By EC Team · Updated September 24, 2026 · 4 min read
In the previous parts of this series, we talked about finding product ideas for free and checking for trademark or patent risks.
Before diving deeper into sourcing, run a quick numbers check on your candidate products. This ensures you can make a reasonable profit after basic fees.
To keep things straightforward, we break down how fees work for both FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant) below, along with free downloadable Excel calculators you can use to test your numbers.
1. FBA Unit Cost Basics
When checking a potential product for FBA, your main focus is estimating how the product’s packaged size and weight will affect your fees.
📥 Free Resource:
(Download this simple FBA profit template to test your product price against product and fulfillment fees.)
1.1 Simple FBA Equation
Net Profit = Selling Price − Total Product Cost − Total Amazon Fees
1.2 Basic Fees to Keep in Mind
① Amazon Referral Fee
- What it is: The commission Amazon charges when a customer buys your item.
- Standard Rates: Most standard categories (Home, Kitchen, Toys, Outdoors) charge a 15% fee. Some categories like lower-priced clothing have reduced fee rates.
- Quick Check: Always check the exact fee percentage for your target category in Seller Central when testing prices.
② FBA Shipping & Packaging Fee
- What it is: The fee Amazon charges to pick, pack, and ship a single order to the buyer.
- How it works: Based on package size and shipping weight (using either scale weight or dimensional weight:
(L × W × H) / 139, whichever is higher). - Quick Tip: Be mindful of size boundaries. Packaging that stretches slightly over a tier limit can push the product into a higher size tier and raise shipping costs.
③ Placement & Storage Fees
- Inbound Placement Fee: A small extra charge if you send inventory to one entry point and let Amazon distribute it across their network.
- Monthly Storage Fee: The cost to store items in Amazon’s warehouse. Fees are standard for most of the year, but jump during the Q4 holiday season (October–December).
④ Damage & Return Reserve
- Safety Buffer: It helps to keep a small buffer aside in your estimates (e.g., 3%–5% for standard goods, or higher for clothing and shoes) to cover returns and transit damage.
2. FBM Unit Cost Basics
If you plan to sell larger items, high-priced niche products, or test a few items without storing inventory in Amazon’s warehouses, FBM is worth looking into.
📥 Free Resource:
(Download this FBM profit template to calculate self-fulfillment profits, including postage and warehouse costs.)
2.1 Simple FBM Equation
Net Profit = (Selling Price + Shipping Charged to Customer) − Product Cost − Logistics Cost − Amazon Referral Fee
2.2 Points to Note for FBM
① Referral Fees Apply to the Total Amount
- The Rule: In FBM, Amazon charges a referral fee on the total amount collected from the buyer. Specifically, this includes both the product price and shipping fees charged).
- Example: Selling an item for $20 with a $5 shipping fee ($25 total) means a 15% referral fee applies to the full $25 ($3.75), not just $20. You cannot lower Amazon fees by charging a high shipping fee.
② Postage & Shipping Distance
- The Rule: Buying shipping labels (USPS, UPS, FedEx) costs different amounts depending on package weight and destination distance (Zones 1 to 9).
- Quick Tip: Light items (under 1 lb) via ground services are generally affordable, but postage costs rise once items go over 1 lb or travel long distances.
③ Local Warehouse & Packaging Fees
If you use a third-party warehouse (3PL) to store and ship items, remember to account for their per-order pick and pack labor fee and outer packaging boxes.
Building a Healthy Margin Buffer
When testing your numbers, look at your Unit Net Profit Margin (%) (before advertising):
Unit Net Profit Margin (%) = (Unit Net Profit / Selling Price) × 100%
The Safety Cushion: Maintaining a 30%+ buffer ensures your product stays in the green even after ad spend, minor shipping rate changes, or running promotional coupons.
Target Margin Buffer: Aim for an initial margin of 30% or higher during your product research phase.
Why This Matters: This 30% margin represents your raw profit per unit after product and Amazon fulfillment costs. Out of this 30%, you will typically allocate 5% to 10% to Amazon PPC ads to drive initial traffic, leaving the rest as your actual bottom-line business profit.
