Protect your margins and boost profitability on Amazon Vendor
Opting for Amazon Vendor Central over Seller Central comes with numerous benefits, allowing you to sell your products in bulk, reduce your operating costs, and benefit from a more direct partnership with Amazon.
While the Vendor Central platform can make many aspects of selling on Amazon considerably easier, you’ll still need to take Amazon selling fees into account to maximise your brand’s profitability.
Understanding how these fees arise and what you can do to keep them to a minimum is crucial for any vendor looking to get the most out of Amazon as a channel and supercharge their growth.
In this guide, we’ll explore how Amazon selling fees are different on Vendor Central, the types of fees you’ll need to account for, and some best practices for managing fees for greater profitability.
Vendor vs Seller: The Differences in Amazon Selling Fees
If you’re just getting started on your Amazon journey, and you’re still on the fence about which route to take, it’s important to understand that Amazon selling fees work in fundamentally different ways on Seller Central and Vendor Central.
With Seller Central, your fees will be applied as both a base rate for having an account, and as a percentage of the value of all the items you sell.
A professional selling plan with Seller Central costs £25 per month excluding VAT at the time of writing, regardless of your sales volume in any given period.
Brands using Seller Central will also have to cover referral fees, calculated as a percentage of each product’s total sale price. This percentage varies from one category to another, and can be as low as 7% for products in the Computers category, or as high as 45% for Amazon device accessories.
On top of these fees, sellers using Fulfilment by Amazon will also need to pay a monthly storage fee, which depends on the physical volume of your stock and is calculated per cubic foot per month.
When operating through Vendor Central, you’re selling your products directly to Amazon rather than using it as a platform to sell to customers, so ostensibly you won’t be paying anything to sell through the platform. However, while Vendor Central doesn’t have the same referral fee format that charges you for each sale, you’ll still need to pay for services offered by Amazon, such as:
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Rolling out campaigns using Amazon Advertising.
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Amazon CoOp fees.
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Chargeback fees.
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Using Amazon Vendor Services (AVS).
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Forwarding your stock.
In summary, while Vendor Central doesn’t present any direct Amazon selling fees in the same way as Seller, there are still inherent costs involved in the platform you’ll need to account for when making projections or optimising for profit.
Types of Amazon Selling Fees on Vendor Central
Now that we’ve laid out the fundamental difference in the way Amazon selling fees work on Seller and Vendor Central, we’ll explore how Vendor Central’s unique costs are structured and what these charges actually pay for.
Here’s a closer look at the different types of fees and operational costs you’ll need to account for on Vendor Central.
CoOp Fees
Amazon CoOp agreements cover fees or discounts that maintain the business relationship between you and Amazon, such as freight expenses for shipping your products to Amazon fulfilment centres, returns arising from damaged or defective products, and other activities. These costs typically start at around 10-15% of payments from Amazon, but this can be subject to periodic changes and renegotiations.
The Vendor Central Amazon CoOp Portal allows you to view all the agreements, invoices, and payments relating to the CoOp agreements you’re enrolled in, and all CoOp fees are paid via deductions from the regular payments made by Amazon against PO invoices.
While CoOp agreements can include stipulations that are more favourable to the vendor than Amazon, there are various expenses attached to these contracts you’ll need to bear in mind when you’re looking to optimise your profit margins.
The four categories of Amazon CoOp fees include:
Freight and Damage Allowances
These fees require you to take on some of Amazon’s operating expenses in exchange for the efficient distribution supplied by Amazon’s logistical solutions. Some of these solutions include Amazon PICs, direct fulfilment, full truck load ordering, direct import, and more.
While freight allowances are the costs charged for Amazon picking up your products and shipping them to fulfilment centres under a WePay agreement, damage allowances require you to compensate Amazon for customer returns within a given warranty period.
In agreements where Amazon covers the cost of shipping, your freight allowance will be calculated based on the cost of shipping your products, with larger and heavier items incurring a higher freight allowance.
Damage allowance is used to cover the cost of Amazon handling returns and disposing of damaged items, rather than sending them all the way back to you. Generally, the return rate on Vendor will be similar to what you’re used to in other ecommerce models, though it may be slightly higher due to Amazon’s lenient returns policies, which may allow items to be returned in an unsellable condition.
Straight Payments
Straight payments are a fixed charge that Amazon will charge you in exchange for promotional activities, rather than an Amazon selling fee calculated as a proportion of your sales activity or charges that are adjusted according to your brand’s performance on the platform.
Amazon Vine enrollment and having your products featured via one of Amazon’s marketing packages are two of the most common activities that incur a straight payment as part of your CoOp agreements.
(SPA)/FLEX Promotional Allowances
(SPA)/FLEX promotional allowances are charged for promotional activities facilitated by Amazon such as Lightning Deals and Amazon coupons, with the amount adjusted according to the number of units sold in a promotion minus any cancelled orders. At the end of a promotional period, Amazon sets a schedule of when you’ll need to pay for the total allowance used.
Price Protection Adjustments
Price protection CoOp agreements are used to protect Amazon from price fluctuations. These state that if you lower the price of one of your ASINs, Amazon will automatically apply the reduced cost to any units in their fulfilment centres, as well as any goods in transit or those in open purchase orders. Though these price reflections aren’t explicit fees, they can eat into the profits attached to your sales and should be accounted for in the same way as any other selling expenses.
Amazon Chargebacks
Amazon chargebacks are a form of financial penalty that Amazon can impose on vendors for violating Vendor Central policies at some point in the fulfilment process, for example delivering a carton that’s mislabelled or overweight.
Amazon lists 13 distinct types of chargebacks that can be imposed on vendors, with issues including ASN (advance shipment notification) inaccuracy, late delivery of import documents, failing to deliver a shipment within a confirmed delivery slot, or submitting an invoice outside of Amazon’s approved digital channels.
Many vendors tend to see chargebacks as an unavoidable part of doing business through Vendor Central. While the costs may seem minor on the surface, the issues that result in chargebacks can have serious knock-on effects with other parts of your supply chain, and your brand’s reputation with the end customer. Over time, relatively minor one-off chargebacks can also add up to a much more serious impact on your margin.
To make matters even more confusing, Amazon can often issue erroneous chargebacks due to mistakes on their side, and end up penalising vendors who haven’t done anything to violate their policies.
Managing chargebacks in-house is a complex operation that can be quite resource-intensive, requiring you to carefully review and compare purchase orders, audit your business for operational inefficiencies, and work closely with your vendor manager to resolve issues that could be causing chargebacks.
Alternatively, many vendors opt to outsource this work to Amazon agencies and experts with more experience in challenging vendor chargebacks and minimising their impact.
Worried about the impact chargebacks are having on your Amazon operation? Our purpose-built ProfitGuard service helps you recover charges on your vendor account for zero up-front investment. Start recovering profit
4 Best Practices for Minimising Fees as an Amazon Vendor
Selling on Amazon fees come in different forms and can be affected by multiple factors.
While you’ll always have to account for some expenses as part of being an Amazon vendor, there are still ways to keep Amazon selling fees to a minimum and protect your profits in the long run.
Here’s a look at four key best practices for minimising Amazon selling fees as a vendor.
Take a Proactive Approach to Chargebacks
Though most vendors are hit by Amazon chargebacks at one time or another, this doesn’t mean you have to accept your chargebacks as a totally unavoidable part of selling on Amazon.
There are plenty of more proactive steps you can take to ensure the impact on your bottom line is kept to a minimum. Though we recommend outsourcing your chargeback management to vetted experts, there are still activities you can tackle in-house to get a clearer idea of how chargebacks are affecting you, and avoid them as much as possible.
Some key actions to consider include:
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Actively monitor the demand trends around your products, and compare this with the volume of purchase orders you receive from Amazon. Highlighting discrepancies and adjusting your inventory levels will help square your inventory management with demand from Amazon’s side, and reduce the chances of chargebacks caused by over or understocking.
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Streamlining your logistics by investing in training programs, revising quality control processes, and reviewing any technology you use when shipping to Amazon to ensure these processes align with Amazon’s standards.
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Keeping in close contact with your Vendor Manager or Brand Specialist, and scheduling recurring meetings where you can clear up potential misunderstandings and better align your processes with Amazon’s requirements.
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Getting familiar with your Vendor Analytics and Operational Performance dashboards to extract relevant data and identify issues that may prevent you from aligning your fulfilment strategy with Amazon forces.
Negotiate Better CoOp Agreements
CoOp agreements are flexible and subject to change based on your working relationship with Amazon. By taking a proactive approach to your negotiations around CoOp agreements, you can help to make sure you’re taking on a minimal proportion of the costs and putting your brand in a favourable position.
Some key best practices for when you’re negotiating your CoOp agreements include:
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Looking out for contract errors from Amazon’s side like charging incorrect amounts or maintaining rates from past agreements.
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Preparing for negotiations thoroughly and going in with a clear idea of both your offers and limitations.
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Review the processes and outcomes of previous rounds of negotiation with Amazon, know how closely their commitments were honoured, and look for ways you can leverage these outcomes for a stronger negotiating position.
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Stay familiar with data around your product profitability, and plan to use this as leverage when negotiating for more favourable CoOp rates.
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Study competitor benchmarks as much as possible to better contextualise the way Amazon views CoOp agreements and how your performance can be used to leverage your position in negotiations.
Maintain Effective Pricing and Promotional Strategies
Price protection agreements with Amazon can mean that any drop in your ASINs’ prices can be retroactively applied to stock in Amazon’s warehouses, units in transit, and those listed in open purchase orders.
This can have a big impact on your profit margins if it’s not properly managed, and it’s crucial to maintain a comprehensive pricing strategy that looks ahead for potential changes in demand and helps you make more informed decisions about any promotional drives.
Part of this should involve careful evaluation of any SPAs and FLEX allowances, looking at the long-term impact on your profitability rather than short-term benefits. It’s also important to ensure these agreements align with your overall pricing goals and don’t inadvertently lead to margin compression.
Consider Third-Party Chargeback Management Services
If you find that chargebacks and disputing them are consuming too many resources, outsourcing this process to a dedicated chargeback management service can be a great way to free up your internal bandwidth and ensure the impact of chargebacks is kept to a minimum.
With a chargeback recovery service, you’ll not only benefit from saving funds that would otherwise be lost to chargebacks, but also learn proactive strategies about preventing these losses in the future, all tailored to the unique needs of your brand.
By outsourcing your chargeback management to a purpose-built service, you’ll gain a broader view of all the deductions applied to your account, helping you identify the patterns and recurring issues that need to be addressed. It’s also an effective way to keep up-to-date with Amazon’s evolving policies and anticipate any changes you’ll need to make to keep your operations ahead of the curve.
Many of these services, including our very own ProfitGuard, work on a performance-based model, meaning there’ll be no up-front cost and you’ll only pay for the lost revenue that’s successfully recovered.
Amazon Selling Fees FAQs
Growing your brand as an Amazon vendor will always come at some expense, but understanding the mechanics behind Vendor Central Amazon selling fees is an essential step in streamlining your operations for a more efficient and profitable experience on the platform.
We hope this guide has given you a better idea of where your Amazon budget is being used, the root of possible inefficiencies at your business, and the next steps in strategising more profitable vendor operations.
For more support with unlocking the potential of Vendor Central, be sure to check out our other blog posts, or schedule a free ProfitGuard audit to find out how we can help minimise the cost of chargebacks for you.
We’ll round up with some frequently asked questions on Amazon selling fees and profitability for future guidance on your Amazon vendor journey.
What is the main difference between Amazon Seller Central and Vendor Central in terms of selling fees?
Seller Central operates on a fee structure that includes a base account subscription fee and referral fees on each sale, and brands may also incur Fulfilment by Amazon (FBA) storage fees. Vendor Central, on the other hand, does not charge direct selling fees but involves costs such as Amazon CoOp fees, chargeback penalties, and advertising expenses.
What are Amazon CoOp fees, and how do they impact vendors?
CoOp fees cover various costs, such as freight expenses, product returns, and marketing agreements between Amazon and the vendor. These fees are deducted from Amazon’s payments to the vendor and typically range from 10-15% of payments received, though this can vary over time through negotiations with Amazon. They can also include freight and damage allowances, promotional allowances, and price protection adjustments.
How do freight and damage allowances affect Vendor Central sellers?
Freight allowances cover the cost of Amazon picking up and transporting stock to fulfilment centres, while damage allowances compensate Amazon for handling customer returns and disposing of damaged goods instead of sending them back to the vendor. These costs depend on factors like product size, weight, and return rates.
What are Amazon chargebacks, and why are they issued?
Amazon chargebacks are financial penalties imposed on vendors who fail to meet Amazon’s fulfilment policies. Common reasons for chargebacks can include incorrect labelling, inaccurate shipment notifications, or missing delivery deadlines. Though they may seem fairly negligible individually, these fees can quickly add up and negatively impact profit margins if not managed effectively.
Can chargebacks be disputed or reduced?
While chargebacks can be disputed, this requires careful auditing of purchase orders, shipment records, and compliance with Amazon’s fulfilment requirements. Vendors can manage this process internally if they’re able to free up the significant time and resources required, or outsource it to chargeback recovery services that specialise in challenging Amazon’s deductions.
What are SPA and FLEX promotional allowances?
SPA (Special Promotional Allowance) and FLEX promotional allowances are costs incurred for Amazon-run promotions like Lightning Deals and coupons. The exact amount of these charges depends on the number of units sold during the promotion, excluding cancelled orders.
How do price protection adjustments work?
Under a price protection agreement, if a vendor reduces the price of an ASIN, Amazon automatically applies the lower price to stock held in their fulfilment centres, goods in transit, and open purchase orders. This can significantly impact profit margins, and should be considered when pricing and planning promotions.
How can vendors minimise Amazon selling fees?
Some of the most effective ways to reduce Amazon selling fees as a vendor include:
→ Monitoring chargebacks and take proactive steps to avoid them.
→ Negotiating better CoOp agreements with Amazon.
→ Developing effective pricing and promotional strategies.
→ Outsourcing chargeback management to third-party services to recover lost revenue and ensure compliance.
