2 Cost Elements that the FBA Calculator Won't Break Down for You
If you are an Amazon seller, you know there are numerous costs that determine how much profit you'll make for each item you sell. Calculating profits is one of the critical things every seller should understand before launching an Amazon business.
Most importantly, you need to have a good understanding of your costs before you decide which product to sell - this is where the FBA calculator comes in.
Costs that Amazon Sellers Incur
Generally, Amazon costs are be divided into three:
- Variable costs that include fees such as Fulfillment by Amazon (FBA), returns, storage
- Starting or upfront costs that include getting samples, photography, inventory costs and shipping
- Marketing costs that include paying for clicks and promotions or campaigns
For FBA sellers, the Amazon FBA calculator makes it easy to determine the FBA fee for each listed item. Using this calculator, you can determine how much your fees will be when you use the FBA model for any product. As a general rule, FBA fee is 15% of a product price plus a $3 fee for shipping and handling the product.
How to Use the FBA Fee Calculator
Using the Amazon FBA option offers sellers more benefits than opting to using the Fulfillment by Merchant (FBM) option. Amazon FBA sellers are able to increase the conversion rates by up to three times and make their products more visible on Amazon than FBM sellers.
Amazon's FBA fee is categorized into:
- Fulfillment fees which covers shipping, handling, packing, product returns and customer service fees
- Stock storage fees
Calculating Amazon's Fulfillment Fees
To determine the fulfillment fee using the Amazon FBA fee calculator, pick a product that resembles the item you wish to sell. Amazon will use the weight and dimensions of that product to calculate your FBA fee. Once you have selected the product, key in the product cost and selling price then click the 'calculate' button. The Amazon FBA fees calculator will display the approximate FBA fee under the fulfillment cost section.
It is important to note that the FBA Amazon calculator only provides estimated FBA costs - not the exact costs. As a matter of fact, the calculator does not consider all the factors that affect FBA fees. These factors include:
- Extra weight based on product size: Amazon adds about 0.25 lbs to packing weight based on the size of an item. For products in the oversize category, the eCommerce giant adds a maximum of 1 lb to the product
- Product dimensional size: Amazon's charges for oversize products are quite high hence the need to consider this during FBA calculation
Amazon's Storage Fees
Besides the fulfillment fee, sellers who use the FBA option have to pay a storage fee to have their items stored in Amazon's warehouse. The storage fee is paid on a monthly basis and the rate is based on cubic feet for units stored in the fulfillment center and volume of products that move through the center.
Amazon has separate fees for standard size and oversize products. Of importance to note is that storage fees are adjusted depending on the season. Generally, the eCommerce giant charges lower fees between January and September and higher fees during the holiday season, from October and December.
Cost Elements that Amazon's Calculator Does Not Show Sellers
There are two key elements that the Amazon Calculator FBA will not break down for you even though they are included in the FBA fee. These are:
Shipping and handling Costs
The FBA calculator does not show sellers how much shipping and handling costs. However, sellers can reduce the cost of sending items to Amazon by shipping different products in a single box. To do this, sellers should print product labels that meet Amazon's standards and place it on every product being shipped. Doing this enables you to save about $ 0.3 per label. Ensure that you select 'Merchant' option under the 'Label Products' section of the shipping plan to label products yourself.
'Pick' and 'Pack' Costs
Amazon's Pick and Pack fee is charged when the company ships an item to a customer. The 'Pick' fee is based on the actual dimensions and weight of the item. On the other hand, the 'pack' cost is applicable in instances where Amazon packs an item on behalf of the seller. Often, this fee applies to specific items such as sharp objects that the eCommerce giant has to pack based on its guidelines. Sellers should specify whether they want to pack items themselves or pay Amazon to do it as they develop their shipping plan.
Online sellers can make a decent income selling products on Amazon. However, their success depends on how well they are able to calculate their costs, price and market their products. For FBA sellers, the Amazon calculator makes it easy to calculate FBA fees. Though it is a simple and straightforward tool, there are costs that the calculator does not break down for users as explained above. There are several things that Amazon sellers can do to reduce FBA fees. These include developing their own shipping plans, shipping products in bulk and managing their stock long term.