Do you? Can you? We at PDMG expose the “ugly” truth. And the truth is it costs a lot to sell on the Amazon platform. Really? We get feedback all the time from our clients, “It’s straightforward, we give 15% to Amazon on every sales transaction. How complicated is this?” It’s very complicated if you sell through FBA. We will explain. If you choose to sell on Amazon through FBA, the costs rise dramatically. Many of the profit calculators out there (especially Amazon’s) don’t fully bake in all the cost of selling on Amazon. At the end of the day, most sellers give 35 to 42% points to Amazon on all FBA sales. Wow, that’s a lot different than 15% isn’t it? Read below, we will get into the details.
Palmetto Digital Marketing Group, a full-service Amazon Agency, concentrates entirely on assisting Amazon sellers and vendors in achieving the best results in every aspect of their Amazon business. Best results equate to top line sales and bottom line profits. So let’s straight talk. What are the real costs of selling on Amazon?
Amazon Revenue Share
-Sellers must give Amazon 15% (for most categories) on all sales as a revenue share commission – no exceptions
FBA Cost
– Amazon’s Pick, Pack and Ship Cost – see chart here. These are variable and at the end of the day, are some of the lowest 3PL prices in the world! But it comes at a hidden cost. More on that later
– Amazon’s inventory storage cost – again a good deal when you look at the numbers compared to other 3Pl solutions
– Amazon’s inbound transportation cost into the FBA centers – this again is discounted and most often cheaper than UPS retail or negotiated rates or LTL carrier rates
“I don’t get it, seems like the costs are low, what is the concern?”
Advertising Cost
– All sellers advertise, and to get impressions to make sales, you must embrace advertising. Amazon is now an advertising platform merged into a marketplace. Amazon loves money driven through advertising, and ads are only going to get more expensive.
Lost Product Costs During Inbound Receiving or Warehouse DC Transfer
– Amazon does not have the best track record at receiving items. They’ve lost tens of millions of dollars worth of inventory either at their DC’s during the receiving process or while transferring product from one DC to another DC. PDMG has seen Amazon lose entire pallet loads before, and Amazon does not like to claim responsibility, so get insurance!
Long Term Storage Cost
– If your product doesn’t sell fast you accrue long-term storage costs, now these add up fast!
Lost Monies for Product Returns
– Amazon will refund the customer’s return as soon as it is scanned by the carrier while returning. Often times those products are used and unsellable. Yeap, you can’t sell them again – it’s a loss. You have 2 options, roll the dice and let Amazon decide what can be sold again and what can’t, or have them sent back to you at a cost. Either way, it’s a loss.
Prep Services
– Amazon is notorious for placing fragile items into poly-bag mailers. Beware. You pay one way or another. Either you pay when customers receive broken items or you pay Amazon for prep services like bubble wrap or bagging.
Amazon Labeling Services
– Don’t have a UPC and want to sell on Amazon through FBA, better pony-up some money. Barcode labeling comes at a cost. More importantly, Amazon has a difficult time labeling products without making errors. If they make errors, not only do you have to pay for the label service, you have to pay when Amazon mislabels. It’s disastrous, you pay with a big fat negative review you can’t remove, with an out-of-pocket cost for the product return.
Inventory Removal Orders
– Yes, if you want your product back from Amazon, they are going to charge you for it.
Does your Product Exceed 18 inches in Length?
– Pay up even more! You are now considered oversized and this comes at a premium.
Lastly and this is an Elected Cost – Got Coupons?
– PDMG loves using coupons to sell on Amazon. And yes of course you need to pay Amazon to use coupons.
So there you have it, the very ugly truth, it’s very expensive to sell on Amazon. PDMG’s key goal is offering sellers knowledge. And with knowledge comes power (or at least awareness). Our Amazon FBA Profit Calculation services can be used to:
– Help sellers price their products
– Help sellers determine what they can invest into advertising and promotions
– Help sellers understand gross margin $’s and %’s
– Help sellers understand net margin $’s and %’s
– Help sellers see the unforeseen cost
– Help sellers understand the true cost of selling on Amazon
– Since 2014, Palmetto Digital Marketing Group has assisted Amazon sellers in managing their Amazon profits
– Our analysts use cost analysis best practices to see the true cost of the Amazon platform
– Our managers understand the platform and all the hidden cost
