Amazon is one of the fastest and easiest eCommerce platforms available in the UK today, and it’s also easily the largest, clocking in at nearly 100 million more monthly visitors than top rival eBay.
If you’re serious about selling then getting your products on Amazon as soon as possible is a must, but it’s important to be aware of the Amazon seller fees that they charge for your sales.
Amazon didn’t achieve a net worth of $1.1tn, 1/3 of the UK’s entire economy by doing things for free, and there are charges involved all the way along to process, often laid out in ways that are confusing for first-time users and old hands alike.
Take a look at our article below, which goes over exactly what selling on Amazon UK costs, so you can work out for yourself how much profit you’ll make from your sales.
Amazon Seller Fees explained
Selling on Amazon attracts a range of fees depending on what you’re trying to achieve and how much you plan to sell.
It can attract a minimal cost if you’re a light user selling less than 35 items a month, but the more you sell the more you’ll have to pay for the privilege. While you can avoid some of these charges by paying for a monthly subscription, you’ll still have to work out and pay your referral fees too on top of this cost, and there are also other options that will increase your shop’s performance at a price. All of these taken together make up your seller fees, and they’ll vary greatly from seller to seller. The key to a successful Amazon experience is carefully working out how each of these costs will impact your businesses’ profitability per unit, so you know how much to charge and which services you should be using.
Working out the fees is a vital part of selling on Amazon because how much you have to pay will decide your pricing strategy, and will decide whether it’s even possible for you to make a profit selling on Amazon. Let’s look at some of them in more detail, so you can make an informed decision in Amazon Seller Central.
Seller fees in-depth
First of all, let’s look at the different types of fee that you pay on Amazon, which make up your total Amazon seller costs. The first type you’ll pay when selling on Amazon is a set ‘per item’ fee charged at a flat rate on every item that you sell when you’re an Amazon Basic Plan user. This costs £0.75, but it is only charged to Amazon Basic Plan users who don’t pay a monthly charge. You pay the same fee regardless of the product or category you’re selling in. While it’s more expensive per item to sell, it shouldn’t make too much difference if you’re selling in low enough volumes to use the Amazon Basic Plan.
The second type of fee to be aware of when selling on Amazon is the Referral Fee. This fee is slightly different from the per-item fee because it is charged as a percentage of the total value of the item that you sell, and it’s charged to everyone who uses Amazon regardless of the plan you’re signed up to.
As one of the UK’s largest retailers, selling via Amazon gives you an enormous advantage over someone selling the same thing on their own website. Rather than having to head all over the web to get different categories of products, customers can get everything in one place and buy the things you sell directly. When you pay the referral fee, you’re paying for the work that Amazon does in drawing customers in from other parts of the Internet onto your products, taking advantage of their massive marketing budget. Read on below to find out how you work out what your referral fee will be on each type of item you sell.
A third type of fee is called a closing fee and only applies to certain categories of product. If you’re planning to sell anything that Amazon considers to be ‘media’ (such as books, films, games consoles or software) you’ll have to pay an extra cost.
The good news is that these costs are now fixed at 50p per item, after years of being a variable fee depending on the type and value of the product you were selling. The bad news is that these costs are always changing, and from 2021 the fee charged for selling books will increase from 50p to £1 per item, so you’ll need to remember to factor that into your costs if it affects your business. It’s also a good idea to keep checking for changes, so you don’t get any nasty surprises. Remember, these costs only apply to media, so you won’t have to pay if you sell something unrelated.
How do I work out my referral fees?
Referral fees are charged by Amazon differently depending on the type of product you sell. These can be very confusing at first. As a company, Amazon also sells its own products, so referral fees tend to be charged to reflect the extent to which your products compete with theirs. For example, tyres and cars are outside of Amazon’s traditional product range and attract the lowest charge of 7% of the item’s value. On the other hand, selling Amazon device accessories is very much within Amazon’s purview, and so these sales attract a whopping 45% charge on each item sold.
Some products attract a slightly more complex progressive charge, attracting one percentage up to a certain value, and then a different percentage for the amount over and above that value. It’s also worth knowing that there is often a minimum charge of 25p on every item, so you’ll always pay at least that amount if your item’s referral fee would end up being less, though many products are exempt.
It’s quite a confusing system to get used to, and Amazon have created a fee calculator to help you out, but see below for the full tabulated list of fees that are charged for each product category.
|Product categories||UK Amazon referral fee (%)*||Per-item min. referral fee|
|Amazon device accessories||45%||£0.25|
|Baby products (exc. clothing)||8% for products with total sales price up to £100. 15% with total sales price greater than £100||£0.25|
|Beauty||8% for products with total sales price up to £100. 15% with total sales price greater than £100||£0.25|
|Beer, wine & spirits||10%||N/A|
|Books, music, VHS & DVDs||15%||N/A|
|Business, industrial & scientific supplies||15%||£0.25|
|Cars & motorbikes||7% for car & motorbike electronic devices; 12% for related electronic accessories and 15% for remaining related products||£0.25|
|Clothing, shoes & bags†||For FBA & SFP selections: 15% for the portion of the total sales price up to £40.00; 7% for any portion of the total sales price greater than £40.00 and 15% flat fee for all other selections||£0.25|
|Computer accessories||15% for the portion of the total sales price up to £100. 8% for any portion of the total sales price greater than £100||£0.25|
|DIY & tools||12%||£0.25|
|Electronic accessories||15% for the portion of the total sales price up to £100. 8% for any portion of the total sales price greater than £100||£0.25|
|Flow control & filtration||12%||£0.25|
|Grocery & gourmet||8% for products with total sales price up to £10.00. 15% for those with a total sales price greater than £10.00||£0.25|
|Health and personal care||12%||£0.25|
|Home and garden||15%||£0.25|
|Industrial electrical supplies||12%||£0.25|
|Industrial tools & instruments||12%||£0.25|
|Jewellery||20% for the portion of the total sales price up to £225 and 5% for any portion of the total sales price greater than £225||£0.25|
|Musical instruments & DJ||12%||£0.25|
|Personal care appliances‡||8% for products with total sales price up to £10.00 and 15% for those greater than £10.00||£0.25|
|Renewable energy supplies||12%||£0.25|
|Sports & outdoors||15%||£0.25|
|Video games (games/accessories)||15%||N/A|
|Video game consoles||8%||N/A|
|Watches||15% for the portion of the total sales price up to £225. 5% for any portion of the total sales price greater than £225||£0.25|
* Last updated: August 2020.
† FBA & SFP referral fee rate selections are valid from 1st March 2020 – 28th February 2021 (promotional period).
§ Not including appliance accessories, microwaves and range hoods.
‡ More details on different products within this category.
So now you have a basic idea of the major types of fees that you’ll encounter as a first time Amazon seller. Next up we’re looking at Amazon accounts. What types of Amazon accounts are there, what do they offer, and what are the positives and drawbacks of using them? Read on below.
Amazon Basic plan (Free)
The Amazon Basic Plan is where everybody starts out when they are selling on Amazon. This lets you sell up to 35 items per month without a monthly charge. While this type of account does attract fees, including the referral fee and the one-off sale fee, you won’t be charged monthly for using your account. This makes it the perfect type of account for low volume sellers. Typically, this is for people selling in their spare time or people who are just starting out and putting their toes in the water.
Pros and Cons
The biggest positive in using the Amazon Basic Plan is that it’s very straightforward to work out how much you’ll pay.
Any item you sell attracts a £0.75 per-item selling fee, which you need to add to the referral fee that you’ll pay depending on the type of product that you’re selling (see above). Don’t forget, you may also need to add the closing fee onto this too if you’re selling something media-related. This could be the option for you if you’re hovering on the edge of profitability via Amazon because of the volume and type of items you sell, and there’s a chance that the fees might add up to more than your total revenue, but it’s worth noting that you’ll miss out on a range of perks that also come with a subscription fee. These include an inability to set your own shipping rates or to upload your items in bulk.
UK Amazon Pro Plan (£28.50/month inc. VAT)
Amazon’s Pro plan is a monthly subscription service that will set you back by £28.50 per month, though with the ability to sell as many products as you want free of the 35 product cap and free of the £0.75 per-item selling fee. This option is a virtual no-brainer for businesses who want to sell more than the barest minimum of stock, or businesses who would end up paying more than £28.50 per month in per-item charges, and it’s really the only way to seriously grow on the Amazon platform. Not only are there financial benefits to subscribing, but it can also make a significant practical difference to your Amazon selling experience.
Subscribing grants you access to a variety of handy tools that make selling on Amazon much easier. These include things like access to the powerful Amazon API, which features powerful reporting tools from the Amazon Marketplace Web Service. This enables you to manage many administration tasks like reporting, spreadsheets, feeds and order management on the platform itself, rather than having to go offline. You are also able to run promotions, upload your listings in bulk, set your own shipping rates for certain products and add extras such as gift wrapping to your orders. While you may not have use for some of these features initially the Amazon Pro services gives you lots of room to grow, and you’ll have no trouble operating within it when your business is five or ten times the size it is now.
When it comes to shipping out the products that you sell when you make a sale, you’re presented with two options: Fulfilment by Amazon and Fulfilment by Seller.
This is exactly what it sounds like, with the first option allowing you to take advantage of Amazon’s revolutionary logistics machine for a higher fee, or handling the shipping yourself for a lower fee. As with the other options we’ve been over which one you use will depend on the type and volume of your business, so let’s take a look at both more closely.
Fulfilment by Amazon (FBA)
Anyone who knows anything about Amazon knows about their famous fulfilment centres. Row upon row of every conceivable product, with placement and collection optimised by sophisticated algorithms and often assisted by robots.
Choosing fulfilment by Amazon FBA gives you access to these facilities to help distribute your products for a fee. Notably, this is a complicated calculation based on a combination of the product’s type, size and weight. This is then added to the storage fee charged for keeping your products in the Amazon warehouses, again based on the product’s size, to give you a total fee per item sold. Remember the storage fees change during the year and are highest around the Christmas period. Furthermore, you’ll be charged extra if you end up storing items for more than 6 months, so you’ll need to take this into account when you plan your next move.
While all of the above attracts a higher fee than it would if you were to ship items yourself, the benefits of access to Amazon’s legendary distribution powers are incalculable if you’re a bulk seller.
The sheer scale of administration can be huge if you regularly sell tens or hundreds of items a day, not to mention the variable cost of shipping different sized orders to different places. To Amazon it’s all in a day’s work. You’ll also benefit from Amazon integration with their computing power, and you’ll be given all sorts of data about the performance of your stock to help cut dead weight or scale up your promotions in certain areas. Be aware, however, that Amazon charge you 20% of your referral fee to process returns if you use their system. Regarding this, it’s always a good idea to factor in a certain percentage of items being returned to ensure you have a high enough profit margin.
Fulfilment by Merchant (FBM)
The alternative to FBA is FBM – This just means that you are responsible for packing and shipping the items that you sell.
Clearly this option is cheaper fee wise than FBA because Amazon doesn’t have to do any of the work, and this is almost certainly the best option if you’re a low volume seller that doesn’t need Amazon’s logistical muscles. One potential issue to note is around the rates you’ll pay when shipping. Amazon helps out by paying towards your shipping in order to encourage you to do business (unless you opt for free shipping), but in the vast majority of occasions, the credit doesn’t cover the shipping cost that Amazon set, so you’ll sometimes find yourself being hit harder than usual by this additional cost. The best way around this is to once again factor in the variance in shipping costs into the price of your products, to make sure you have enough margin left over to take the occasional hit.
Admittedly, there are still a few more fees that might crop up when you use Amazon’s service.
The most common is experienced by high volume customers which are counted as storing more than 2,000,000 products a month. These customers are then charged £0.0003 for every subsequent SKU added. It’s also important to note that you can be charged for a range of extras too numerous to list. For example, currency conversions when being paid by foreign buyers, re-packaging returns that were sent back in damaged or non-Amazon boxes, and handling fragile or dangerous items. While these charges vary and are often only a few pence per unit, it’s important to remember that they exist and will make a difference to your bottom line.
Contact Cloud Commerce Pro today to see how we can integrate with your Amazon channel and easily manage orders, shipping & inventory, and access reports for each of your Amazon marketplaces from one simple location.