Your sales are growing and your revenue reports look fantastic, but at the end of the month, the deposit in your bank account is much smaller than you expected. Where did all the money go? The answer lies in Amazon's complex and multi-layered fee structure.
A lack of deep understanding of these fees is the number one reason why many Amazon sellers are "busy" but not actually profitable. Success on Amazon is not about how much you sell, but how much you keep. This guide will break down every fee you are likely to encounter, providing a clear framework to calculate your true net profit on every sale.
1. The Two Core Fees (Everyone Pays These)
No matter what or how you sell, you will pay these two fees.
- The Referral Fee: This is Amazon's commission for giving you access to their massive customer base. It's a percentage of the total price a customer pays (including the item price, shipping, and any gift-wrapping charges). The percentage varies by category, but for many popular categories in the UK (like Beauty, Health & Personal Care, and Clothing) it's 15.3%. This fee is charged on every single sale, whether you fulfill the order yourself or use FBA.
- The Subscription Fee: To operate as a business on Amazon, you need a Professional Seller plan, which comes with a flat monthly subscription fee. In the UK, this is £25 + VAT per month.
2. Fulfillment by Amazon (FBA) Fees
If you use Amazon's world-class logistics network (and most successful sellers do), you will pay a set of fees for the services they provide.
- FBA Fulfilment Fee (The "Pick & Pack" Fee): This is the main FBA cost. It's a flat fee charged for each unit that Amazon picks from the shelf, packs into a box, and ships to the customer. It also covers the cost of handling customer service and returns. The fee is based on your product's size tier (e.g., Small Envelope, Standard Parcel) and its outgoing weight.
- Monthly Storage Fees: This is the "rent" you pay for storing your inventory in Amazon's fulfillment centers. It is charged per cubic foot per month and is significantly higher during the peak shopping season in Q4 (October - December).
- Aged Inventory Surcharge (Long-Term Storage Fees): This is a major profitability killer. It is a substantial penalty fee charged on any units that have been sitting in a fulfillment center for too long (typically over 271 days). It's designed to stop sellers from using FBA as a long-term storage unit.
- Removal & Disposal Fees: If you have slow-moving stock or need to recall inventory, you will pay a per-item fee for Amazon to either return the items to you (a removal order) or dispose of them (a disposal order).
3. Other Common Costs to Factor In
A true profitability calculation goes beyond just Amazon's direct fees.
- Cost of Goods Sold (COGS): The price you paid your supplier for the product.
- Shipping & Import Costs: The cost to get your inventory from your factory to Amazon's fulfillment centers, including freight, customs duties, and taxes.
- Advertising Costs: The money you spend on Amazon PPC (Pay-Per-Click) ads. This should be tracked as a percentage of your sales (ACOS/TACOS).
- Returns: While FBA handles the logistics, the cost of a returned item that cannot be resold is a loss that comes directly out of your profit.
4. Putting It All Together: Calculating Your Net Profit
To truly understand if a product is viable, you must calculate its net profit on a per-unit basis before you ever place an order with your supplier.
Here is a simple framework:
Sale Price
- Minus Cost of Goods Sold
- Minus Amazon Referral Fee
- Minus FBA Fulfilment Fee
- Minus FBA Storage Fees (estimated per unit, per month)
- Minus Advertising Cost (estimated per unit)
- Minus Inbound Shipping & Duties (estimated per unit)
- Minus VAT (if applicable)
= Estimated Net Profit Per Unit
A profitable Amazon business requires a holistic strategy that optimizes every cost center, from supply chain and advertising to storage fees and compliance. Sitruna is a full-service Amazon agency that helps brands manage these complexities, ensuring every aspect of your operation is geared towards maximizing net profit.
Useful Resources
Conclusion: Revenue is Vanity, Profit is Sanity
Success on Amazon is not measured by your total sales, but by the amount of money you actually keep. A deep, granular understanding of the entire fee structure is the most critical financial skill for any seller. By calculating your true net profit for every product, you can make informed decisions that will build a genuinely healthy and sustainable business.
Maximizing your profitability on Amazon goes beyond just understanding the fees; it requires expert management of your advertising, logistics, and overall strategy. Sitruna is a full-service agency dedicated to growing your brand's bottom line. Schedule a free discovery call with the Sitruna team at www.sitruna.com/meet to get a complete analysis of your brand's profitability and growth potential.
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