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Paradoxical as it may seem, this is a real example of a product selling 50 units in 1 day 50 with negative profit. The reason are the Amazon FBA Storage fees.
They are withdrawn once a month and most sellers miss them when calculating their profit. Storage fees is a good example of the difficulty when calculating Amazon fees, let’s examine them closely.
Amazon FBA fees breakdown
Sellers who work in the FBA (Fulfillment by Amazon) program must pay storage fees for products stored in Amazon’s warehouses. The current prices for US-based warehouses vary by time of the year and product size (standard or oversize products):
- January-September: $0.69 per cubic foot standard size and $0.48 for oversize products
- October-December: $2.40 per cubic foot standard size and $1.20 for oversize products (notice Black Friday / Xmas seasonality is far expensive).
Additionally, there are huge long-term storage fees that are applied to items stored longer than 6 or 12 months as of the Inventory Cleanup date ($11.25 and $22.50 per cubic foot respectively). September 15, 2018 these fees were changed from a semi-annual basis to a monthly basis.
The fees are calculated based on the combined volume of the products and sellers stocks in an Amazon FBA warehouse.
This volume, however, changes dynamically since products are shipped out every day. This makes calculating exact storage fees quite hard.
How to calculate FBA fees in real time?
There are services that give users the actual real-time information. For example, sellerboard (formerly known as amzcontrol) takes it's numbers from your Amazon seller account, rather than calculating them based on the volume of the products stored.
They are automatically included in profit calculation, along with the number of other types of fees charged by Amazon.
And what about the reinbursements?
Besides Storage fees, Amazon sellers have a difficult time calculating returns correctly, so usually they are just being ignored. There are two main reasons for that: «they don’t really matter» or «it’s not clear how to calculate them».
Well, here's bad news: returns do matter.
The good news: sellerboard has you covered taking all returns into account automatically, let's see how in our example below:
It's important to know that returns contain not only processing costs and non-refundable costs but also adjustment of sales and costs.
Let’s see an example. Let's say you sold 1 unit in January. If client returns it in February you should: give back the money to the buyer, adjust Amazon fees and more stuff.
So how do you calculate returns correctly? Let's describe all of the components seen in the graph above:
- Product (-1207.99): money refunded to customers for the purchases
- Refund commission (-31.60): Amazon fee for returns handling
- Commission (+157.98): Amazon returned us the refer fee, that they withheld upon sale
- Shipping / Shipping chargeback (+28.29/-33.68): refund for the shipping to the customer and to shipping chargeback refund to the seller.
- Product cost (+316.17): if the returned product is “sellable”, sellerboard will calculate the COGS with a plus sign. When the product was sold, COGS for the unit was calculated with a minus.
If the unit is returned broken, it’s cost will not be calculated with a plus.
In summary, it's much easier to use a special software to visualize all of your data, takes all amazon fees into account automatically, supports changing buying prices as well as monthly or fixed costs (e.g. virtual assistant, or photo shoot).
All of this and many more features are available at sellerboard. sellerboard.com (formerly known as amzcontrol.com)
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About the author
Vladi Gordon
Amazon Analytics expert and CEO at Sellerboard.com, one of the leading Amazon Analytics softwares. Former Head of Product Management & Software Development at XPLN Price Intelligence and also AMZControl.
Speaker a AMZSummits and other Amazon related events.
