Amazon is your best e-commerce platform if you are a start-up or a small-scale e-business owner. Aside from its hassle-free account creation, there are also tons of tools, tutorials, and blogs online that can guide you along your e-commerce journey.
One of the most popular seller tools is the Amazon FBA calculator. It is a supportive tool that measures the profit margin while reflecting the fees to be applied when using the FBA (Fulfillment By Amazon) program. Whether you are still thinking of switching to FBA or using it already, understanding how to use this specific tool will boost your e-commerce career.
Do You Need The Calculator Now?
While you can start using an Amazon FBA calculator anytime, it is best to use it when gathering data for new products to list on Amazon. This tool can provide you a better picture of the fees you need to apply for every product you sold. Moreover, you can use it to understand your potential gain margin on a per-unit basis.
Alternatively, you can start using an Amazon FBA calculator when the need to calculate the impact of increasing or decreasing your prices arises. You can use the data to identify which product cost budget should you continue or establish your minimum buyer price to keep your products profitable. An Amazon FBA calculator can also help you give you the margin you can possibly see from a high buyer cost.
If you are currently under Amazon’s FBM (Fulfillment By Merchant) program, an Amazon FBA calculator can show you a clear comparison of the fees and margin difference from each program.
Good Read: How to Use Amazon’s FBA Calculator in 2020 – Amazon Seller Guide
The Fees
Various fees are integrated with FBA, and if you are not keen on using the calculator, it can be quite challenging to have an accurate picture of your costs. Below are the fees that an Amazon FBA calculator shows if you utilize it.
Selling on Amazon
This kind of fee has two parts – the variable closing fee and the referral fee.
- Variable Closing Fee: It is only applied if applicable because it is a category-specific fee. It means it may go up or low depending on the product’s classification. A variable closing fee is only used for media items like video games, video discs, music, books, and software.
- Referral Fee: It is the payment for selling your product on Amazon. The basis of its computation is a percentage of your selling price or the least dollar amount, whichever is more prominent. However, take note that your product category also affects the percentage used for computing the referral fee. As a general rule, the base rate is 15%, and the minimum dollar cost is always at $1.
FBA Fees
The FBA fee is measured on the weight and size of a specific product. It has two aspects – a monthly storage fee and the fulfillment payment itself.
- Monthly Storage Fee: One of the best features of the FBA program is getting access to Amazon’s warehouses, where you can store your products for a minimal amount. The cost depends on the volume of the item per cubic feet.
- Fulfillment Fee: It is the expenses incurred for the delivery of the product to the buyer. It includes the packing, pick-up, shipment, and customer service fees for the labor and materials used.
How FBA Calculator Works – An Example
You now understand the basics of what an Amazon FBA calculator is. The question is, how does it work. Right? Here is an example to give you a run-down of how useful an FBA calculator is to your online business.
Step 1: Place your identifier to search for the product you want in Amazon. You can find it using an ISBN, ASIN, EAN, or the product description/ term. Let’s say you are selling a book as an example.
Step 2: Once the product you are searching for appears, you can start placing the values in the required fields of Fulfillment program to compute the margin for that specific item.
The item price is the first information that you need to input. You can check other listings to see the average price range of your item – that is if you do not have a repricer tool. We will use the value of $12.99 for your book.
Step 3: The next value you need to complete is the Ship to Amazon box. If you are doing FBA before, you might have an idea of the average per-unit cost to ship your items to the warehouses. As discussed previously, Amazon FBA fees are entirely dependent on the item’s size and weight. This factor applies to this field. You can try to input your lucky guess to understand the margin impact it can cause you or leave it blank. As we are doing an example, we will use $0.40 for your book item.
Step 4: The last field to fill out is the cost of the product box. You must put the per-unit price to buy the item from a wholesaler or supplier. Remember that it should include all expenses, including the overseas shipment fee, customs fee, packaging materials, etc. to get the item to you. For our example, we will use $3.50. Once you have completed this last requirement, you can click “CALCULATE.”
The Amazon FBA calculator will then reveal to you the net profit and the net margin for each item. The results will vary depending on the values you placed on the fields required. If you take a closer look, you will see that the calculator will provide you costs for the Selling on Amazon, Fulfillment by Amazon, and Total Fulfillment fees. It will also offer various graphs to help you have a clearer understanding of where the costs went.
Final Thought
The Amazon FBA calculator is an excellent instrument for an online start-up seller and those who want to level up their game in e-commerce. It will give you an edge over competitors as you will understand the margin impact more to improve your business decisions. This tool will allow your prices to be more competitive while increasing your profit. Well, why don’t you try it out to see the difference yourself?
