Amazon FBA simplifies your business but comes with significant costs. Between fulfillment fees, storage charges, and hidden penalties, these expenses directly impact your bottom line - especially with Amazon's annual fee adjustments.

Many sellers focus solely on increasing sales while overlooking operational efficiency. This leads to excess storage fees, oversized item charges, and preventable penalties that silently eat into profits.

This guide includes key strategies to reduce your Amazon FBA costs without compromising service quality, helping you protect your margins and increase profitability.

Link My Books helps sellers track all Amazon fees and connects your payouts with Xero or QuickBooks. This automation spots any fee errors or overcharges that cut into your profits.

Key Takeaways from this Post

Understanding FBA Fees Is the First Step to Reducing Them: Many sellers unknowingly overpay due to a lack of visibility into how fees are calculated.

Smart Inventory Management Saves Thousands: Reducing excess stock and optimizing storage levels can significantly cut long-term storage fees.

Automation Is the Key to Maximizing Profitability: Using tools like Link My Books eliminates manual errors, overcharges, and unexpected fees by tracking costs in real time.

Where Most Amazon Sellers Go Wrong with FBA Charges

Amazon's FBA (Fulfillment by Amazon) program helps sellers scale their businesses by handling storage, packing, and shipping. However, rising costs and hidden fees can significantly impact profitability. While Amazon has announced no increases in U.S. referral and FBA fulfillment fees for this year, sellers must still optimize their operations to avoid unnecessary costs.

Navigating Amazon's Fulfillment by Amazon (FBA) fees can be complex, and many sellers inadvertently make mistakes that erode their profit margins. Common pitfalls include:

Miscalculating FBA Fees: Sellers often underestimate the comprehensive costs associated with FBA, including fulfillment, storage, and returns processing fees. This oversight can lead to diminished profits, especially when margins are thin.
Poor Inventory Management: Ineffective inventory control, such as overstocking or stockouts, can result in increased storage fees and lost sales opportunities. Overstocking leads to higher storage costs, while stockouts can harm seller performance metrics.
Ignoring Amazon's Inventory Performance Index (IPI) Score: A low IPI score can result in storage limitations and higher fees. Sellers who neglect to monitor and improve their IPI scores may face increased costs and restricted storage access.
Not Understanding Product Size and Weight Implications: Failing to accurately measure and categorize products can lead to unexpected fees, especially for oversized or heavy items. Sellers who do not account for dimensional weight pricing may incur higher fulfillment charges.
Overlooking Unplanned Service Fees: Improper labeling or packaging can result in unplanned service fees. Sellers who do not adhere to Amazon's preparation requirements may face additional charges for non-compliance.

How to Reduce Amazon FBA Fees

Step #1: Understand Amazon’s Fee Structure

Amazon FBA fees are divided into multiple categories, each impacting your overall profitability. Here’s what you need to know:

Fulfillment Fees (Pick & Pack Costs)

Amazon charges fulfillment fees per unit sold, covering picking, packing, and shipping. These fees are based on:

Product size and weight (standard-size vs. oversized items)
Shipping method and destination

🔹 Amazon has confirmed no increases in U.S. fulfillment fees, and has reduced inbound placement service fees for large, bulky items by an average of $0.58 per unit.

💡 How to Reduce Fulfillment Fees:

Optimize product packaging to fit within the lowest size tier.
Reduce dimensional weight by using lightweight, protective materials.
Consider FBA alternatives like Amazon’s inbound placement service, which minimizes split shipments and reduces fees.

Storage Fees (Monthly and Long-Term Fees)

Amazon charges monthly storage fees based on cubic feet and imposes long-term storage fees for inventory unsold for over 365 days.

🔹 Amazon is expanding fee discounts for new sellers under the FBA New Selection Program, which provides free storage and removals for eligible products

💡 How to Reduce Storage Fees:

Keep Inventory Performance Index (IPI) scores high to avoid storage restrictions.
Remove slow-moving stock before the 365-day limit to prevent long-term storage fees.
Use Amazon’s FBA New Selection Program to receive free storage and removal benefits.

Referral Fees (Amazon’s Commission Per Sale)

Amazon takes 8-15% of each sale as a referral fee, depending on the product category.

🔹Referral fees remain unchanged for 2025. However, Walmart fulfillment services are reportedly 15% cheaper than Amazon FBA, putting pressure on Amazon’s fees in the future.

💡 How to Reduce Referral Fees:

Bundle products to lower per-unit fees.
Choose product categories strategically to minimize referral fees.
Monitor competitive fulfillment options like Walmart Fulfillment Services to find cost-effective alternatives.

Step #2: Optimize Product Packaging and Dimensions

Amazon's dimensional weight pricing means that even lightweight products can incur high fulfillment fees if packaging is too large.

Reducing Packaging Size

Many sellers unknowingly pay more due to inefficient packaging.

💡 How to Reduce Packaging Costs:

Work with manufacturers to reduce excess packaging while maintaining protection.
Keep dimensions within standard-size thresholds to avoid oversized fees.
Use flat-pack designs for lightweight items like apparel.

📌 Source: Amazon’s Packaging Guidelines

Step #3: Improve Inventory Management

Inefficient inventory management results in high storage fees, stockouts, and costly removals.

Monitor Inventory Performance with Amazon’s IPI Score

Amazon assigns each seller an Inventory Performance Index (IPI) score, which affects storage limits and fees.

💡 How to Maintain a High IPI Score:

Keep inventory levels optimized to prevent excess storage fees.
Remove unsold inventory before 365 days to avoid long-term storage penalties.
Use FBA restock recommendations to balance supply and demand.

Step #4: Use Amazon’s Programs and Incentives

Amazon provides several cost-saving programs that help sellers lower fees.

FBA New Selection Program

This program offers free monthly storage and removal benefits for new-to-FBA parent ASINs.

💡 How to Benefit:

Enroll new products to qualify for free storage and removal.
Monitor eligibility as Amazon updates the program annually.

📌 Source: Amazon’s FBA New Selection Program

Low-Price FBA Rates (Replaces Small & Light Program)

Amazon has discontinued the Small & Light Program and replaced it with Low-Price FBA Rates to provide discounted fulfillment fees for lower-cost items.

💡 Key Details of Low-Price FBA Rates:

Products must be priced under $10 (or equivalent in other marketplaces).
Lower fulfillment costs compared to standard FBA fees for eligible products.
No separate enrollment is required—all qualifying products automatically receive the discounted rate.

📌 Source: Amazon Low-Price FBA Rates

This update makes it easier for sellers of low-cost items to benefit from reduced FBA fees without additional program enrollment.

Step #5: Regularly Audit and Analyze Fees

Amazon occasionally miscalculates fees or overcharges sellers, so monitoring your fees is critical.

Use Fee Monitoring Tools

Several tools can track and analyze your FBA fees, helping to identify overcharges.

💡 Best Fee Tracking Software:

Link My Books: Automates Amazon fee reconciliation with Xero & QuickBooks.
Helium 10 Refund Genie: Helps identify FBA reimbursement opportunities.
Getida: Provides automated audits of FBA charges.

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How Link My Books Makes Reducing Amazon Fees Simple

Managing your Amazon FBA and your accounting manually is overwhelming. With multiple fees, complex tax rules, and endless reports, it’s easy to lose track of what you're actually earning.

Link My Books takes the guesswork out of your bookkeeping, automating everything from payout reconciliation to tax calculations, so you always have accurate financial data at your fingertips.

How Link My Books helps amazon sellers stay profitable:

Automated Payout Reconciliation – No More Guesswork

Amazon payouts are not a simple reflection of your sales—they include fees, refunds, taxes, and reserved balances. Manually tracking this is time-consuming and error-prone.

✅ Link My Books automatically matches your Amazon sales, fees, and refunds to your accounting software (Xero or QuickBooks), giving you accurate, real-time financials

✅ Supports all Amazon marketplaces and integrates with eBay, Shopify, and Etsy, so you can manage your entire e-commerce business from one place

Learn how to reconcile Amazon payments in Xero.

Accurate Tax Calculation – Avoid Costly Mistakes

VAT, GST, marketplace facilitator taxes, Amazon sellers deal with some of the most complex tax rules out there. One mistake in tax reporting can mean overpaying, underpaying, or triggering compliance issues.

✅ Link My Books automatically calculates the correct VAT or sales tax for each transaction, ensuring compliance with UK VAT, EU OSS, and US sales tax rules, and making it easy to fill out your 1099-K form.
✅ Separates Amazon-collected taxes from seller-responsible taxes, so you don’t double-pay or misreport your liabilities.

Cost of Goods Sold (COGS) Tracking – Know Your Real Profits

Your Amazon revenue means nothing if you don’t know your true costs. Many sellers make pricing decisions without factoring in COGS, leading to unexpected losses.

✅ Tracks your Cost of Goods Sold (COGS) automatically, so you always know your real profit margins.
✅ Helps with pricing strategy, adjust your prices based on real data, not guesswork.

4. Real-Time Reporting & Analytics – Insights That Matter

Standard software wasn’t built for Amazon seller accounting. You need insights tailored to FBA, multi-channel sales, and marketplace-specific fees.

✅ See your profitability in real-time, factoring in FBA fees, taxes, refunds, and storage costs.
✅ Track cash flow, sales performance, and reserve balances, so you’re never caught off guard by Amazon holding back payouts.

5. Benchmarking – See How You Compare to Other Sellers

How do your refund rate, profit margins, and sales growth compare to similar Amazon sellers? With Link My Books' benchmarking feature, you get industry insights based on real seller data.

✅ Compare your sales growth, fee ratios, and refund rates to industry trends.
✅ Focus on percentage changes and trends rather than raw numbers to spot areas for improvement.

6. User-Friendly Setup – No Accounting Experience Needed

Most Amazon sellers aren’t accountants, and you shouldn’t have to be. Link My Books is designed for ease of use, with most sellers set up in under 15 minutes.

✅ Step-by-step guided setup so you can start automating your Amazon accounting fast.
✅ Free onboarding call with an expert to ensure you’re set up correctly.
✅ Ongoing support with guides, webinars, and expert advice whenever you need it.

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FAQ on Amazon FBA Fees

How Do I Avoid FBA Storage Fees?

Amazon charges storage fees based on how much space your inventory takes up in their fulfillment centers. If you're not careful, these fees can quickly add up, especially long-term storage fees for items that sit unsold for over 365 days.

Monitor Your Inventory Performance Index (IPI) Score: Amazon assigns sellers an Inventory Performance Index (IPI) score, which determines how efficiently you manage your stock. A low score can lead to storage limits and higher fees.
Remove Slow-Moving Inventory Before It Hits Long-Term Storage Fees: Amazon charges long-term storage fees if your inventory stays in fulfillment centers for more than 365 days.

✅ Set up automatic removals for aging inventory to avoid penalties.
✅ Use Amazon’s liquidation program to sell off slow-moving stock at discounted rates.
✅ Run promotions or create bundles to clear out older inventory faster.

✅ Only send enough stock to cover the next 30-60 days of sales.
✅ Use third-party logistics (3PL) warehouses to store excess inventory and replenish Amazon fulfillment centers as needed.

How to Reduce My Return Rate on Amazon FBA?

Amazon tracks your return rate, and a high return rate can negatively impact your account health, lead to higher fees, and even get you suspended.

Improve Product Descriptions and Images: Many returns happen because buyers didn’t receive what they expected.
Address Common Customer Complaints: Analyze negative reviews and return reasons to identify patterns in customer dissatisfaction.
Improve Packaging to Prevent Damaged Returns: Many returns happen because the product arrives damaged.
Provide Better Customer Support: Respond quickly to buyer inquiries to clear up confusion before they initiate a return.

How Can I Calculate Referral Fees for Amazon Sellers?

Amazon charges a referral fee on every sale, which varies by product category. The typical Amazon referral fee ranges from 8% to 15%, with some exceptions.

Use Amazon’s Fee Calculator: Amazon provides a fee calculator to help sellers determine exact referral fees based on the product price and category.
Understand Referral Fee Percentages by Category: Some common Amazon referral fees by category:
- Electronics: 8%
- Apparel & Accessories: 15%
- Home & Kitchen: 15%
- Books & Media: 15%
- Beauty & Health: 8-15%

Calculate Referral Fees Manually

Formula:
📌 Referral Fee = (Product Price) x (Referral Fee Percentage)

Example:
If you sell a $50 home appliance and the referral fee is 15%, your referral fee would be:

📌 $50 × 0.15 = $7.50 per sale

By understanding how referral fees work, you can adjust pricing strategies to maximize your profits while staying competitive.

A good Amazon payment reconciliation software will help you reconcile everything correctly.

Reduce Your Amazon FBA Fees Automatically With Link My Books

You might be unknowingly overpaying for FBA fees because you don’t have a clear breakdown of all your costs. Manually tracking these expenses is difficult, and it often leds to missed overcharges, incorrect tax filings, and profit miscalculations.

With Link My Books, you can:

Automatically track and categorize Amazon FBA fees.
Ensure accurate profit calculations by factoring in all Amazon costs.
Prevent tax errors with correct VAT and sales tax calculations.

Stop guessing your profits, overpaying taxes, and spending hours reconciling Amazon payouts. Link My Books automates everything, and integrates seamlessly with Xero and QuickBooks so you always know your true earnings - with zero manual work.

Start your free trial with Link My Books today! 🚀