Fulfillment by Amazon: Part I of FBA – Costs and Fees

Posted on January 27, 2009. Filed under: Amazon | Tags: , , , , , |

Have you ever thought out using Amazon’s fulfillment services but just didn’t know where to start?  Well, we’ve got something great for you!  Our company is gearing up to take advantage of the Amazon FBA program and so we are educating ourselves about the program.  We thought that as we learn more about FBA we’d share the information with you, too.

This is the first in a series we plan.  Of course, the first step in deciding whether the Amazon fulfillment program is right for you is learning about all the costs involved.  This post is not considering the “time” factor involved.  Below are the financial costs one would incur to participate in the Amazon fulfillment program.

1. Shipping Costs to Get Your Product to Amazon

Obviously your product has to be sent in bulk to Amazon.  You can choose any carrier you desire but you bear the costs of shipping to Amazon.  We’ll be discussing in a later post about the actual mechanics of preparing items for shipping and the ultimate shipping of the product to Amazon.

2. Pro Merchant fees / Advantage fees

To particpate in the Amazon fulfillment program, you either need to be a registered Pro Merchant account holder ($39.95 a month) or sign up as an Advantage member ($29.95 a year).  Advantage account holders are limited to sellers of media products like books, CDs, and video games.  Advantage members can ONLY have orders fulfilled that are placed on the Amazon.com website.  Pro Merchants can have their Amazon.orders fulfilled by Amazon as well have their non-Amazon.com orders fulfilled.

3. Inventory Storage Fees

Pro Merchant accounts: Storage fees are assessed on every unit of product for every day it is located in the Amazon warehouse.  The rates are $0.45/cubic foot per month for the months January through September and $0.60/cubic foot per month for the months October through December.  Note that the actual storage fees are prorated on a daily basis.

Advantage members: No storage fees are incurred for the first 60 days.  After 60 days, the inventory will be disposed of or converted to Fulfilled by Amazon inventory, whichever you choose.

4. Order Handling Fees

Pro Merchant account holders whose buyer placed an order on Amazon.com:

fba11

Pro Merchant account holders whose buyer placed an order outside of Amazon.com.  It is important to note that any order placed in an Amazon webstore is still considered to be outside of Amazon.com for fulfillment purposes:

fba2

Advantage Members whose buyer placed an order on Amazon.com:

fbaadvantage1

NOTE: All of the fulfillment fees and associated costs listed above are in addition to the actual selling fees assesssed by Amazon.

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6 Responses to “Fulfillment by Amazon: Part I of FBA – Costs and Fees”

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I don’t understand what this means:
“Advantage members: No storage fees are incurred for the first 60 days. After 60 days, the inventory will be disposed of or converted to Fulfilled by Amazon inventory, whichever you choose.”

What happens when it converts to Fulfilled by Amazaon inventory? Does that mean that Amazon simply seizes the goods and owns them from then on?

Nadine, what it means is that you begin paying storage fees at the same rate as the Fulfillment by Amazon: The rates are $0.45/cubic foot per month for the months January through September and $0.60/cubic foot per month for the months October through December.

We have used FBA for a few months now. The advantage is we can travel more while buying inventory. The disadvantage is not being able to clearly identify the costs (especially in determining clearly our profit after taking into account our inventory cost). FBA has no clear mechanism to keep up with your net profit after taking into account your inventory cost. I think this is by design by Amazon. It is geared towards sellers with lots of the same item, not unique items with different costs. There is no easy way to determine this from being able to download a spreadsheet or otherwise.

I have been selling books via Amazon FBA since the summer of 2007. This has been one of the best decisions I have made.

Here are some benefits:

-I make around $2 more per book.

-Books sell faster.

-I have been able to grow an inventory of 20,000+ books by myself.

-I have tons of time to pursue other interests/revenue streams.

-I am able to purchase inventory that would NOT be suitable for regular merchant fulfilled, but is profitable for FBA (ie. lower priced books).

-I could go on and on…

Nathan Holmquist

If you like Fulfillment by Amazon, why would you not look at saving some money by using a 3PL that can provide more service for the same price; therefore creating more value. Amazon is great and I am a loyal shopper, but as a seller the are harvesting your sales data to determine their prices and undercut you on your price. I think it is a conflict of interest. You should check us out at http://www.sbcfulfillment.com check this page especially http://www.sbcfulfillment.com/solutions/why-sbc-is-better-than-amazon

This is not the full story on FBA fees. I wonder how much of this has changed for you in the past year, or if your experience is particular to the items you’re selling.

Here is a chart I found on 12 Passive Fees not explained up front by FBA sales reps:

http://fba-problems.blogspot.com/2008/08/fba-passive-fees-are-not-explained-up.html

If you don’t have time to ship your own Amazon items, have you (or anybody) ever tried hiring someone to come over to your home or office & do it for you? How many items are we talking about, anyway?

Just wondering about other alternatives.


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