Takeaways from Amazon’s 2020 SMB Report

Interested in Amazon’s 2020 small and medium-sized business (SMB) report but only want the pertinent facts? Check out the highlights from Amazon’s SMB report here!

Third-party Sellers

Third-party sellers account for more than half of Amazon’s unit sales. The following data is for the period from June 1, 2019 to May 31, 2020.

  • 3P sellers sold more than 3.4 billion products
    • An increase from 2.7 billion products last year
  • 3P sales amount to 6,500+ products per minute
    • This number is up from 4,000 products per minute from 2018
  • American 3P sellers averaged $160,000 in sales
    • Up from $100,000 year over year
  • 20% more American 3P sellers passed $1 million in sales from the last report
  • Amazon works with more than 2 million partners, including sellers, developers, authors, and delivery partners
    • Up from 1.9 million from the 2019 SMB report
  • Amazon Business customers spent over $7 billion
  • SMB exports up to $3.1 billion
    • An increase from $2.4 billion
  • About 3,700 SMBs passed $1 million in sales
  • More than 450,000 sellers worldwide use FBA, with sales growing by 34%

Other interesting data in the report are the states with the most Amazon sellers. 47 states have more than 1,000 sellers. 26 states have more than 5,000 sellers. Below are the five states with the most Amazon sellers:

  1. California, with 100,000+ sellers
  2. Florida, with 50,000+ sellers
  3. New York, with about 50,000 sellers
  4. New Jersey, with 20,000+ sellers
  5. Utah, with 70,000+ sellers

Additionally, the 2020 SMB report lists the states with the fastest-growing sellers year over year:

  • Iowa, with 57% growth
  • Washington, with 57% growth
  • Alabama, with 53% growth
  • Virginia, with 50% growth
  • Louisiana, with 49% growth

Other interesting data of note is the hiring of 82,000 last-mile delivery drivers hired through the more than 1,000 Amazon Delivery Service Partners.

What does this data mean? Amazon’s marketplace sales are growing year over year. Combined with a few other factors like Amazon’s investment in and expansion of fulfillment centers, delivery drivers, and other logistical services, Amazon continues to dominate and expand its position in ecommerce.

Other factors, like the worldwide pandemic, have caused major retailers like JC Penney and GNC to declare bankruptcy and reorganize. Whether these retailers will rebound still remains to be seen.

All of these factors mean that Amazon will continue to dominate the online marketplace, and the drastic increase in unit sales per minute is evidence that third-party sellers on Amazon continue to increase their revenues even as traditional brick-and-mortar retailers lose sales as a result of reduced foot traffic and pandemic restrictions.

Ultimately, Amazon’s 2020 SMB report is good news for third-party sellers who are established. With the ongoing pandemic, more and more people are shopping online, and it’s clear that they’re choosing Amazon.

Read our article on Amazon’s 2019 SMB Report.

Amazon Prepaid Return Label Enrollment

Amazon will begin enrolling professional sellers into the Prepaid Return Label program on June 15, 2020.

The Prepaid Return Label program will issue prepaid return shipping labels for qualifying returns. Sellers are charged for return shipping.

Many sellers are already participating in this program. Sellers can also self-enroll in the Prepaid Return Label program in the Manage Seller Fulfilled Returns tool.

Sellers who are not part of the program should see a message in their Manage Returns page that reads “Get access to faster returns by taking advantage of the Prepaid Returns Label program.” Click on it to enroll in the program.

What does that mean for sellers?

Amazon will automatically authorize all returns that fall into its returns policy, and Amazon will provide customers with prepaid return shipping labels through the Buy Shipping Services. Seller accounts are charged for the return shipping cost when the label is scanned by the carrier.

As of this time, sellers don’t have the option to specify a carrier or issue their own prepaid labels.

Customer return requests that fall outside of Amazon’s return policies or that are usually exempt from returns are sent to sellers for review.

All returns, including automatically-authorized returns, can still be tracked via the Manage Returns page.

What do sellers need to do to enroll?

Before Professional sellers can enroll in the Prepaid Return Label program, they’ll need to verify and confirm a few settings on their accounts.

  • Set up or verify that the default return address on the account is correct. Amazon requires a US domestic address for returns
  • Make sure return addresses are set if there are multiple marketplaces
  • Ensure that the weight and size information for products are accurate since return shipping costs are calculated with the provided information

What categories are exempt from prepaid returns?

Not every return is automatically allowed. Per Amazon’s policies, some categories are exempted from the prepaid returns program. Those categories are:

  • Amazon Custom
  • Business, Industrial & Scientific Supplies > Professional Dental Supplies
  • Business, Industrial & Scientific Supplies > Professional Medical Supplies
  • Certified Preowned Watches
  • Handmade
  • Sexual Wellness

In addition to the categories above, Amazon allows sellers to request exemptions for SKUs that:

  • have special shipping or handling requirements (like dangerous goods)
  • are non-returnable by law
  • are high-value (greater than $100) items need special shipping (like shipping insurance)
  • are non-physical (like warranties or digital software)

Request exemptions for SKUs in bulk by going to the Return Settings and Return Attribute Overrides link.

Other important information

  • Sellers can still set returnless refunds, and customers who request a refund will get a full refund as soon as they submit their request
  • Sellers are charged only when the customer returns the package to the carrier (when the label is scanned)
  • Sellers can also appeal an Amazon-authorized refund or return if they believe that the refund or return should not have been authorized
    • Reimbursements for customer-damaged products are limited to 50% of the order value of the product
  • Sellers are responsible for filing a claim with the carrier if the return is lost in transit
  • FBM or MFN sellers can unenroll from the Prepaid Return Label program by contacting seller support

For many sellers, this program will streamline customer service and save time. However, returns should still be monitored and claims filed if packages are lost in transit or if products are damaged by customers.

The Prepaid Return Label program will encourage more customers onto Amazon’s marketplace, and easier returns generally eliminate customer obstacles to purchases. Indeed, the ease of returns will likely encourage more customers to shop on Amazon.

What is Amazon Posts?

Amazon Posts allows sellers to use curated photos to motivate and inspire shoppers to engage with brands and products on Amazon.

Posts is Amazon’s answer to social media commerce. If you’ve ever purchased something you saw on Facebook or Instagram, then you’ll be familiar with what Amazon Posts attempts to replicate. Even if you haven’t purchased something through social media, you’ve likely been exposed to its advertising.

Amazon Posts is currently in Beta, and best of all, it’s currently free to participate in!

Sellers who have a focused brand should give Amazon Posts a try. So if you’re selling in beauty, apparel, lifestyle, or other similar categories, Posts may give your brand that extra boost in exposure and sales!

Get started today by going to the Amazon Posts page!

How does Posts work?

Brands that participate in Posts will see a carousel on the product detail page that includes related brand products. Customers who click on an image on the carousel will be brought to the shopping feed.

All the posts on the carousel are shoppable, and customers can get more information about the product with a simple tap.

In addition to the product detail page, Posts will also show up in these areas:

  • Brand-owned detail page
  • Related brand detail page
  • Related post feed
  • Category feed

What sellers get from Posts

Sellers can only benefit from Amazon Posts, though the one drawback is that having an updated, curated brand means that someone will need to actively manage the account.

That means someone will need to take and edit pictures, and actively post, curate, and update the account. Conversely, having an account that isn’t regularly updated may reflect poorly on the brand.

Posts will be a great addition to health, beauty, and lifestyle brands, and it’ll be a good fit for businesses that already have a social media presence. But smaller businesses may want to consider the dangers of having Posts that are outdated or filled with less-than-stellar photos.

Here are some other benefits:

  • Currently free to participate in
  • Access to engagement metrics, views, clicks, and clickthrough rates
  • Publish product-focused content to promote brand

Amazon Posts can be a great addition to brands that already have a social media presence—simply adding another platform doesn’t take that much more effort if all the photos are already in place.

Best yet, Amazon Posts is currently free! Every seller knows how competitive Amazon is. Any small advantage over a competitor can give sellers a boost in sales. Give Posts a try today and see how you can promote your brand and give it an edge!

Takeaways from Amazon’s 2019 SMB Impact Report

With 2019 at a close, it’s a good time to look back into the impact Amazon had on SMBs. Below is a summary of Amazon’s 2019 Impact on SMB Report.

SMBs continue to choose Amazon to sell their goods over other marketplaces, increasing Amazon’s market share and providing consumers with more choices. Year over year, more and more SMBs choose to sell on Amazon:

  • 2016: 600,000 SMBs
  • 2017: 900,000 SMBs
  • 2018: 1,600,000 SMBs

In 2018, SMBs accounted for over $160 billion in sales, accounting for more than half of Amazon’s overall sales. For 2018, these SMBs had significant sales:

  • More than 200,000 SMBs had sales of over $100,000
  • More than 50,000 SMBs had sales of over $500,000
  • More than 25,000 SMBs had sales of over $1,000,000

More than one billion dollars was loaned to SMBs to help support their Amazon stores.

But what does all of this mean for sellers? Amazon’s report includes these benefits:

  • US-based sellers had on average $90,000 in sales
  • US-based sellers more than doubled their export sales using FBA

This large growth in both Amazon’s distribution centers, fast delivery, and SMBs choosing Amazon over other platforms means that SMBs now sell on average 4,000 items per minute!

The most popular categories for SMBs are:

  • Health & Personal Care
  • Home
  • Beauty

The top ten states with the fastest-growing SMBs are:

  1. Mississippi
  2. Nebraska
  3. Maine
  4. Texas
  5. Indiana
  6. Colorado
  7. North Dakota
  8. Vermont
  9. Wisconsin
  10. Missouri

Amazon has also grown in other ways. Amazon delivery vans have likely become more and more common on the streets. And people keep in touch with Amazon-related news may recall Amazon’s Delivery Service Partner program, which advertised $100,000 earnings when it first launched.

Other areas of growth include Amazon Web Services (AWS), Kindle Direct Publishing, and Alexa development.

Amazon is still growing, and it seems like a new distribution center is being built every month. What this expansion shows is Amazon’s plan to reduce delivery times and continue to grow its share of the online market sales.

Updated Amazon Seller Fees February 18, 2020

A lot has changed for Amazon in 2019. More warehouses, new delivery services, and one-day delivery are just three of those exciting changes. Starting on February 18, 2020, Amazon is changing its fee structure for Amazon sellers as well.

Read our handy summary of these fee changes and about the new and exciting FBA New Selection program!

Referral Fees

  • Shoes, Handbags, and Sunglasses fee drops from 18% to 15% for items with a total sales price above $75.00
  • Outdoor furniture fee drops from 15% to 10% for any portion of sales above $200
  • Personal care appliances to be consolidated into Health & Personal Care category, dropping the fee from 15% to 8% for items with a total sales price of $10 or less
  • Activewear will be charged the same fees as Clothing & Accessories at 17%
  • Ring accessories to be consolidated into the Amazon Device Accessories category and charged a fee of 45%
  • Amazon Business to have one referral fee rate per category, so items above $1,000 will have the same rate as items less than $1,000

Fulfillment Fees

Core fulfillment fees are going to be increased by an average of 3-4% across the board.

Screenshot of new fees for Amazon FBA starting on February 18, 2020

Other changes to fulfillment fees are below:

  • Clothing will no longer have the $0.40 per unit charge
  • Small & light fee will now have a single per-unit fee by weight instead of separate order handling, pick and pack, and weight fees
  • FBA Label Service for Small and Light items will be $0.10 per unit
  • No long-term storage fees for small and light items in fulfillment centers for 181-365 days
  • Small and Light will now have the same standard long-term FBA storage fees (more than 365 days), so $0.15 per unit instead of $0.50 per unit
  • Small and LIght will have the same standard FBA disposal and removal fees

Introducing FBA New Selection

New to FBA for 2020 is the FBA New Selection program. This program allows sellers to enroll new-to-Amazon ASINs for fee reductions and other benefits.

Sellers must opt-in before they’re qualified to take advantage of this new program.

Benefits sellers will receive from this program:

  • Fee waivers for up to 500 new-to-Amazon ASINs
  • Free monthly storage for the first 50 units of each parent ASIN in the 90 days after the first unit is received at the fulfillment center
  • Free removals of the first 50 units within 180 days
  • Free returns processing for five product categories in bold below
    • Apparel; Shoes, Handbags, & Accessories; Jewelry; Luggage; and Watches will have their returns processing fees waived for the first 50 units of each parent ASIN
    • Returned items must be received within 120 days from when the inventory was first received
  • $100 inbound transportation discount for new FBA sellers through the Amazon Partnered Carrier program

Who is eligible?

  • Sellers with an Inventory Performance Index (IPI) score of 400 or higher
  • Sellers who have no storage limit

What is eligible?

  • Small standard and large standard-sized items are eligible
  • Parent ASINs must be new to Amazon
  • ASINs in media not eligible
  • Used items not eligible

Other information about FBA New Selection

  • Begins April 1, 2020
  • Only first 50 units of each eligible ASIN qualify for fee waivers
  • Only the first 500 new-to-Amazon ASINs qualify for the fee wavers, but this limit is reset every year on April 1
  • Available only to Professional sellers

Fee increases aren’t really surprising to veteran Amazon sellers who are accustomed to annual, and sometimes semi-annual, changes to Amazon’s fee structure.

The biggest benefit will be to sellers who are participating in the Small & Light program, which has been drastically simplified with consolidated and reduced fees.

Amazon’s FBA New Selection program also looks interesting, as it encourages sellers to continue to introduce new products, which will be great for Amazon and customers.

Be prepared for these changes to Amazon’s fee structure starting on February 18, 2020!

Understand your Amazon Inventory Adjustment Report

Many Amazon FBA sellers never look at their inventory adjustment report. While Amazon’s automated system does a pretty good job at keeping inventory reconciled, it’s not a perfect system. If you ignore the report, then you could be giving up a lot of money.

Handling fulfillment for millions of sellers is no easy task. Even small businesses sometimes have trouble keeping track of their inventory. So it’s no surprise that some inventory gets lost or damaged because of Amazon’s size and processes.

Most FBA sellers understand how to reconcile their inbound shipments with what Amazon receives. But many sellers ignore the inventory movements that take place once Amazon has received the inventory.

If you’ve never taken a look at your inventory adjustments, then consider taking some time to look through at least one report on a popular SKU to make sure that Amazon has reimbursed you for all of the items they’ve damaged or lost.

To access this report, go to Reports > Fulfillment > Inventory Adjustment.

Below is an example of an inventory report. Notice the various movements.

Understanding Amazon's FBA Inventory Reconciliation Report

Let’s go over what this report means. The first column shows quantity into or out of your stock. So a -1 means one unit out of your inventory. Conversely, a 1 means one unit into your inventory.

The second column provides a description of the adjustment.

The third column tells you the disposition of the unit. The image above is fairly simple in that there aren’t any complex issues.

Looking at the report above, you should notice that there are -4 units out of your stock for “Inventory misplaced” and +3 units for “Inventory found.”

Let’s assume that this report is complete. This report shows that Amazon lost 4 units but only found 3. The result is that Amazon owes you 1 unit or the cash value of that 1 unit.

While this reimbursement is usually automatic, there are likely instances where Amazon has failed to reimburse you. You can find reimbursements on your fulfillment reports. This report will tell you whether you’ve been reimbursed with a unit or with cash. Search for the Merchant SKU using a wider date range to capture late reimbursements.

Reimbursements for warehouse lost or damaged units can take anywhere from a few days to a few weeks since lost units may be found a week later.

In the image below, we see that Amazon has reimbursed the seller with cash. These reimbursements usually take place 30-45 days after the inventory has been lost or damaged by Amazon.

In instances where Amazon reimburses sellers with cash, they may claw back that cash reimbursement and instead return a unit. These reversals show up on the settlement as clawbacks or reimbursement reversals.

Amazon to QuickBooks Online Accounting: Recording Reimbursements

You can reconcile your inventory by counting the number of units misplaced and compare that to the number of units found. Then take a look at your reimbursement report to see if Amazon has reimbursed you for the discrepancy. If not, then you should open a claim for reimbursement with the proof you’ve gathered.

Make sure that the date ranges are accurate, and avoid requesting reimbursements for recently lost items since those may be found soon. Doing so will only increase your work for no gain since Amazon will likely reverse the cash reimbursement.

But your inventory reports are not going to be as “clean” or simple as the one provided above. You’ll likely see various descriptions and dispositions on the report, making reconciling your Amazon inventory that much more difficult.

See the image below for a more complex report.

Understanding Amazon's FBA Inventory Reconciliation Report

In this new image, we see a much more complex inventory report. In the third column, we now see Unsellable, Customer Damaged, and Warehouse Damaged.

Here’s a link to Amazon’s page for understanding the various codes on your Inventory Adjustment report.

In this more complex report, there are 2 units misplaced, but only 1 is found, resulting in -1 change to your inventory. If Amazon hasn’t already reimbursed you for it, you could open a claim for the 1 missing inventory.

There are also a few different Dispositions in the report. Unsellable means that inventory is likely placed back into your unfulfillable inventory. This is the inventory that you either remove or dispose of—if you do nothing, then Amazon automatically disposes of the inventory after 30 days.

Customer damaged returns can be problematic if you’re selling large-ticket items like furniture or consumer electronics. That’s because some customers may swap out, damage, or even “rent” their purchases for a few weeks.

In the past, Amazon was pretty good about reimbursing sellers for returns that were damaged by customers. But that’s not the case today. Now, sellers are responsible for charging restocking fees, and many reimbursements have to be dealt with through SAFE-T claims.

Sometimes, customers will mark that their purchases are defective in order to get free return shipping and avoid restocking fees. When this happens, you may see “Defective” as the reason, but upon receipt, the warehouse worker may mark the unit as Sellable, returning the unit to your Sellable inventory.

That’s great news except when the unit was actually defective, or the unit was carefully swapped out with a lower quality, model, or counterfeit unit. Then the next customer who purchases your item will also be a victim of fraud.

Customers who receive defective items or obviously used or fraudulent items are more likely to leave negative seller feedback and product reviews. Since most customers don’t leave reviews, even one negative feedback or review can really impact sales.

What can you do to improve your bottom line for your Amazon business?

  • Have all returns for complex products sent back to you instead of being inspected by an Amazon fulfillment worker—only you know how your product should look and work
  • Set automatic removals for your seller account so that you can inspect all returns
  • Include a periodic review of your inventory adjustment reports, inbound shipment reports, and reimbursement reports to understand what’s going on with your inventory at the fulfillment centers
  • Reconcile your inventory and open any claims for units that were lost or damaged by Amazon and not reimbursed
  • Look into writing a restocking fee into your seller policies so that you can minimize fraud
  • File SAFE-T claims for eligible cases—even if it may not be worthwhile, a valid SAFE-T claim against a customer may allow Amazon to track serial scammers

Anyone can create an individual selling account and sell on Amazon. And many people can even start selling professionally but to be successful on Amazon, you’ll have to be more efficient than other sellers to give yourself that competitive edge.

That means you’re streamlining your business processes and making sure that you hold Amazon accountable for any inventory they’ve lost or damaged. After all, that’s what part of your fees are for.

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Fulfillment by Amazon (FBA) Donations Starts September 2019

Starting September 1, 2019, Amazon will begin donating eligible excess and returned products from sellers using FBA. This program is called Fulfillment by Amazon (FBA) Donations, and it’ll be available in both the UK and US marketplaces.

Amazon has partnered with Good360, an organization that specializes in product philanthropy. Good360 partners with companies to source needed goods, and it distributes those goods to its network of diverse nonprofit organizations.

Amazon joins a growing list of other businesses that are looking to reduce waste. Good360 has such corporate partners like Disney, Hasbro, and Home Depot, to name a few.

Sellers who are using FBA and have eligible products will automatically be enrolled in the donation program. When sellers choose to dispose of overstock, returns, or otherwise unwanted inventory, then Amazon will donate the inventory instead. This service is available only to inventory stored at US fulfillment centers.

There’s no additional cost outside of the usual disposal fees, and Amazon will handle the donation.

Sellers who do not wish to donate their inventory will have to disable donations in their FBA settings. This can be found under Settings > Fulfillment by Amazon > FBA Donations program. Simply do a search for FBA Donations to find it, or scroll all the way down to the last option (at the time of this article).

Of course, there are some issues to consider. Instead of being thrown away at a landfill, donated goods may eventually end up being resold online. Issues like warranty claims, brand image, and customer support should be considered if you have a particularly complex product.

Overall, donated inventory means that less stuff ends up at landfills. And people in need will be helped as well. Both people and the environment will be better for it.

You may also want to consider other options if you’re considering donations. For example, Amazon Outlet is a way to recover some cost from your inventory.

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Set up inventory in QuickBooks Online for Amazon Sales

It’s easy to set up inventory in QuickBooks Online to track your Amazon sales, but there’s a lot more you can do to optimize your inventory for better tracking.

Learn more about these related topics on SellerZen:

Let’s take a look at the different options when you add new inventory in QuickBooks Online. You’ll need a QuickBooks Online plan that supports inventory tracking, so that means you’ll have to get Plus or Advanced.

To add a new product or service, go to Sales > Products and Services > New > Inventory.

QuickBooks Online only requires a few fields to quickly set up inventory, but you’ll want to think about how you’re going to organize inventory in QuickBooks Online.

Consistency will help with your workflow, and it’ll lead to better reporting and more efficient reconciliation if you always follow the same procedure.

Let’s take a look at the new inventory setup below.

Here’s an example from your Manage Inventory on Amazon.

Below is the recommendation for how you should populate the fields for your inventory item in QuickBooks Online.

Notice that the Name, Initial quantity on hand, and As of date are the only fields required. QuickBooks uses the default accounts for the other accounts.

For the Name field, many sellers are tempted just to use their Product Name on Amazon. That might be something like “Super Shiny Stainless Steel Spoon 4-Pack,” but this isn’t ideal because Product Name on Amazon can be changed. Some sellers will go through multiple Product Name changes before settling on one they like.

When you change a product title on Amazon, you’ll have to change it through QuickBooks, and this can cause a lot of confusion.

We use the Amazon SKU to QuickBooks Name field so that there’s no confusion when the Product Name changes.

For the QuickBooks SKU field, we recommend using the Amazon ASIN just so sellers can search for convenience should anyone change the QuickBooks Name field for whatever reason. Using the Amazon ASIN in the QuickBooks SKU field also gives you another level of fine detail should you need it.

For the Initial quantity on hand, we recommend that you put 0 when you create a new inventory item. Why? If you enter a number here, QuickBooks Online will put the Cost of Goods Sold at $0, giving you 100% profit when the item sells. Of course, that’s not likely to be true.

Use Vendor Bills or Expenses to receive and increase your inventory accordingly.

The “As of date” field is also important. For this field, you’ll want to enter a date that precedes the date of the first sale. This is because putting the current date on the inventory item will mean you can’t create a sales transaction with a date before the one you selected.

So if you’re setting up your QuickBooks Online for the first time, have those inventory purchase dates ready, or at least have an estimate of it ready so that you can post transactions to QuickBooks Online without errors.

FBA sellers may want to use the inventory shipment date here, or simply use the date of the Purchase Order, Bill, or Expense when you purchased the inventory.

These settings can be changed later, but any changes will also affect your reporting.

The remaining fields in the inventory item deal with the associated accounts.

Notice for the Description field, we entered the Product Name here. While this isn’t necessarily required, having it will make reviewing your transactions much easier. But you’ll have to update this field whenever you make a change on Amazon.

This can be very tedious if you’re optimizing your Amazon listings daily. Otherwise, leave it blank if you have a fairly descriptive Amazon SKU and QuickBooks Name.

One common mistake sellers make here is to add their Cost to the field. QuickBooks Online will generally ignore the value in the Cost field if you’ve used Bills, Expenses, or Checks to receive inventory. But in their absence, it’ll use the value in the Cost field.

The reason you should leave the Cost field at 0.00 is that any update to the Cost field will mean that you’re using averages instead of the actual cost per unit. And averages will give you some misleading information about your inventory status.

One thing sellers can do with the inventory accounts (Inventory Asset, Income, and Expense account) is to set up the inventory so that inventory transactions are tracked across multiple warehouses or brands.

Alternatively, you can use class tracking or location tracking in QuickBooks Online, but if you’re already using those features for other reasons, then having different Inventory Accounts can be helpful.

For instance, you can have all of your kitchen utensils use a Kitchen Utensils Sales of Product Income Account. And you can just use the default Inventory Asset and Cost of Goods Sold account.

When you run reporting later, you’ll be able to see your sales income from Kitchen Utensils, Home Goods, and Furniture income accounts.

Or, if you’re like many sellers, you can use different accounts to track various warehouses. For instance, you’d have a Warehouse A Inventory Asset, Warehouse A Sales of Product Income, and Warehouse A Cost of Goods Sold.

When you run reporting later, you can more details about sales and inventory at both of your warehouses.

The remaining fields aren’t necessary. Leave the Sale price, Purchasing information, and Preferred Vendor fields blank. If you’re using a repricer on Amazon, then it’s pointless to enter a Sale price on the actual item—you’ll enter it on the document that you create.

The Preferred Vendor field is a convenience that may help your workers if you have multiple vendors for the same item. This will let your employees know which one you prefer.

If you set up inventory in QuickBooks Online correctly and consistently, then your accounting for your Amazon transactions will be far more detailed. Better financial reporting in QuickBooks Online will give you an advantage over other Amazon sellers who are just guestimating what their finances are.

Or use a service like SellerZen to automate the hassle of manually entering all of your Amazon transactions.

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Amazon Fees Explained for New Sellers

Amazon fees are rarely discussed amongst sellers. You’ll often hear about how much money people are making on Amazon, but you’ll rarely hear about what the cost of doing business is.

If you’re not careful about your expenses and the fees that Amazon charges, you could be losing money.

Take a look at your settlement. You’ll see that fees are all lumped together, making it difficult to know the expenses line by line. While you can get a bit more detail by filtering, those details aren’t organized as well.

For most sellers, the selling fees don’t matter since there’s no way to opt out of paying them, but understanding the fees Amazon charges will empower sellers in making critical business decisions.

Below are the most common fees and credits you’ll see from Amazon.

Per-item Fee

This fee is a flat $0.99 rate charged on all items sold with the Individual Selling Plan. If you’re consistently selling more than 40 items a month, then you should upgrade to the Professional Selling Plan, which has no Per-Item Fee and a host of other features.

Referral Fee on Item Price

Items sold on Amazon will have a referral fee based on a percentage of the item price or the minimum referral fee of usually $1.00. For many categories, that cost is 15% of the item price, but the percentage can range anywhere from 6% (Personal Computers) to 45% (Amazon Device Accessories).

Referral Fee on Gift Wrap

If you charge for gift wrap, Amazon will take a percentage of this as well. In some states, gift wrapping is taxable. For example, Arizona doesn’t tax gift wrapping services, while Florida does. California does tax gift wrapping depending on what the item is.

Referral Fee on Shipping

Amazon takes 15% whatever you charge for shipping.

Variable Closing Fee

This fee depends on the category of the item you sell. Media like books, DVDs, and Video Games are $1.80 per item you sell. But most categories outside of media won’t have this fee.

Sales Tax Collection Fee

Yes, Amazon even charges you to collect sales tax.

Refund Administration Fee

Fee for non-media items. This cost is 20% of the order-related fees, up to $5.

Shipping Services

You can purchase shipping from Amazon. This is the recommended route, as you get more seller protection by purchasing through Amazon than you would shipping it on your own.

Amazon may also charge a small fee for specific shipping services purchased through Amazon.

Amazon’s shipping is likely to be cheaper than what you would pay if you were to go to the post office or at a UPS retail location.

Cost of Advertising

This is the total cost of your advertising fees on Amazon for the period.

Shipping Services Refund

Refund for shipping services purchased.

High Volume Listing Fee

This fee is for sellers with more than 100,000 active listings. Each listing after is charged a monthly fee of $.005.

FBA Fulfillment Fee

This FBA fulfillment fee depends on the item you’re selling. But it starts at $2.41 for small, standard-sized packages weighing under 10 ounces.

Storage Fee

Storage fees are for storing your items at the fulfillment centers. For items sitting in the warehouse longer than twelve months, you have to pay long-term storage fees, which are a lot more.

For standard-sized products from January to September, the cost is $0.69 per cubic foot. For October to December, the cost goes up to $2.40 per cubic foot.

Long-term storage fees increase to $6.90 per cubic foot.

Inbound Transportation

This charge is for shipping purchased through Amazon to ship to their fulfillment centers.

Subscription Fee

The subscription fee is for Professional accounts.

Successful Charge

This is usually any money you’ve paid Amazon through your credit card. So if you have 0 sales and a -39.99 subscription fee on your settlement, you’ll see a 39.99 Successful charge entry on your next settlement.

Payable to Amazon

This is the amount you owe Amazon, it’s generally carried over from the last settlement.

Removal Fee (Disposal)

If you need to dispose of your inventory, then Amazon charges $0.15 per item or $.30 for large items.

Removal Fee (Return)

If you want your inventory returned to you, then it’s $0.50 per item or $0.60 per oversized item.

FBA Label Fee

If you choose to use Amazon’s label service, then it’s $0.20 per label.

Amazon Capital Services

If you’ve accepted an Amazon loan, then you’ll see this listed on your settlements.

Warehouse Damage

Amazon will reimburse you for damaged FBA inventory. They may reimburse you in cash or give you another of the same product.

Warehouse Lost

This reimbursement is for lost FBA inventory.

Removal Order Lost

You’ll receive a reimbursement for removal orders that Amazon loses.

Removal Order Damaged

This reimbursement is for removal orders that Amazon damages.

Reversal Reimbursement

If Amazon has reimbursed you in cash for lost inventory and later finds it, you will see this charge.

Sample Fees for an Individual Account FBA Order

Let’s say you sell a standard-sized, lightweight item (under 10 ounces) on an Individual account. For the sake of convenience, let’s say it’s in the office products category with a 15% commission.

Your fees would be the following:

  • $20.00 Sale Price
    • $2.41 FBA Fulfillment Fee
    • $3.00 Referral Fee
    • $0.99 Per-Item Fee
  • Total to your seller account $13.60

Missing from these fees are your inbound shipping fees, storage fees, and cost of goods. Generally, inbound transportation fees are low if you’re sending in large shipments. Storage fees are generally low if your inventory moves quickly.

If this is your only sale for the period, you’ll see any money you owe Amazon deducted from your sales proceeds. So you may end up getting less than $13.60 for inbound and storage fees.

Many sellers will never take a look at the details of their sales. They’re satisfied so long as there’s a net positive disbursement. But after accounting for cost of goods sold and labor, there may not be much of a margin.

But knowing the details of the orders will allow businesses to make smarter financial decisions like whether or not they should discontinue a product or stop using FBA.

Read our other articles about Amazon below:

Understanding Amazon Current Reserve or Unavailable Balance

Are you wondering what the current reserve or unavailable balance is on your settlement report?

Learn more about how the previous and current reserve balance and how they work in this article.

You may see these on your settlement reports as previous unavailable balance and unavailable balance. We’ll use previous reserve and current reserve instead.

The reserve balance is withheld from your account to cover potential issues like

  • A-to-z claims
  • Chargebacks
  • Low seller performance metrics
  • Account review
  • Pending order delivery

Previous Reserve Balance is the amount that was withheld from your previous settlement and released on your current one.

For instance, if your current reserve balance is $100 on January 1, then your Previous Reserve Balance (and your beginning balance) will be $100 on January 15 so long as there were no problems with orders.

Current Reserve Balance is the amount withheld from orders until 7 days after the latest estimated delivery date.

Using our example earlier, if your disbursement is on January 15 and you have an order that nets $100 on January 14 with a delivery window of January 16-20, then that $100 won’t be available to you until January 27.

For many sellers, this $100 will carry over to the next settlement period. Sellers who request transfers daily won’t be able to request the $100 until January 27.

In addition to recent orders, you’ll also see funds held in reserve for chargebacks and A-to-z claims.

This running reserve balance ensures that your account has enough to cover any claims from customers.

Amazon may also keep funds in reserve for other reasons.

New sellers have a longer reserve period, so they may not receive their first disbursement until a month after their first sale. This reserve balance may be withheld for a longer period from sellers who have a long delivery window.

Sellers with low seller performance metrics may also see a longer reserve period. That’s because low seller performance metrics can mean higher instances of returns and A-to-z claims.

A combination of chargebacks, A-to-z claims, and low seller performance metrics may mean that funds are held in reserve for longer than expected.

Even sellers who have a sudden increase in sales may be put under account review because of the sudden spike in account activity.

Why have any reserve balance?

One reason for a rolling reserve is fraud. In the past, fraudulent sellers took advantage of the absence of a rolling reserve to scam customers and Amazon.

This worked because they were able to upload a large amount of inventory at low prices, set long delivery windows, collect money from sales, and then disappear. Amazon would be left with angry customers and the cost of the refunds.

How can I change my reserve period?

There’s no really no way to change how Amazon handles your reserve balance. If you have low seller performance metrics, then work on improving those metrics.

See if you can reduce your shipping window by using FBA or improving fulfillment processes. Getting your orders to customers quickly means you’ll get your money sooner.

Not interested in FBA? Look through our list of third-party Amazon service providers to find another solution.

If you’re getting a large number of returns and A-to-z claims, then look into what’s causing the issues.

  • Do your products have a flaw or defect that can be fixed? Is this defect across all products or just some? Consider inspecting your products at the factory or upon arrival.
  • Are your products getting damaged during shipping? If so, then improve the packaging.
  • Getting a lot of return fraud? Consider implementing some security measures like tamper-evident seals on packaging

You’ll want to improve your performance metrics regardless of the reserve period since low metrics can lead to account suspensions. Taking some proactive steps to improve your metrics can save you from the stressful process of writing appeals and waiting.

Minimize any risk to your account by fulfilling orders on time, entering tracking information, and providing excellent customer support.

Learn more about these other Amazon topics below.