Amazon has been laser focused on increasing its profitability in recent years. According to the company’s recent public filings, net income increased by over 48 percent in Q3 2024, reflecting Amazon’s work to improve its bottom line. As part of this ongoing effort, the E-commerce behemoth has consistently increased the fees it charges sellers using its Seller Central platform (also known as 3P). For example, Amazon increased fulfillment fees (more on that below) by as much as 30 percent from 2020 to 2022, according to market research firm Marketplace Pulse. And towards the end of 2023, Amazon introduced a handful of new fees as well as a change in how fulfillment fees are calculated.
If you’re a B2B seller on Amazon, understanding and proactively managing these fees is essential to ensuring your profitability on the channel. If you do not factor fees into your planning, then you are likely going to torpedo your own profitability.
So, what fees can sellers expect in Seller Central? Let's dive into the specifics.
Referral Fees
Amazon primarily generates revenue from its 3P sellers through commissions, known as referral fees, which typically range from 8-20+ percent and average around 15 percent. This percentage varies based on the product category and sometimes depends on the price point of the product being sold. For instance, categories such as electronics and jewelry can have higher fees, while those like books often incur lower fees. B2B categories typically see a rate between 12-15 percent for most items.
Notably, the company recently introduced lower fees for B2B bulk purchases completed through Amazon Business. This strategic change aims to attract and retain business buyers, encouraging larger transactions. By reducing fees for bulk purchases, Amazon has made it more cost-effective for businesses to purchase items in large quantities, which can bolster the profitability of 3P sellers by reducing the per-unit fulfillment costs incurred on these orders (more on fulfillment costs below).
In addition to the fees noted above, Amazon charges sellers a subscription fee that is either $.99/item sold for individual sellers or $39.99/month for businesses.
Fulfillment Fees
There are two primary methods for fulfilling products through Amazon Seller Central: Fulfilled by Merchant (FBM) and Fulfillment by Amazon (FBA). With FBM, you are responsible for the entire fulfillment process, including packaging, picking and packing, shipping costs, and managing returns and customer service, including staffing needed to facilitate fulfillment.
In contrast, Amazon can take over the fulfillment process through the FBA program, which covers everything from storage and shipping to customer service and returns. Of course, this convenience comes at a cost that varies depending on the size and weight of your products. It is generally more profitable to sell lightweight, easy-to-ship items using FBA than to sell heavy, bulky items. For example, a $100 micrometer, a small tool used for measurement, will incur significantly lower FBA fees than a $12 anvil, which is expensive to fulfill despite being a low value item.
It is therefore essential to analyze fulfillment costs for every single item in your catalog in order to determine the most cost-effective—and profitable—fulfillment method. Amazon provides an FBA calculator, where you can enter your product information and compare FBM and FBA costs. It’s important to note that you may opt to use FBA for some products in your catalog; you are not obligated to use it for every item you sell on the platform. By conducting a thorough analysis on fulfillment costs, you can choose the most financially advantageous strategy for each product, ultimately optimizing your overall business performance on Amazon.
Amazon Storage Fees
When using the FBA service, sellers should be aware of associated storage fees, which can vary throughout the year. To effectively plan for these costs, we recommend allocating around 0.5 percent of your projected revenue for storage fees. Proper inventory planning and forecasting can help optimize these costs, ensuring that you avoid unnecessary expenses.
Moreover, when using FBA, you should take inbound costs into consideration when calculating profitability. This involves placing products into Amazon's fulfillment centers on consignment, meaning Amazon stores the product until it sells. Shipping products to Amazon involves inbound placement services that come with associated fees, and these costs are often tied to your own shipping expenses. While these inbound costs should be relatively small, they are still important to include in your overall budget and strategy.
In addition to storage fees, Amazon offers Amazon Warehousing and Distribution (AWD) services, which sellers can optionally use. AWD is a staging and replenishment service that offers lower cost storage as well as fast replenishment into FBA fulfillment centers. AWD also allows you to use Amazon for fulfillment of orders from other sources, such as your own website or bulk orders from retailers or distributors. Many sellers find this convenient and are happy to contract out that function as a means to reduce the complexity and cost of owning and operating storage facilities.
Advertising Expenses
Successful Amazon programs often leverage Amazon’s advertising tools to boost visibility and drive sales on the platform. Much like Google Ads, Amazon advertising operates on a pay-per-click (PPC) model where you pay for placement in search results through sponsored products, sponsored brands, sponsored display, and other placements. The ad system is an auction, with sellers bidding on relevant keywords to ensure their products appear in front of the right audience. However, without proper expertise and proactive management, advertising costs can quickly spiral out of control.
A well-managed ad program aims to achieve a high return on ad spend (ROAS), typically ranging from 10-20+ percent based on the program's goals. Generally, you want your on-platform advertising expenses to account for 3-6 percent of your total Amazon revenue, although newer programs might see higher percentages initially to kick start sales and accumulate reviews.
Of course, it's important not to rely solely on ads to drive traffic to your products. A holistic approach that includes organic search optimization (SEO), customer engagement, and other marketing strategies will create a solid foundation for sustained growth.
Expert Resources and Infrastructure
In addition to fees associated with managing a profitable Amazon presence, B2B sellers need to also take the cost of managing Amazon programs into consideration. That often means hiring resources—either internally or externally—to plan, execute, and manage your Amazon presence. You are greatly limiting your opportunity and potential profitability without putting the right resources behind Amazon.
If you’re in need of an expert Amazon consultant, Enceiba is here for you! Schedule a call with one of our Amazon experts to discuss your business and begin exploring your Amazon opportunity!