Firstly, let’s categorise the four different types of Amazon fees
Amazon will charge you 4 different types of fees: Selling Plan, Referral fees, Fulfilment fees and Other (long-term storage fees or additional programmes like advertising). Amazon have two different types of selling plans – Individual and Professional. We can quickly brush through the differences between these plans, as a fully-fledged FBA seller you’re going to want to have a Professional Amazon selling plan, this means we can ignore then £0.75 charge per unit sold when using an Individual plan and focus on the £25.00 (plus VAT) per month fee with the Professional selling plan. For a more in-depth breakdown of the differences between both plans have a look at the following Amazon plan comparison.
Example: Real Amazon Product Breakown – Fees, Sales and Profit
We can see with this products that we can purchase it for £10.00 and then sell it on Amazon for £38.99, however, we don’t make £28.99 in profit. So, let’s look into exactly how many units this item we should purchase, how long they will take to sell and how much profit we’d be making off this one product accounting for all the Amazon fees we’ll be paying.
This product sells 550 times per month and has 4 sellers on the ‘buy box’ meaning we would be the 5th Amazon store selling this product at £39.99… From this, we can say that we will receive 20% of the sales for this specific product… or 110 sales per month. Typically when selling on Amazon we only want to buy 2 weeks worth of inventory, in this case we’d be looking at around 55 units, if we can get our hands on that many!
So, what do the numbers look like buying 55 units? Keep in mind, we can buy much less than this depending on our budget…
Our total purchase price would be £550.00 which would then generate us a total revenue of £2,199.45. Accounting for our cost price of £550.00 as well as the £612.17 in Amazon fees which would be deducted, we would make a net profit of £1,037.28
What are the fees per sale for this specific product?
Here, we would pay £5.30 in “Referral fees” alongside an additional £5.84 in “Fulfilment fees” making the total fee for selling this product £11.14. This can feel like quite a lot of money to pay in fees, however, keep in mind that Amazon are doing 90% of the work for you whilst selling the products to customers that are visiting their platform each and everyday – that sounds like a fair compromise!