Tired of FBA Fees Eating Your Profits? Check This Out!

Every Amazon seller knows that a big chunk of their revenue—about a third—gets eaten up by fees.

If you're under the illusion that you can avoid some of those fees and still rake in profits, you may be in for a rude awakening. That’s not how it works.

In fact, this isn’t unique to Amazon at all. No matter which platform you’re selling on, the reality is the same—around one-third of your revenue will likely go toward service fees like returns and commissions. The rest goes to covering production costs and your take-home profit.

And I’m only talking about standard fees. Once you use extra services like FBA, the costs start to climb.

FBA is like your one-stop shop for handling all the messy logistics, from prepping to shipping. It does take the hassle out of fulfilment, but it doesn’t come cheap.

And trust me, those fees can quietly add up if you’re not paying attention. When they’re all bundled together on your bill, it’s easy to lose sight of what’s really cutting into your bottom line.

The frustrating part is that FBA fees continue to climb. Earlier this year, Amazon rolled out a fresh batch of fee hikes, potentially pushing the percentage of revenue lost to fees from a third to nearly half.

That’s why it’s crucial to know exactly what you’re paying for. Understanding how these FBA fees work can save you from overspending and help you make sure you’re squeezing the most value out of the service.

Today, we’ll review the current FBA fees, so you can see exactly where your money is being spent. After that, I’ll offer some practical strategies for getting the best possible return on what you pay.

Fulfillment Fee

The first fee on the list is the fulfillment fee. This is what Amazon charges to handle your orders, and it varies based on the size and weight of your products. Amazon has gotten more detailed in its pricing, especially for standard-sized items.

If you’re selling a small item that weighs under 10 ounces, for example, the fulfillment fee might run you between $3.06 and $3.42.

But if your product is bigger—say, large standard or bulky—you’ll see those fees jump higher, with large items weighing up to 20 pounds costing over $6.92. The takeaway here? The bigger and heavier the product, the more Amazon is going to charge you.

Storage Fees

FBA storage fees are another cost that can sneak up on you. These fees vary depending on how much space your products take up and what time of year it is.

Between January and September, Amazon charges $0.78 per cubic foot for standard items. But come Q4—the holiday rush—those fees jump to $2.40 per cubic foot.

Why? Because that’s when Amazon sellers are moving the most inventory, and Amazon’s warehouses are packed to the brim. To manage space, they hike up fees and subtly encourage you to send only what you need.

Aged Inventory Surcharge

If your items hang around Amazon's fulfillment centers for over a year, you’ll face the aged inventory surcharge, previously known as the long-term storage fee.

If your inventory sits there between 181 and 365 days, you’re looking at $6.90 per cubic foot, or $0.15 per unit, whichever is higher.

This fee kicks in on the 15th of every month, so it’s important to track your inventory closely to avoid racking up these charges.

Storage Utilization Surcharge

If you have too much inventory in Amazon’s fulfillment centers, you’ll also get hit with a storage utilization surcharge. Amazon's goal is to keep their warehouses streamlined, so they charge extra for overstocking.

As of April 2024, sellers with a storage utilization ratio exceeding 22 weeks will face these surcharges. In simple terms, you need to manage your inventory wisely to avoid those extra fees. 

Low Inventory Surcharge

Surprisingly, you can also get charged for not having enough inventory. If Amazon notices that your stock levels are too low compared to your sales history, they’ll tack on a low inventory surcharge.

This new fee applies when your inventory levels drop below 28 days of supply, and it’s calculated based on both short- and long-term historical sales.

Removal and Disposal Fees

If you need to get items out of Amazon’s warehouses, you’ll have to pay a removal or disposal fee. Standard-sized items cost $0.97 per unit to remove or dispose of.

Just keep in mind that it can take Amazon up to 90 days to process a removal order, so if you’re planning on selling those items elsewhere, make sure to give yourself enough time.

Unplanned Services Fees

These fees apply if your inventory arrives at an Amazon fulfillment center unprepared. Whether it’s missing labels, needing bubble wrap, or requiring bags, Amazon will charge you per unit.

For example, labeling costs $0.30 per unit, and bubble wrap fees are $0.60 per unit. So, it’s worth ensuring that your products are prepped before they get to Amazon’s doorstep. 

Returns Processing and Referral Fees

When a customer returns an item, you’ll be charged the same fulfillment fee as if you had sold it. And then there’s the referral fee, which is a percentage of your sale price—usually around 15%, but it can be lower for categories like electronics.

So how do you maximize your profit with all these fees?

All these fees can add up quickly, but the good news is, there are ways to minimize them.

First off, consider using Amazon’s Brand Referral Bonus Program, where you can drive traffic from external sources to Amazon and earn a bonus that offsets your referral fees. It’s like turning a 15% fee into just 5%, which can really add up, especially on high-ticket items.

Another smart move is optimizing your inventory, especially in Q4. Use tools like Amazon’s Inventory Performance Dashboard to track sales and make sure you’re not overstocking, as storage fees skyrocket during the holiday season.

Just-in-time inventory management can help here—keeping enough stock to meet demand without getting hit with excessive storage fees.

Also, don’t forget to use Amazon’s FBA calculator. It’s a handy tool to estimate your storage, fulfillment, and other fees upfront so you know what you’re getting into before you commit. 

To avoid the dreaded aged inventory surcharge, be proactive. Check your reports regularly and if you see products nearing that 365-day mark, either run a sale to move them or pull them from Amazon’s warehouses.

Lastly, take advantage of Amazon’s shipment preparation tools to make sure everything is properly labeled and packaged. This avoids unnecessary unplanned service fees, saving you both time and money in the long run.

As for my final friendly reminder—Amazon updates its fee structure regularly. Keeping tabs on these changes can help you stay ahead of the game, adjust your pricing, and plan your inventory strategy.

In short, FBA costs can be daunting, but with a few strategic adjustments, you can keep them in check while ensuring your business remains profitable.

Stay tuned for more practical tips that will help you grow your online business!