Found a great product that you want to sell on Amazon and too excited to start the launch? Not so fast. Before you move forward with the arduous task of product sourcing and supplier negotiation, be sure to check first how much FBA fees are to be charged against the product for you to be able to identify if it’s profitable. After all, it’s what we are after right? Profits!
In this article, we’ll guide you through the step by step process of using Amazon FBA calculator for you to identify the cost of selling a specific product on Amazon FBA so let’s dive in!
What is Amazon FBA Calculator?
The Amazon FBA calculator is a tool that helps Amazon sellers calculates margins. It also gives sellers clear visibility of the fees associated with selling products via Fulfillment by Amazon (FBA).
It’s not only useful for sellers trying to look for potentially profitable products to sell on Amazon, but it’s also of great use for sellers who are wanting to switch from merchant-fulfilled to FBA as it can help in comparing which is more favorable for them in terms of fees they have to pay Amazon.
When to use the FBA calculator?
As mentioned earlier, Amazon FBA is most helpful during product research. Not only you can use this tool to get a clear sense of the potential profit margin of a specific product you are planning to sell on Amazon, but it also gives you a clear idea of the FBA fees to be charged against a specific product on a per unit basis. And you may very well know that by knowing all the possible fees you are to pay, you are able to decide whether the product is worth selling or not.
Another great use of this tool is it can help you visualize the impact of raising or lowering the sale price or product cost on an item on your margins. This information is very useful when determining what is the product cost budget range you need to maintain. Moreover, it can help you determine the minimum list price in order for you to remain profitable as well as what kind of margin you could reap from a higher list price.
You can also use the FBA calculator if you are on the verge of switching from merchant-fulfilled to FBA since it can give you a clear visual comparison of costs and margin under each model.
FBA Fees included in Amazon’s FBA calculator
Selling on Amazon Fees
- Referral Fee – It is the fee that you have to pay for selling your product on Amazon. The referral fee is calculated as a percentage of the sale price or a minimum dollar amount, whichever is higher. The rate of the fee varies by category, but the most common is 15% while the minimum dollar amount is almost always $1.00. The referral fee is category-specific so some categories may have higher or lower rates than the others.
- Variable Closing Fee – Variable closing fee is a fee that applies only to media products such as books, music, videos, DVDs, video games, consoles, and software (BMVD products).
Fulfillment by Amazon Fees
Fulfillment by Amazon fee is another fee you need to take into consideration when planning to sell a product on Amazon via FBA. This fee is calculated based on the dimension and weight of the product and it has two components as follows:
- Fulfillment Fee – This fee covers the pick and pack, packaging supplies (e.g boxes, labels, dunnage), shipping to the customer, and customer service.
- Monthly Storage Fee – is a fee based on the volume of the product (in cubic feet).
Let’s do it!
Let’s see what the calculations look in real life by using a yoga block as a demo product.
Go to the Amazon FBA calculator link.
Input a product identifier to pull up the product that you are researching. This can either be an ASIN, EAN, ISBN, or a keyword or search term. In this example, we will be using an ASIN.
You also need to ensure you choose the correct marketplace/country.
Click on “Search”.
The data of the product will be displayed such as the product name, ASIN, package dimensions, and unit weight.
Begin with filling out the details under the Amazon Fulfillment column to calculate the margin of the product.
Item Price: If you have no idea of how much the price should be, you can search for similar products to get a sense of the price range. For this specific product, let’s use the actual list price which is $10.99.
Ship to Amazon: If you are already selling on Amazon, you may already have an idea of how much is the average per unit price to ship your products to the Amazon warehouses. It is important to note that the shipping cost varies based on the size and weight of the product, the quantity you ship at any given point in time.
Feel free to play around with the value to see the impact on the margin. If you have no idea of what the shipping cost is, you may opt to leave it blank. But if you do, keep in mind that you will see additional costs and margin impact from your shipping expenses. For this example, let’s use $0.20.
Cost of Product: Fill out the final field which is the “Cost of Product”. This is the per unit cost to purchase this product from your supplier, which may be a manufacturer or a wholesaler. You have to keep in mind that this should include all costs including packaging materials, overseas shipping, customs, and any other expenses associated with purchasing the product. For this example, let’s use $3.
Once done, click on “Calculate”.
From here, the calculator will show you the net profit and net margin of the product based on the values you input. Selling on Amazon fees and Fulfillment by Amazon fees will be automatically calculated which gives you the Total Fulfillment Cost.
Selling on Amazon Fees
For this sample product, the applicable fee is the Amazon Referral Fee that amounted to $1.65.
Fulfillment by Amazon Fees
For this specific product, the monthly storage fee is $0.24 and the Amazon Fulfillment fee is $3.28.
Net Profit =$2.62
Net Margin = 23.84%
Aside from the fees, the calculator will also show you a series of graphs which gives you a visual representation of the revenue, cost, seller proceeds, and net profit.
Understanding Margin Impact
With Amazon’s FBA calculator, you are given a very easy and quick way to understand the margin from various business decisions and changes from factors like shipping costs and products costs.
Changing the Customer Price
As mentioned earlier, you may play around with the prices you input in the calculator to get a clear idea of the impact on your margin. So say, for example, you decide to reduce the customer price in order to be more competitive – with the use of the calculator, you will have a clear sense of how low you can go while keeping the product profitable.
To give you a concrete example, let’s change the customer price from $10.99 to $10.47 and see how it will affect the margin.
For this product, reducing the price by $0.52 doesn’t seem to have a big impact on your margin. So should you decide to offer a lower price at this range, then you may go ahead and do so.
Changing the Cost of Product
The same applies to the cost of the product. For experienced sellers, they might already have an idea that in certain cases, the price may go up and down at any given point in time. With the use of the Amazon FBA calculator, you will get better visibility on how much increase you can accommodate that will still keep the product profitable. On the other hand, if the cost of the product goes down, you will have an idea of how much additional profit you may gain.
To demonstrate, let’s change the cost of the product from $3 to $2.5 while keeping the original price which is $10.99 and see how much additional profit you can gain.
Let’s compare the costs.
- Customer Price is $10.99
- Cost of the Product is $3
- Profit will be $2.62
- Customer Price is $10.99
- Cost of the Product is $2.5
- Profit will be $3.12
So based on the above values, a decrease in the cost of the product by $0.50 will result in an increase in the profit of $0.50.
FBA Fees that NOT INCLUDED in the FBA Calculator
As mentioned earlier, the Amazon FBA calculator is a great tool for visualizing and estimating costs, it is important to note that there are certain Amazon FBA fees that are not being calculated by the tool. These fees are those that only apply in specific circumstances, so it’s very important that you understand what those fees are and know which circumstances they would apply as this can save you from unpleasant surprises along the way. Let us help you get to know these fees by outlining and explaining them below.
FBA Long-term Storage Fees
Every 15th of the month, Amazon conducts an inventory cleanup where inventories that have been in the US fulfillment centers for more than 365 days will incur a long-term storage fee (LTSF) of $6.90 per cubic foot or a $0.15 per-unit long-term storage fee, whichever is higher.
Should you need to have your inventory removed or returned to you from Amazon warehouses, you need to take note of the per unit removal fee you are to pay Amazon. Fees are also applicable with disposal or liquidation of your products that are in the Amazon warehouses.
So there you go! Be sure to take note of all those fees to ensure you get the best idea of how much profit you can gain from your products. Good luck!
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