Amazon charges every seller a “referral” fee, and a “variable closing” fee for some product categories, taken from your sale price. The sale price used for calculating these fees includes the cost of shipping and gift wrapping. The variable closing fee is dependent on the type of product category you are selling.
You also have to take into account the fees associated with Amazon seller plan, shown below.
|Seller Fees||Individual Seller||Pro Merchant|
|Flat Fee||$0.99 per item in addition to the % fee||$39.99 per month but no $0.99 fee per item|
|Sales Percentage Fee||Variable, depending on product category||Variable, depend on product category|
The referral fees by each product category is mentioned below. If you are selling a low cost item such as something under $10, than you should pay special attention to minimum referral fees, since this can severely impact your gross profit margins.
Many sellers avoid selling a low cost item by bundling higher number of units into one listing. For example, if you have a product that costs $3/unit; you are much better off to sell a lot of 10 for $30 to avoid getting impacted by minimum referral fees on a $3 sale.
|Category||Referral Fee %||Minimum Referral Fee %|
|Amazon Kindle, Baby Products (Not Baby clothing), Beauty, Books, Clothing & Accessories, Health & Personal Care, Home & Garden, Kitchen, Luggage & Travel, Music, Musical Instruments, Office Products, Outdoors, Shoes, Handbags & Sunglasses, Software & Computer/ Video, games, Toys & Games, Videos & DVD, Video Games, Watches, Other||15.00%||$1 Not applicable for Videos, DVDs, Kindle Books, video game or software $2 for watches|
|Automotive & Power ports, Industrial & Scientific, Tools & Home Improvement||12% Not for wheels or tires||$1.00|
|Camera & Photo, Consumer Electronics, Unlocked Cell Phones, Video game Consoles||8.00%||$1 Not applicable to video game consoles|
|Collectible Coins, Electronic Accessories, Entertainment Collectibles, Major Appliances, Sports Collectibles||Variable||$1.00|
|Accessories for Kindle||25.00%||Not Applicable|
Comparing Amazon FBA vs your own fulfillment
Let us dive right in and look at cost of selling on Amazon doing your own fulfillment and comparing it to Amazon FBA program.
|Fees||Sell on Amazon FBA||Sell on Amazon|
|CPA fees||8-15% - depends on your product category||8-15%, depending on product category|
|Handling the Order||Media items - $0 Non-media items - $1 Clothing - $1 + weight handling*|
|Pick and Pack||Media - $1.02 Non-media - $1.02 Clothing - $1.42 + weight handling*|
|Storage Feed||January to September - $0.51 per cubic foot for standard sized, $0.40 per cubic foot for oversized October to December - $0.68 per cubic foot for standard, $0.53 per cubic foot for oversized|
|Inventory Placement Service Fee||Standard - up to 2 lb. - $0.30 - $0.40 Between 2 lb. and 5 lb. - $0.30 - $0.40 plus $0.10 per pound Oversized - 5 lb. and over - $1.30 plus $0.50 per pound over 5 lb.|
Calculating landed cost of our product to a FBA warehouse
In all the calculations above, we have not included the shipping and customs charges for actually getting your product from the manufacturer to the warehouse (FBA, inhouse, third party service) from where it can be shipped to Amazon buyers.
If you are simply involved in retail arbitrage, than this may not be a major cost for you and you can ignore this section.
However, a vast majority of Amazon FBA sellers are in fact procuring their products from factories in China, and for them, the shipping ans customs duties of getting the product from the manufacturer to the warehouse is a signficant cost that cannot be ignored.
There are three ways to ship form China to Amazon Warehouse:
- The items will be sent directly to Amazon Warehouse from China.
- The items will be sent to your home first and then to Amazon Warehouse.
- The items will be sent to a third-party company and then to Amazon Warehouse. This company will also check and prep the products for you.
Chinese supplier - Amazon Warehouse
A lot of people use this first method because it is the fastest and cheapest way among the three options for obvious reasons. This is especially true if you decide to use air or express cargo. You must pay for the shipping fee twice if the products must go through your home or a third-party company.
Chinese supplier - You - Amazon Warehouse
Some sellers prefer that they see the products that they ordered firsthand before selling them online. This is especially helpful when it comes to ensuring that the items meet Amazon’s quality requirements. This is also ideal if you live near the US main ports, like Los Angeles. It will add more to your shipping expenses if you live far from major ports because of the additional transportation costs from the port to your home. However, if you do decide to have the items shipped to your home first, you will be responsible for prepping your products, which can be a tedious process, especially for beginners like you.
Chinese supplier - Third-party – Amazon Warehouse
If you want your products to be inspected, prepped, and monitored professionally, and you have extra money to spare, you can hire a third-party company that can do all these things for you. You need to find a third-party company that is also located in the same state as the Amazon FBA warehouse if you want to have low shipping costs. If it is in a different state, the shipping costs will be a lot more expensive.
This is a complicated method of shipping items for export and import because it involves a lot of steps.
It may be complicated, but it is still one of the major ways to transport products from one country to another because it can accommodate a large shipment at a much lower cost.
The main disadvantage is the length of time. Shipping by sea has several stages:
- From the Chinese supplier to Chinese port (domestic)
- From the Chinese port to the US port (international, export and import)
- From the US port to your home, to the third-party company, or directly to Amazon FBA warehouse (domestic)
Two forwarders are involved in the entire process — the Chinese and US forwarders. They must coordinate with each other and handle all the processes involving importing and exporting these goods to and from their respective countries.
You can either find your own freight forwarder or you can let your supplier find one for you.
You need to understand that Amazon is not responsible for anything related to customs clearance and does not provide any delivery support.
They also do not act as a contact for overseas customs clearance.
These are all the responsibilities of the freight forwarder and the seller.
If your goods do not meet the requirements of the customs, they will be detained, and the freight forwarder should know how to handle such scenarios.
Finding your own freight forwarder vs. letting your supplier find one for you
If you think you will continue having this business for many years to come, you might want to find a freight forwarder that you can rely on. Sounds cheesy, but that’s how it should be. Moreover, finding your own forwarder is beneficial because you can find someone who speaks the same language as you do. And you are satisfied with what you have researched about them. You can choose someone who meets all your business needs. You can choose either a freight forwarder who is in China or in the US, although the latter is preferred by many. The main reason is the ease of communication, and there will also be no time difference that can affect communication because you live in the same state.
If you find your own freight forwarder, your Chinese supplier should deduct the cost from the total amount that you must pay. The amount depends on whether the forwarder will ship from the supplier’s warehouse or from a seaport in China.
Most beginners usually resort to the second option of letting their supplier find a freight forwarder for them because they do not have a lot of contacts yet. But as they continue doing their business, they will get recommendations from fellow sellers on where to find the best freight forwarder.
But you can still choose to let your supplier handle the shipment process. This is especially a great idea if your supplier has done business with an Amazon seller before because they already know how it works.
You do not have to explain about Amazon fulfillment centers, and the right way to prep the products. Just make sure to ask about the shipping costs because sometimes, they do not include the cost of shipping from the US port to Amazon.
The benefit of letting your supplier find a freight forwarder for you is that you do not need to search for it. And searching for freight forwarders and knowing what questions to ask can be challenging.
With the expertise and connections of your supplier, you can be sure that you will have a reliable freight forwarder who can handle your shipment for you. The only downside is that you are not learning the nitty gritty of processing shipments and searching for your own contacts because you let your supplier do it for you.
Cost of sea freight
There are a lot of steps involved when it comes to shipping goods by sea. However, it is still the cheapest way to ship because it can accommodate a large volume of shipment, unlike air freight, which has a limit.
The cost of sea freight depends on where the shipment is coming from, where it is going and what month you are going to ship.
But for reference, you can use $300 for a cubic meter (CBM) which includes all shipping costs from a seaport in China to one of Amazon’s warehouses located in the south of the USA.
This will at least give you a rough estimate of how much you will be paying. The United States is a large country, and the shipping costs also depend on where you are in the US. If the Amazon warehouse is in the west coast, the shipping fee will be much lower than if it is in the east coast.
There is also a minimum shipping capacity when using sea freight, which is 2-3 CBM per shipment. Keep in mind that when using sea cargo, most of the fees and charges that the freight forwarders need to pay in the entire process of importing and exporting the goods are fixed no matter how much CBM shipment you have. The minimum is 2-3 CBM which is not difficult to reach since you are shipping goods in bulk.
Shipping time for sea
So how long does it take for your cargo to reach Amazon’s warehouse from China if you use sea freight? There are so many factors involved that it usually takes at least 30 days for a shipment to reach Amazon’s warehouse located in the west coast coming from a Chinese seaport.
If the Amazon warehouse is in the east coast, it will take an additional 10 days, so 40 days in total.
This is the minimum timeframe, but it could take longer than that. For example, if you ship during the holiday season in the US or during a festival in China, your cargo might take a longer time.
There are also times when the customs clearance takes a longer time to complete because they are processing a higher volume of cargos than usual. Other factors that can affect the delivery time are the weather, labor issues at seaports, seasonal behaviors, and so on.
Christmas is the best time to sell online because a lot of people are buying gifts for their loved ones. So, if you are planning to sell stuff for Christmas, you must make sure that your shipment leaves China by the last week of October.
If not, you will suffer delays and your shipment that you intend to sell on Christmas will arrive late, probably after Christmas. During this time, there is a much higher volume of shipment, which is why things get stuck at the customs.
The second method of shipping is via air freight, and this is ideal if your shipment exceeds 1000 lbs. If it is below 1000 lbs., you can try express cargo, which involves a courier company such as DHL, FedEx, and UPS.
However, most sellers on Amazon use either sea cargo or air freight because they usually have a lot of stuff to ship. Just like with sea freight, goods shipped via air freight also must go through customs clearance.
And just like sea freight, you also need to find a freight forwarder who will handle the entire process, including clearing customs. You must make it clear to your freight forwarder that you want to pay for the total cost of shipping the products.
You do not want to pay fees again when the shipment reaches your home or for import and export fees. This should be clarified by the freight forwarder before you decide to use their service.
Cost of air freight
When it comes to air freight shipping, the cost depends largely on the weight and volume of your shipment.
Typically, air freight shippers charge per dimensional weight or actual weight, depending on which one is higher.
To calculate the dimensional weight, you need to multiply the shipment’s volume in CBM by 167.
For example, if your shipment has a dimension of width-60 cm x height- 60 cm x length- 60 cm, you will get 216,000. Divide this by one million and you will get 0.216. To get the volumetric weight, multiply this by 167.
Your shipment’s volumetric weight is 36.072 kgs. If this is bigger than the shipment’s actual weight, you will be charged based on the volumetric weight, or vice versa.
Compared to sea freight, air freight is a lot more expensive, especially if you are shipping heavy items. Imagine if you are shipping items that weigh a total of 2000 lbs.
A medium sized box by sea from Shenzhen, China to New York, USA, will cost only about $1200. But if you ship the same item via air freight to and from the same destination, you may pay a whopping $4000.
Shipping time by air
Obviously, shipping via air freight takes a much shorter time than sea freight because airplanes are 30 times faster than ships. It will only take your shipment 3 days to one week, again depending on different factors such as speed of getting cleared at the customs, holiday season, and so on. Therefore, air freight is a lot more expensive than sea freight.
If you are pressed for time, you should consider choosing air freight. Maybe you are planning to sell before the holiday rush, and you want your items to reach on time. Or maybe you are selling goods that have expiry dates or items that are seasonal.
Electronics and other expensive items are also usually shipped via air because they will have a lower chance of getting lost or damaged because of the shorter shipping time. They are also more protected in planes than in ships in terms of storage conditions.
Ideally, the customs value is calculated as: cost of product + cost of transportation to the Chinese port + export clearance in China.
However, freight forwarders just estimate the amount at 20% to 30% of the value of the product in the United States, and this is what they declare at the customs clearance. To estimate the tariff of the product, you just multiply this amount to the current tariff rate.
Customs also assigns a standardized classification system to determine customs duty.
HS Code means Harmonized Commodity Description and Coding System or simple Harmonized System.
This consists of classification names and numbers to sort out traded goods that come in and go out of the country.
You must ensure that you assigned the correct HS code to your goods. Otherwise, you may be charged the incorrect customs duty.
Since you are not shipping the goods yourself, you do not really have to worry about these things because the freight forwarder or the courier company handles the entire process from start to finish.
All you must do is to be aware of these details so that you at least have an idea how much you need to pay when shipping your products.