Starting an Amazon store unlocks a whole new possibility, especially when we talk of financial freedom. As the e-commerce industry continues to boom even with the global lockdowns, more and more sellers turn into millionaires or billionaires. Who would not want to be a part of such a lucrative industry?
But here is the thing. If you’re planning to launch your store, it’s essential to consider the prime expenses, including Amazon referral fee. The fees come as constant headaches, especially when no income is rolling for the initial months.
Thankfully, you can do things to minimize Amazon fees and boost your store’s income potential.
Before we talk about that, let’s have a briefing about what these fees are all about.
Professional Seller Fees VS Individual Seller Fees
There are two main selling plan options of Amazon, namely, individual seller plan and professional seller plan. Along with its pros and cons, each plan comes with its set of corresponding fees.
Let’s break these down further.
Individual Seller Plan
For people who will sell with this plan, here are the main advantages:
- Low product quantity
- One-off items
It has the following disadvantages though:
- Manual listing – Unlike in the professional option where you can use templates to fill in product information and upload them en mass, the individual plan requires you to manually upload the products.
- Restriction of Category – You’ve read that right. Amazon imposes restrictions on the items you sell, especially when these are beauty products and collectibles.
- Ineligibility for the Buy Box – Many sellers gear for the Buy Box button to drastically increase sales. But an individual seller plan user cannot avail of the service. That’s a big opportunity to miss considering the powerful features of the Buy Box.
Professional Seller Plan
Unlike the individual account plan, the professional seller plan does not require a fee per sale, and it comes at a monthly third-party9. This option is the best for those who are planning to sell 50 times or higher every month. It also saves sellers of this plan from the $1 Amazon fee per item.
A professional seller plan comes with the following advantages:
- Eligibility for the Buy Box – Every seller using this plan can avail of the Buy Box opportunity.
- Multiple product listing – With this feature, you don’t have to create an individual listing for every item since Amazon will provide you a tool to upload to tens to thousands of products at a time.
- Reporting features and Integrations – Multi-channel inventory management tools are essential in Amazon selling. If you have a premium plan, you can use and integrate these tools into your store. You will also have access to professional sellers’ reporting tools, such as business reports and professional selling plans.
- Promotions – Promotions such as “buy one get one free” and “giveaway” are possible when you’re using the professional plan. With that, you can generate feedback, boost your seller ranking, and introduce more products to the market.
- Multi-market listings – Using the premium plan, you can duplicate your listings to Mexico and Canada for free, even if you’re selling in the USA market.
Knowing the Amazon Seller Fees
Sellers don’t have to pay fees when listing products on Amazon, as fees only apply when an item has been sold. These fees are:
- Referral Fees
- Shipping Fees
- Variable Closing Fees
Take note. There is a separate set of fees for sellers using Fulfillment by Amazon (FBA). For this option, it’s up to Amazon to ship your product to an Amazon fulfillment center and store it there until ready for shipping to the customer. Although this is a more convenient option, it comes with added costs for the time Amazon has to store, including fees for the weight and size of the product.
So, what do you have to do?
How to Boost Income while Reducing Amazon Fees
Here are things to do to reduce fees in Amazon to boost your store’s profitability.
How to Reduce Amazon Shipping Fees
Here are ways to do that.
- Priority Mail – It’s best to leverage options like US post office Priority Mail when shipping relatively lighter products such as action figures and phone covers. It’s more often cheaper than the Flat Rate box and comes with a free box.
- Online Labels – To get you a more competitive postage rate and a free postal tracking service, consider printing your postage online. Since it allows you and the buyers to know where the products are, it is crucial to improving customer experience.
- Free Packaging Materials – You can ask the local vendors to give you their used tissue paper and boxes or browse for these materials on Craigslist. To help promote environmental awareness, you can also use shredded magazines and newspapers to protect your products. You’ll be surprised at the amount of money you can save on packaging materials every month.
- Negotiate – Consider leveraging on a bargain if you sell items every now and then. However, it’s recommended to contact Fedex or UPS and ask them what volume they offer special rates and customer discounts. This is important, especially when you’re shipping in serious quantities. That can help you remove some percentage points from your shipping expenses.
- Pay attention to volume – It’s recommended to send two smaller boxes rather than one large box since UPS and Fedex are now charging more based on volume instead of weight. You’ll save a lot of cash when you do this consistently.
Reducing Amazon Referral Fees
Amazon referral fees are way higher for some products such as Jewelry and Fashion. So you might want to consider niches such as beauty and baby products and backpacks since the required fees are significantly lower.
Reducing Variable Closing Fees
Sellers should carefully calculate if it’s worth selling items with required VCF payment. Let’s say you’re paying over 20% in VCF for a book worth $5; then you are at a loss or very minimal profit. But you are in a better position, and your VCF is more marginal when you’re selling your books under the $30 range.