you want to expand your business and become more competitive nationally or internationally, then joining Amazon FBA would be a perfect option for you. You can use Amazon’s warehouses around the world to store, package, and deliver products, but you need to thoroughly understand the pros and cons before making your final decision. The above mentioned five points are for reference, and if you have other questions, you can contact us at any time, and our highly proficient officials will guide you regarding your queries.

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