If you’ve shopped on Amazon in the past year or so, then you have probably noticed a change with the company. The e-commerce giant started raising their fees up to 200% annually earlier this year and it has continued ever since. In fact, they now charge so much that many merchants aren’t even able to break even after paying these crazy fees.
On top of that, they are increasing the fees faster than before which is making it even harder for merchants to stay afloat. However, there is still hope if you know what to do. We will explain further below and help you navigate through this treacherous domain of selling goods on Amazon.
Understand Amazon Fee Increases
Amazon is raising the fees for merchants all the time. This is because they make a lot of money from these fees. They charge a percentage of the total sale price of your products, meaning they take a hefty cut of every item you sell on their platform.
They also charge a fee every time a customer uses their Fulfilled by Amazon service to get their item. While there are many reasons that may explain why they are increasing your fees, one of the main reasons is to keep their shareholders happy.
Amazon is regulated by the same laws as every other business and has to abide by financial regulations. This means they have to make enough profit every year so that they can cover their costs and pay their shareholders. As mentioned above, the way they generate revenue is by charging a percentage of the total sale price of the items you sell on their platform.
They also charge a fee each time a customer uses the Fulfilled by Amazon service. This fee amounts to only $0.0098 per item sold through their service.
What Fees Do Amazon Collect From Sellers?
There are many fees that Amazon charges its merchants, but we will discuss three of them here. These fees make up the majority of the revenue that Amazon makes from business owners.
Fulfilled by Amazon Fee: $0.0098 per item sold through the Fulfilled by Amazon service. This fee amounts to only $0.0098 per item sold through their service.
Shipping Fees: Click-through and hold services are what most sellers use for shipping their products. However, these services cost a lot for Amazon. According to Business Insider, shipping by these methods can cost as much as $18.25 per order.
Subscription Fees: If you use Amazon’s shipping, payment, or subscription services, then you will be charged a fee each time a customer uses it.
Ways to Stay Profitable on Amazon While Sticking to Your Pricing Principles
There are many ways to increase your profit margins on Amazon. However, the problem is most of them involve changing your pricing principles so that you lose almost all of your profit. There are two ways to increase your profit margins while sticking to your pricing principles.
The first one is to use automation to increase your sales. The other is to use the Fulfilled by Amazon service to get more customers to use your shipping. Using automation to increase your sales means you use a tool that can automatically send sales emails to your customers.
The tool will then prompt them to buy the product by creating a sense of urgency. This is how most e-commerce businesses increase sales. Using the Fulfilled by Amazon service to get customers to use your shipping method is one of the most profitable ways to increase your profit margins on Amazon.
It’s also a way that many Amazon FBA sellers aren’t doing. With this strategy, you don’t need to change your pricing principles at all. All you need to do is select Fulfilled by Amazon and then select the shipping method that you want the customers to use.
Tips for Avoiding Fee Increases on Amazon
Amazon is charging more fees than ever before, but this doesn’t mean you need to buckle under. In fact, you can stay profitable while sticking to your pricing principles and avoid fee increases on Amazon.
Don’t Cut Costs to Keep Profits: If you are trying to stay profitable on Amazon, then chances are you are trying to cut costs. This is a bad idea because it means you are lowering your margin. You should always try to hold your margins high. If you need to cut costs, then do it. But don’t cut them to keep your profits.
Automate Your Sales: One of the best things is you can automate your sales to avoid losing money. This is because you will be able to focus more on marketing your products.
Choose Fulfilled by Amazon Shipping: This sounds like a very obvious tip. But if you are doing Amazon FBA, you will be surprised how many sellers are not using Fulfilled by Amazon. This will cost you more money in Subscription Fees, but it is the most profitable way to increase your profit margins on Amazon.
Shipping Options: What types of shipping do you offer? Are your options the best ones for your customer base? If you are not sure, then you should make some changes.
Cost of Selling: What is the cost of selling per item? Is it high enough? In order to stay profitable, you need to ensure that your cost of selling is not affecting your profit too much.
Keep an Eye on Your Sales: It’s important to keep an eye on your sales. This helps you identify what types of marketing are working and what is not.
Keep Track of Your Costs: You should also keep track of the costs of selling. This will help you identify what type of cost is affecting your profitability the most.
Keep an Eye on Trends: It’s important to keep an eye on what is happening in the market. This helps you identify trends that may affect your business.
Keep an Eye on Amazon Trends: It is also important to keep an eye on what is happening in Amazon. This helps you identify upcoming fee increases and make the appropriate adjustments.
There is no doubt that Amazon is the most popular platform for buying and selling goods online. But while they provide a smooth and hassle-free way of doing this, they also charge a lot of fees. This is why you need to know how to make money on Amazon profitably.
Amazon has several fees that they charge to their merchants. All of these fees have to do with the cost of using their platform. Amazon is also increasing the fees for these services. This means that the more you use them, the more money Amazon takes. This is why it is important to know how to make money on Amazon profitably.