When selling a product on Amazon, what costs should the seller account for?

Accurate calculation of product cost is a very important link for sellers. It may include production, sales, post-maintenance and other aspects that require very rigorous control of each link of expenditure.

There are platform fees, sales commissions, packaging fees, production, transportation, and various expenses related to returns. General expenses related to the business, such as taxes, website construction and maintenance, labor costs, and utilities and other daily expenses.

The cost of each item is directly related to the market positioning and selling price of the future product. Of course, it also depends on the attributes of the product itself and the degree of market saturation. These comprehensive factors determine whether the product should be defined as a running or profitable product. We still do high-end series at the average market price.

Amazon selling expenses

Let's first look at the specific fees that should be paid to Amazon as a seller.

Currently, Amazon charges sellers different fees:

• Platform fee: As a professional seller, you pay a monthly platform fee of US$39.99; individual sellers charge a fee of US$0.99 per item based on the number of products sold;

• Sales commission: Amazon is based on a percentage of sales (ranging from 5% to 45% depending on the product category) or a fixed fee of $1-2 per product.

• Delivery fees: Amazon charges sellers various fees based on the size and weight of the product. The price of each item is usually between 2-10 dollars. If you choose Amazon's other services, such as labeling services, Amazon will charge an additional fee.

• Storage fee: Amazon recently adjusted the storage fee of goods to be calculated once a month.

Fee standards implemented in 2018

The following are three product examples, the proportion of FBA expenses:

• Settlement fees: These fees only apply to books, video games, DVDs, software and game consoles, and vary according to product category and shipping details.

These basic expenses will also cause additional expenses due to some unpredictable factors, such as procurement costs. Apart from the dozens of management costs that may be involved, the flow of funds and profitability will become more difficult in the later stages.

Cost of other expenses

In addition to specific fees paid to Amazon, other fees must be considered when determining profits.

• The purchase cost of each product, which means the cost of product inventory, as well as the later logistics cost, etc.;

• Basic expenses, including utilities, wages and benefits, insurance, travel, taxes, marketing, website development, storage, rent, etc.;

• Costs related to returns, including freight, packaging, price reduction, etc.;

Once you know these costs, you can begin to determine the production volume of each product or SKU.

Amazon seller fee calculator

First, we need to divide all indirect costs (the cost of the second part above) by the total number of units sold last year to calculate the total resource allocation cost for each product.

The result of this calculation is to clarify the difference between the actual cost of each product and the expected value. Since these costs may fluctuate in different time periods, they must be checked frequently.

In addition, we can preview the total cost in the report function of Seller Central. Use the Amazon seller calculator to calculate related costs.

Notice how much does each product cost in one month? When added to the distribution cost of each product, can I still make money from the SKU? If the cost exceeds the recent income, you need to pay attention to adjustments.

If these methods do not work, we must promptly choose to stop using FBA distribution on certain sku, or stop selling the product.

Maintaining the profitability of each product is crucial, not only to choose the right inventory for Amazon’s business, but also to ensure that it can adapt to the market’s constantly updated policies and unpredictable competition, and maintain a long-term existence.
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