The e-commerce sector is in a constant state of expansion, and correspondingly, the market is also seeing consistent growth. As a result, consumers are presented with an ever-increasing variety of […]Read in: 7 min
How much is Amazon’s commission and what other costs do sellers incur?
- Last update: 19.10.2022
- Published: 27.06.2022
- Read in: 7 min
By joining Amazon, you gain access to the international marketplace, and thus the opportunity to earn a lot of money. The platform often goes out of its way to meet its customers and offers, among other things. different models of cooperation. One of them is FBA, so you don’t have to deal with logistics and customer service.
This sounds very encouraging, but Amazon charges fees appropriate to the level of service, which we will discuss today. We will also draw your attention to the costs you will incur when selling on this popular platform, even though they are not directly related to it.
How much is Amazon's commission?
Amazon, unfortunately, is not for everyone. The sale of some products is unprofitable due to fees (imposed due to shipping or product category or dimensions) that exceed the seller’s margin.
On the other hand, there are products that Amazon promotes to sell. It does this by, among other things, charging their sellers a lower commission.
In Poland, lower commissions will apply until March 31, 2023. Below we have cited what they look like at this point in several categories.
- Computers – 4%
- Software – 9%
- Books, music, DVDs – 9%
- Industrial tools and instruments – 10%
- Beauty – up to PLN 40 – 4%, above PLN 40 – 6%
- Business, industrial and scientific articles – 10%
- Video games – 8%
Amazon has also imposed a minimum commission amount of £1 in many categories.
Of course, this is not the only cost you will incur when selling on Amazon. So let’s move on to discuss the fees for having an active account.
What is the cost of the account?
When you set up an account on Amazon, you have to choose between two plans. Individual (Basic) or Professional (Professional).
- Individual plan
Designed for beginner sellers who list less than 40 products per month and do not plan to advertise at this point. The individual plan does not allow you to take part in many promotions and programs, such as applying for buy boxes (recognition as the best product in a particular category). An individual account can only be used by one person. Its cost is PLN 4 per product sold.
Shipping amounts in the individual plan are top-down.
- Professional plan
It is designed for those who intend to sell more than a few dozen products per month and plan to use advertising. The professional plan gives you access to the API and allows you to integrate with external tools such as. Taxology. Users of this plan receive reports that help them, among other things. tax settlements. They also gain the ability to sell in 10 additional categories.
Its cost is PLN 165.91 per month and there are no additional fees charged on product sales. Shipping amounts are set by the seller (except for books, music, video games and DVDs)
FBA model (Fulfillment by Amazon).
FBA is a collaborative model in which Amazon takes over your responsibilities for warehousing, shipping goods to customers and handling returns. On your side is usually left the appropriate marking and shipping of goods to one Amazon warehouse. Depending on the selected variant, the goods can then be sent to further warehouses.
Using the FBA model, of course, involves additional fees:
- Implementation fee.
This is a fee for order picking and packing, parcel shipping, customer service and returns. Its height varies depending on the type of product, its dimensions and weight.
The fee may increase if:
– you use multi-channel fulfillment and want to brand the packages with your own brand (additional charge per package),
– You want Amazon to take care of labeling packages with a barcode,
– you inadequately prepare packages that will arrive at Amazon’s warehouse, (employees will take care of their preparation, but fees will be charged for this),
– When packages are out of standard size, or out of shape.
- Storage fee
This is the storage fee for products, calculated on the basis of the average daily amount of inventory in cubic meters. Fees vary depending on size, category, season and whether the goods are considered safe.
The fee may increase if:
– You want Amazon to take care of preparing the returned products for re-shipment,
– you have to dispose of the products and you outsource it to Amazon,
– you store goods for more than 331 days (long-term storage fee).
- Other costs
By selling in the FBA model, you will also incur costs not imposed by Amazon, but necessary to run the business. An example would be the warehouse system needed to control the flow of goods . It is often necessary to integrate it with Amazon so that it takes into account the data from the reports. The same is true for the accounting system needed to invoice customers.
Systems and their integrations cost up to several thousand zlotys.
Preparing goods for sale is another cost to keep in mind. In the FBA model, packaging and labeling must follow the platform’s guidelines. By not following the rules, sellers risk Amazon not accepting their goods into stock. To create the labels you will need EAN codes – bar codes for your products. Buying the pool needed to start selling is a matter of a few hundred zlotys. Along with other fees, this does not seem like a large expense, but it is worth keeping in mind when estimating.
EFN – European Fulfilment Network is a variant of the FBA model. Using it, you can sell your products to all EU countries by stocking them in just one Amazon warehouse in the EU country of your choice.
The EFN has the advantage of greater control over the goods and the ability to ship to other countries without registering for VAT with the local authority. However, these conveniences come at a cost of two to three times the cost of shipping.
It is useful to know who (consumers, from which countries) buys your goods and determine warehousing on this basis. If you sell mainly to Germany and have only a few orders per month from other countries, the EFN model (warehousing only in Germany) will suffice. On the other hand, if the sales of a commodity are distributed more or less equally between, for example. Germany and France, it’s a sign to think about warehousing in France, as increased shipping fees outside of Germany can eat up all the margin.
Active use of an account on Amazon comes with additional fees that may not be so obvious:
Sales completion fee
When selling multimedia products – in the category of books, music, DVDs, videos, video games (games, accessories and consoles) and software you have to expect an additional fee. It amounts to PLN 3-4 per product sold.
Administrative fee for return
If your product is returned, Amazon will give you back the commission, less an administrative fee (shipping cost). This fee is 20% of the commission amount or £20 – the lesser of the two will be charged.
It is also important to remember that Amazon blocks some of the funds for returns. If your merchandise is returned frequently, it can be as much as 20-30% of the amount.
Withdrawal of goods
A seller who has to withdraw his products from sale, and thus remove them from his warehouse, has to expect to pay a large amount of money to send them back…. Unfortunately, in this business model, it is cheaper to dispose of the goods than to send them back to their warehouses. Alternatively, in some countries the seller has the option of donating the goods to charity.
Charge for a large number of products on display
This fee is not one of those often imposed. This is because it only applies to vendors who exceed two million SKUs in a given month. When someone reaches such a huge number of exhibited products, a fee of 0.0016 zloty will be charged on each additional one.
If you want to withdraw the money to your account in gold, you have to remember that Amazon applies its currency conversion rate, which will be less favorable for you. This can be as much as a difference of 10-20 pennies per euro, which is very noticeable with large withdrawals.
Beginning vendors can apply to the Vine program. It involves sending its products for free, to selected users. These are people who have earned merit by writing helpful reviews and have been invited by Amazon to participate in this program. After receiving and testing the product, they give feedback to build a credible profile and better position ads.
If you have a good track record (a string of successes related to past sales – good reviews, few returns, high sales), and your product is interesting, innovative and popular, it has a good chance of qualifying as an Amazon Choice. This is a convenience for customers who, seeing a product labeled in this way, know that it has good reviews, a favorable price and can be delivered very quickly.
Having your product highlighted as an Amazon Choice, means that Amazon will promote it for free. For example, it can hit the front page, appear high in listings, or receive a buy box .
All of this will go a long way in increasing sales and allow you to dispense with other forms of promotion.
However, Amazon Choice is not easy to acquire, which is why marketing efforts are necessary for most sellers to stay on the platform.
If you decide to work with an agency such as Selium, you will probably start with an audit of your product and a discernment of the competition. Thanks to this you will learn, among other things. At what price it will be most advantageous to sell, so as to stay high in the listings.
Another marketing service you can use for dynamic pricing. Agency, can change the price of your product, depending on demand, competitor prices, etc. Agencies also take care of preparing the marketing strategy, running the campaign and taking care of the ad content. They also often help in getting buy boxes.
Before deciding to cooperate, it is worthwhile to analyze a particular agency well to be sure that it offers quality services. This is important because the cost of the agency is amounts of several percent of revenue.
Creating a listing
In order for your product to have a chance at high sales, the ad must be heavily polished. It must have high-resolution photos, contain all the necessary information and search-optimized ad content, etc. Taking professional photos and creating content is best outsourced to specialists, as is the translation of listings, necessary to sell abroad.
Cost of doing business
Running a business on Amazon requires opening a business. This involves many costs, among others. Social Security, or accounting. Sometimes novice sellers forget this and are surprised by the high fees. On the other hand, at a later stage, these amounts become less and less burdensome for the entrepreneur.
Taxation of sales on Amazon
Under the FBA model, your goods are stored in Amazon’s warehouses, which are located in seven countries. If you store your products outside the country where you do business, you are required to register for VAT with the local authority there.
If you use the FBM model, or FBA only in selected countries, and you ship your goods outside the countries where you store them, you have an obligation:
- register for VAT in these countries
- or register for VAT OSS
You have to realize the selected option only when the total amount for sales in all countries exceeds 10,000 euros.
For those who don’t want to delve into the complexities of taxation, they don’t have to give up selling on Amazon, they can take help from Taxology. Our specialists have extensive experience in going through these complicated processes.
Vat Compliance companies will help you with, among other things:
- Preparing and submitting VAT, VAT EU (WNT/WDT), VAT OSS returns to the authorities.
- Maintenance of VAT records.
A professional tax service is worth investing in at the very beginning. In this way, you will avoid, among other things:
- Delayed tax payments (and therefore late payment penalties).
- Rejections of applications for VAT/VAT OSS registration.
- Poor calculations and failure to meet tax obligations.
At first the price of VAT Compliance may seem high to you, but as your business grows it will become less and less noticeable.
The amount is fixed and not calculated based on your income.
If this service has piqued your interest and you have more questions, contact us here.