Selling on Amazon offers a lot of advantages to sellers, like improved brand visibility online and better customer reach across multiple marketplaces. While you sell your products on Amazon, you need to pay for fees especially if you have subscribed to FBA program.
As you may have noticed, Amazon offers different services, programs that you can choose to opt in to help you run your online business.
However, sometimes these services and programs that you are paying for could result to a hefty expense for your business and Amazon may end up costing you more money than it brings in.
In this article, we will explain what is included in the amazon fees and how to deduct the expenses from your gross profit so that you know if your business is profitable.
The Costs You Must Absolutely Understand
Based on what you are selling on Amazon, the fees would be different. You must take in account:
- Referral Fees (varied from categories)
- Nature of the Product (Multimedia, clothes)
- Weight Handling
- Pick & Pack
If you want more information concerning FBA fees, you can check this page with all the FBA fulfilment fees products’ criteria.
What is included in the Amazon Fees?
First thing you must do is to understand what your costs are. Indeed, there’s different categories and different costs that you must take in consideration to run your business properly on Amazon.
Keep in mind some costs are indirect due to special operations such as shipping costs…etc.
You can also have additional costs due to administrative service fees or stock management fees.
This is the detailed list of the fees you can find on your profit and loss statement:
Table of Content
1)Added Value Service
Giftwrap charges for Amazon fulfilled units are part of your gross sales proceeds. Amazon reports them to you as revenue and charges you a Giftwrap – Chargeback fee equal to the amount charged to the customer.
Shipping charges for Amazon fulfilled units are part of your gross sales proceeds. Amazon reports them to you as revenue and charges you a Shipping – Chargeback fee equal to the amount that you charged the customer.
Per-unit fee charged to compensate Amazon for the cost of fulfilling.
FBA Weight Based Fee
Fee charged against the value of the item
Fixed/Variable Closing Fee
Variable Closing Fee _ Closing Fees
Fixed Closing Fee_Per-item fees for Individual Sellers
Monthly subscription fee
Monthly paid services fee. They refer to special advertisement such as DSP and marketing strategy.
Sales Tax Collection Fee (Tax Calculation Services Fees)
◆FBA Inventory Storage Fee
◆FBA Long-Term Storage Fees
Calculated as: FBA Storage Fee + FBA Long Term Storage Fee
Fee for FBA Inventory Disposals
Fee for FBA Inventory Removals
FBA Inbound Transportation Fee
FBA Inbound Transportation Program Fee: FBA Inbound Transportation Program Fee
Low Value Goods Tax
Low Value Goods Tax-Principal + Low Value Goods Tax – Shipping
Marketplace Facilitator Tax
Marketplace Facilitator Tax – Principal – The tax withheld by Amazon on the Principal.
Other fees refer to extra fees that you may pay if a mistake occurred. It is possible that Amazon did not charge you for the right amount and after checking charged you with additional fees.
How to Calculate Amazon Fees?
We have calculated the Amazon fees as followed:
How to Calculate Tax, Gross Profit & Gross Profit Margin?
If you want to know your profit, then you will need to know how much you are paying for tax as this is an unavoidable part of your business expense.
Calculated as followed:
(Sales-Tax) + (Refund Cost-Tax) + (Refund Cost – Shipping Tax) + (Refund Cost-Marketplace Facilitator Tax) + (Amazon Fees – Marketplace Facilitator Tax)
You need to calculate your gross profit to know if your sales are profitable. You need to take your gross sales amount minus all expenses related to goods, Amazon fees and taxes.
Calculated as followed:
Sales + Reimbursements + Refund Cost + Promotion Cost + Advertising Cost + Amazon Fees + Tax
Gross Profit Margin
Gross Profit margin enables you to measure the health of your business on Amazon. You can analyze the fluctuation of the Gross Profit Margin percentage and see directly if there’s any anomalies in your sales performance.
Calculated as followed:
Gross Profit / Sales * 100%
Monitor your Amazon Fees with Us
To sum up the Amazon fees are sorted in 7 categories:
- Added Value Service (Giftwrap)
- FBA Fees
- Referral Fees
- Storage Fees
We recommend you use our software BigCentral to automatically generate a profit and loss statement.
BigCentral you can easily monitor your business profitability. BigCentral provides you all the details you need to know to keep a steady track on your account health. You can have a precise overview of your selling activities and all the costs you pay and the profit you make day by day.
In conclusion, subscribing FBA program when you sell on Amazon is very helpful. However, the more diverse your products are, the more complex the fees would be, and it can make things extremely confusing for sellers to keep track.
We recommend you pay attention to your business accounting to make sure that the services you are paying for on Amazon are worthwhile and not eating into your profit.
Amazon Accounting Series ✨
Start your 14-day free trial and get instant access to your visual and comprehensive P&L report with Big Central now.