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Is Amazon eating your profits one fee at a time?

Posted on by SellerBites

An Amazon seller plugged their numbers into the FBA calculator and nearly choked: $19.99 retail, just $0.64 profit. Thatā€™s a razor-thin 3.2% marginā€”before ads, returns, or reality. šŸ‘Š

Now theyā€™re second-guessing everything. The seller community had opinionsā€”and not all of them were comforting.

Would you still launch?

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SELLERBITES INBOX

An Amazon seller (OP) asked: ā€œIs this really how FBA fees work? Iā€™m showing $0.64 profit on a $19.99 itemā€¦ what am I missing?ā€

OP plugged their numbers into Amazonā€™s FBA Revenue Calculator and nearly choked. 

After landing cost ($3/unit and $3.89 with tariff), the calculator showed cost per unit at $19.35 and net profit just $0.64 on a $19.99 sell priceā€”3.23% margin. 

Hereā€™s the breakdown:

  • Fulfillment fee: $13.79
  • Storage fee: $0.54
  • Inbound shipping: $2.02
  • Unit cost after tariff: $3.89
  • Final cost per unit: $19.35
  • Estimated monthly sales: 100
  • Estimated monthly profit: $64

And thatā€™s before ads, promos, returns, or reality. šŸ˜…

šŸ“‰ The $0.64 wake-up call

OP was gearing up to order 2,507 unitsā€”roughly $7,500 landed (before tariffs)ā€”and thought they had room to price competitively.

But now, with Amazonā€™s numbers staring back at them, theyā€™re wonderingā€¦

Did they just make a $7,500 mistake? šŸ˜¬

šŸ§® Somethingā€™s off in the math

Seller in the thread  noticed OPā€™s calculator inputs werenā€™t right.

  • Item price field is wrong. OP entered $3 (unit cost) where the selling price should go. That alone wrecked the output.
  • Shipping charge field used incorrectly. Sellers suggested setting that to $0 and rolling inbound costs or misc freight into the proper cost fields.
  • COGS left blank. Unless the product is free, you need to enter landed cost (product + tariff + inbound to FBA).
  • Weight creep. Double-check unit weight; even fractions matter. A $13.79 FBA fulfillment fee is huge for something expected to retail at $19.99.

Fixing those fields gives a truer margin pictureā€”and may be less terrifyingā€¦ or confirm itā€™s worse.

šŸ’£ The margin trap

Even if the fee numbers were right:

  • $3.89 landed + $13.79 fulfillment + storage/inbound etc = almost no headroom at $19.99.
  • Thatā€™s before PPC, promos, refunds, damaged inventory, and return shipping.
  • Launching thin leaves you no defensive budget if a competitor cuts price or costs rise (tariffs, freight, fuel).

šŸ§  What other sellers said

The hive-mind didnā€™t sugarcoat it.

  • Raise price. If the category can support $24.99ā€“$29.99, go there fast.
  • Premium over bargain. Competing cheap with those fees is suicide; build brand and charge for value.
  • Recalculate after package change. Shave size to drop fee tier before launch.
  • Always account for ads. Some sellers set their top-of-search pricing strategy assuming $5ā€“$10 blended ad spend per unit.
  • Returns happen. Budget for themā€”or your ā€œprofitā€ disappears.
  • Plan for tariffs. Negotiate cost relief, reduce materials, diversify sourcing away from one country.

šŸš§ Should you even launch?

At just $0.64 profit per unitā€”before ads or returnsā€”some sellers say itā€™s a no-go. Others see it as a long-game play. But when margins are this thin, one bad turn can tank the whole launch. 

Do the math, expect the worst, and donā€™t ignore the hidden fees.

THOUGHT OF THE DAY

If your margin is $0.64 before ads and returns, is it really a profitā€”or a ticking time bomb?

Donā€™t just price your product, pressure test it. A solid cost breakdown means nothing if FBA fees, errors, or packaging knock your margins down to cents.

TOGETHER WITH WALMART MARKETPLACE

Set your business up for growth with Walmart Marketplace & WFS

Lavazza, a successful coffee brand, saw more than 200% growth in Walmart Marketplace sales within 18 months of leveraging Walmart Fulfillment Services (WFS) to manage fulfillment*  

*Data provided by Lavazza.  

Before WFS, Lavazza filled their own orders, which strained their logistics network. With WFS, Lavazza sees: 

ā€œWe send our product to a single location. Walmart picks it up and distributes it faster than we’d be able to do.ā€   

ā€“ Matt Oā€™Hara, E-Commerce Operations Manager, Lavazza North AmericaĀ Ā 

Want to grow your business? Let WFS do the heavy lifting while you focus on scaling your way.Ā 

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