Understanding the different types of fees associated with transactions on Amazon is essential when calculating and tracking your costs and profit on the popular eCommerce company.
One of the most important fees to keep in mind is the Amazon referral fee which applies to every single transaction. But, what exactly does this mean?
To provide a short and simple answer, the referral fee is a fee that Amazon charges every time you sell a product on their website. This fee is a percentage of the total sales price and is typically around the 15% mark.
It’s worth bearing in mind that this percentage can vary depending on the product category. For example, it can drop as low as 8% for items such as personal computers and then rise as high as approximately 45% for Amazon Device Accessories.
This guide will take a detailed look at the Amazon referral fee, including all the information you need to know about how the fee is calculated, who has to pay it, and what happens when a discount code is applied. We’ll also look to answer some of the frequently asked questions related to the topic.
Is It Fair For Amazon To Take A Referral Fee?
The vast majority of people understand and appreciate that Amazon taking a small referral fee is only fair.
For instance, if you recommend your friend to buy a house from someone you know, it isn’t unreasonable to expect some form of “referral fee” for referring your friend to the seller in the first place. It’s almost like a commission.
This is exactly the same concept as the Amazon Referral Fee, except instead of houses, it’s products on Amazon.
The popular and well-trusted Amazon platform is attracting thousands of customers to your products, so it’s only right that they’re able to charge a small referral fee for their role in the sale.
Just think about it. If you were using your own independent website to sell your products, there’s every chance that you’d have to spend a significant amount of money (upwards of $10,000) in marketing before making any kind of serious profit.
Instead, Amazon allows you to achieve results considerably faster than the vast majority of ecommerce platforms.
How Is The Fee Calculated?
The referral fee is determined by Amazon calculating the percentage of the total price paid by the customer. This percentage is usually 15%. So, if for example you’re selling a product for $150 but decide to run a sale for $120, then Amazon would calculate the referral fee from $120, not $150.
Does Everyone Have To Pay A Referral Fee?
Irrespective of your account type or fulfillment type, everyone has to pay the Amazon referral fee. This is the same whether you have a professional selling plan or just an individual one.
For those who own an individual seller account, you’ll have to pay a fixed closing fee of $0.99 for every item you sell. This fixed closing fee is in addition to the referral fee.
In contrast, if you have a professional selling plan, there’s a $39.99 monthly fee. While this may seem like a considerable chunk of money, you won’t need to pay a fixed closing fee with a professional seller account.
What’s more, with a professional selling plan, you also have access to powerful seller tools and insights.
So, once you’re selling at least 40 items per month through Amazon, it’s beneficial to upgrade to a professional selling plan as not only will you save a significant amount of money on fees, you’ll also receive benefits such as management tools and volume listing.
In terms of shipping and delivery, you still have to pay the referral fee irrespective of whether you’re selling the product FBM (fulfilled by merchant) or FBA (fulfilled by Amazon).
Therefore, if you’re fulfilling orders for your item sales FBM, the total referral fee is the percentage of both the item price and shipping amount combined.
For example, if you’re selling a Star Wars figurine for $20 and you decide to charge your customers $3.50 for shipping, then your final referral fee will be 15% of $20 + $3.50 ($3.53).
Is There A Minimum Referral Fee?
If the price of the product you’re selling is so low that the final referral fee ends up below $0.30, Amazon will charge you a minimum $0.30 referral fee.
Take for example, a collectable soccer card that you’re selling for $1.40. While the standard referral fee calculates to just $0.21, you’d have to pay a minimum referral fee of $0.30 because of Amazon’s policy.
It’s worth noting that Amazon applies their minimum referral fee on a per-item basis, so whichever category your product falls into, you’ll have to pay the $0.30 fee.
What About Claim Codes And Discount Coupons?
If you’re selling your item at a discount so the customer can type in a “claim” code at checkout for a reduced price, the Amazon referral fee will be based on a percentage of the sale price, not the original full price.
To explain this further, imagine you’re selling a pristine hairbrush for $30. Your referral fee would usually be 15% of the sale price ($30). However, if you offer your customers a discount of 50%, they can type in a claim code at checkout to get the hairbrush for $15 instead.
As a result, you’ll only have to pay a referral fee of $2.25 – which is 15% of the $15 sale price.
Frequently Asked Questions
What Happens To A Referral Fee If A Product Is Returned?
This all depends on the product that’s being returned to you. If it’s a non-media product, Amazon typically refunds 80% of the fee paid, as well as any other fees up to $5.
On the other hand, if the item being returned is a media product, you’ll receive a full refund of all your fees. Just keep in mind that this refund may not include $0.99 individual seller fee.
How Do I Pay A Referral Fee To Amazon?
To make things significantly easier, Amazon automatically deduct referral fees, so there’s no need for you to manually process anything.
Is Paying A Referral Fee Legal?
Referral fees are like commissions, and they’re the payments that a product seller makes to third parties in return for sending customers their way and recommending their services. These fees are legal due to the fact that they’re a key part of many organizations and businesses’ marketing.
Do Referral Fees Increase Or Decrease Over Time?
All Amazon fees – not just referral ones – can either increase or decrease each year. If there’s a change, you should be advised at least a couple of months in advance and this can also be viewed in your Amazon Seller Central account.
How Do I Avoid The Amazon Referral Fee?
While it isn’t possible to avoid the Amazon referral fee altogether, you can be strategic when it comes to deciding which items to sell on Amazon.
For example, many people choose to sell products on Amazon which have a low referral fee, while using different marketplaces such as eBay for items with a higher referral fee.
Related Articles:
