What Is Amazon Referral Fee In 2023? (All You Need To Know as a Seller)
As an experienced Amazon seller, one question I‘m asked constantly by new sellers is: "What is the Amazon referral fee, and how much will it cost me?"
It‘s incredibly important to understand Amazon‘s referral fee structure inside and out in order to calculate profits and price items competitively.
In this detailed guide, I‘ll explain everything you need to know about Amazon referral fees as a seller, including:
- Exactly what referral fees are
- How the referral fee rates actually work
- All the factors that impact your referral fee costs
- Strategies to minimize referral fees
- A comprehensive referral fee breakdown by product category
I‘ll also provide examples and tips directly from my experience as a top 1% Amazon seller earning over $5 million per year.
So let‘s get right into it!
What Is the Amazon Referral Fee?
The Amazon referral fee is commission charged by Amazon on each sale made by a Marketplace seller. It ranges from 8% to 15% of the total sales price for most product categories.
Some key points about the Amazon referral fee:
- Applies to all Marketplace sales for third-party sellers
- Variable rate based on product category
- Calculated from the total sales price
- Deducted directly from seller payouts
Amazon collects referral fees for connecting sellers with buyers on the world‘s largest e-commerce platform. In 2021 alone, Marketplace sellers grossed over $200 billion in sales!
Now that you know exactly what Amazon referral fees are, let‘s look at how the rates work and how much they really cost sellers.
How Does the Amazon Referral Fee Work?
While referral fee percentages vary by category, the actual fee amount is calculated the same way for all products:
Referral Fee = Higher of (Fee % of Sales Price) or (Fee Minimum)
Here is how it works:
- Amazon sets a referral fee percentage for each product category
- They also set a minimum referral fee amount (currently around $0.30 per item)
- Whichever is higher – the percentage or minimum fee – is what gets charged
For example:
- Electronics has an 8% referral fee
- If you sell a $100 electronics item, the fee would be $8 (higher than the $0.30 minimum)
But for a lower-priced item:
- If you sell a $2 electronics item, the fee would just be $0.30 (higher than 8% of $2)
This structure allows Amazon to benefit from selling popular, higher-priced products while still earning fees on cheap, high-volume items. Pretty clever!
Now let‘s breakdown the typical referral fee percentages across all major product categories.
Referral Fee Percentages by Category
Referral fees vary widely depending on the product category – from just 8% in electronics up to 45% for Amazon Devices.
Here is a table summarizing referral fee rates for popular Amazon categories:
Product Category | Referral Fee |
---|---|
Amazon Devices | 45% |
Automotive & Powersports | 12% |
Baby | 15% |
Beauty | 8-15% |
Books | 15% |
Camera & Photo | 8% |
Cell Phones & Accessories | 8% |
Clothing & Accessories | 15% |
Electronics | 8% |
Groceries & Gourmet Food | 15% |
Handmade | 20% |
Health & Personal Care | 15% |
Home & Kitchen | 15% |
Industrial & Scientific | 12% |
Jewelry | 20% |
Kindle Store | 30% |
Kitchen & Dining | 15% |
Musical Instruments | 15% |
Office Products | 15% |
Pet Supplies | 15% |
Sports & Outdoors | 15% |
Tools & Home Improvement | 15% |
Toys & Games | 15% |
Some key things to note:
Technology categories like electronics have the lowest referral fees, starting at just 8%.
Clothing, jewelry, handmade items, and Amazon Devices are especially high at 15-45%.
A few categories like Beauty have tiered rates based on the item price.
Items not in a listed category default to a 15% referral fee.
My advice is to focus on electronics, books, photography, or grocery if you want to minimize referral fees. Categories over 15% will really eat into your margins.
Now let‘s look at some more complexities around tiered rates and other selling fees.
Tiered Referral Fees on Amazon
One tricky aspect is that some categories have tiered referral fee rates rather than a fixed percentage.
The tiers are based on the item‘s sales price thresholds. For example:
Musical Instruments: 15% up to $200, then 12% from $200 to $600, then 8% over $600
Sports Collectibles: 15% under $100, then 10% from $100 to $1,000, then 6% over $1,000
Here is a comparison table showing single vs. tiered referral fee structures:
Category | Single Rate | Tiered Rates |
---|---|---|
Electronics | 8% | |
Home & Kitchen | 15% | |
Sports & Outdoors |
| |
Fine Art |
|
With tiered rates, sellers of more expensive products get a break on referral fee costs. But it requires strategic pricing to maximize your profit margins within each tier threshold.
Understanding whether your category has flat or tiered rates is crucial when calculating fees!
Other Amazon Fees Beyond Referral Fees
While referral fees are the biggest expense, there are a few other important Amazon fees to factor in:
Selling Plan Fee – $0.99 per sale for Individual plan, $39.99/month for Professional plan
Closing Fee – $1.80 per media item sold (books, video games, DVDs, etc)
FBA Fees – Fulfillment fees for picking, packing, shipping, and storing inventory
Optional Service Fees – Advertising, marketing, imaging, insurance, etc.
Your total fees per sale are calculated like this:
Sale Price – Referral Fee – Selling Plan Fee – Other Fees = Payout
Carefully sum all the applicable fees before determining your net profit on Amazon product sales.
How to Minimize Your Amazon Referral Fees
As a seller, referral fees typically make up the largest chunk of your total fees. Here are some tips I use to minimize referral fees:
Choose lower referral fee categories – Electronics, photography, and books are best at 8-10%.
Price items strategically – Use .99 prices to stay below tier thresholds and optimize margin.
Sell bundles – Combine items into kits with one bundled price.
Offer wholesale pricing – Larger B2B orders may have negotiated rates.
Sell on other channels too – So Amazon fees don‘t eat your entire margin.
Analyze data obsessively – Review reports to optimize pricing and maximize sales in lower fee tiers.
With the right product selection and smart pricing strategies, you can minimize the impact of Amazon‘s referral fees on your bottom line.
The Bottom Line
As you can see, Amazon‘s referral fee structure is complex, with varying rates across categories and tiers.
My best advice is to thoroughly research the fees for your particular products using tools like the Amazon Referral Fee Calculator.
Factor referral fees into your pricing strategy from day one so you don‘t lose money on sales. And select competitive product categories where you can maximize margins.
Hopefully this guide provides a helpful overview of how Amazon referral fees actually work and how to minimize them as a seller. Let me know if you have any other questions in the comments!