Selling on Amazon can be a lucrative business, but with such a mighty platform comes a wealth of fees. This is by no means designed to put you off using Amazon. It does, however, highlight the hidden costs on Amazon that you perhaps hadn’t considered. Businesses want to make a profit; that’s rule number 1. Costs vary from storage fees, returns and refunds, unplanned services, package dimensions and even ad spend. Read on to find out more about these unexpected profit eaters and, most importantly, how to fix them!
1. Ad Spend
Amazon advertising is fantastic for discoverability and making sales. However, poor Advertising Cost of Sale (ACoS) can significantly drain your profits if your ad spend is not managed carefully. Budgets can be wasted on campaigns if they’re run inefficiently, for example, running them during off-peak times or targeting ineffective keywords. These mistakes can lead to higher costs without seeing the sales to back it up.
How to fix it: Do your research before setting up your campaign, finding the best keywords that work for your product. Monitor active campaigns regularly and edit them to optimise your ad spend. Use previous campaign data to inform your future Amazon Advertising.
2. Returns and Refunds
Nobody wants to have to accept returns or refunds for their products, but it happens. Whilst Amazon often offers free returns and refunds to their customers, they actually charge an administration fee to the supplier for every return. This can really eat into profits, especially if you have a high-return rate. Not only does it mean you’ve lost a sale, the product may be deemed as unsellable upon return, and sent for liquidation or disposal, which involves an additional fee! It’s worth running returns reports if you have regular returns to decipher if there is a common problem that can be fixed.
How to fix it: Improve your product descriptions with thorough and accurate information to set the customer’s expectations, in turn lowering return rates. You can also resolve issues by providing excellent customer service before they lead to returns.
3. Unplanned Services
Sellers often don’t realise there can be charges for operational errors. Returns, liquidation and disposal fees mentioned above are some of those. Another is when your inventory arrives at an Amazon warehouse without the appropriate packaging or labelling. Each category is quite specific about what is needed, and it’s a fee that can easily be avoided if you do your research. Other unplanned costs can include poly-bagging for liquids, bubble wrapping for glass and breakables, and FNSKU labelling after these.
How to fix it: Ensure all your products meet the labelling and packaging requirements before shipping. You can check the Amazon Prep Guidelines here. If managing labels in-house is difficult, Amazon FBA do offer a label service that can be a cost-effective solution.
4. Package Dimensions
Amazon use dimensional weight to calculate a product’s shipping fee. Whilst you may have a lightweight product, if your packaging is quite large, this may increase the dimensional weight of your product. They have three sizes that products are grouped into – small standard size, large standard size and bulky. They have to meet the following criteria:
Small standard size
- Unit weighs less than or equal to 1lb
- Length is less than or equal to 15 inches
- Width is less than or equal to 12 inches
- Height is less than or equal to 0.75 inches
Large standard size
- Unit weighs less than or equal to 20lb
- Length is less than or equal to 18 inches
- Width is less than or equal to 14 inches
- Height is less than or equal to 8 inches
If your unit is larger than these, it will be considered oversized and charged as a bulky item. Sellers often trip up here as they have larger packaging than necessary, incurring these additional postage fees.
How to fix it: Redesigning your packaging to be more compact can help reduce shipping fees, as well as be more environmentally friendly. If you regularly evaluate your packaging materials and shipping methods, it can lead to future cost savings.
5. Storage fees
Storing in Amazon warehouses obviously comes with a fee. No doubt, you would have factored this into your budget. But did you know these are broken down into short-term and long-term storage fees?
Short term
Amazon has a very useful rate card that you can see here, but to sum up, the short-term storage is a monthly fee. Fees are based on the unit’s size when properly packaged, and charged per cubic foot in the UK, and per cubic metre for other European countries.
Long term
The long-term storage fee, also known as the Aged Inventory Surcharge, is applied to any products that have been sitting in the warehouse for over 240 days. They say that overstocked items limit their ability to provide space for fast-selling items that customers want. It’s all about them being able to provide high levels of service for customers and sellers alike. You should also note that this fee increases the longer your stock sits there, and is charged per cubic foot/metre, as per the short-term costs. The prices below are as of the 15th February 2025.
Amazon can also return long-term stock to you at your expense if they need the space for large events such as Prime Day.
How to fix it: Keep on top of your inventory levels by regularly auditing your inventory, forecasting for demand, particularly for sales or seasonal events, and running promotions on slow-moving stock, ideally in advance of the Aged Inventory Surcharge being applied.
These are just five of the hidden fees on Amazon that you can avoid with some careful planning and research. Maybe you’ve got some stock sitting in the warehouse that you now know needs pushing before it incurs those extra storage fees? Or perhaps your last ad campaign didn’t bring you the sales you were expecting? Or you could even have realised that your packaging is eating into your profits. If you need help looking into any of the points made here, do get in touch with the Brand Monkey team. We have spent years working with Amazon, and our expertise really lies in giving you the best opportunity to become a success.