Chris Muscarella, thanks for the question I don’t trying to answer it with real-life examples from my store.
Amazon FBA services (storage, fulfillment and shipping) for your website-originated orders are appx half what a small business would otherwise face when you take into consideration shipping. However they are structured strangely and it is hard to compare apples to apples because there are at least 10–15 costs at play including packing materials, receiving, returns etc. To talk about fees, first off we must distinguish between your site’s orders pushed there, and Amazon-originated orders. Let’s call them Shopify and Amazon orders for short.
Amazon orders originate on their site and have the potential to grow very quickly. Charges are organized into 4: order handling (fixed), pick and pack (fixed), and weight handling (variable), and a referral fee of 14%. Fulfillment (sum of three fees) on an Amazon order is about $4.40 for a 2-lb yoga mat — pretty expensive compared to a fulfillment warehouse. (Because some are fixed, the fees are a lower % if the value of your item increases . Conversely if you have flat fulfillment fees on a pencil, they would be more than the price of the item. This is why you don’t see individual items on Amazon.) However, it may be useful to clump these together and think of Amazon orders as a wholesale client that orders a lot and gets a really small discount (21% in this case). A great deal! If you were to merely list on Amazon and fulfill yourself, you’d experience only the referral fee. Again, this scenario is ideally a volume/revenue-side play because Amazon brings so many ‘eyeballs’ and shoppers. Again, as I noted in the article, if you can ship your own product you get all of Amazon’s demand and none of their supply chain risk.
Side note: I did carefully audit Amazon’s ridiculously complicated accounting (they maintain payments in escrow for appx. a month before giving them to you, a genius way to make revenue) and could not find an error, even with returns, refunds etc. They are extremely detailed and precise — I think the average seller can trust that this is done accurately and thankfully not review it often.
The savings come from pushing orders to Amazon from your site. In this case the fulfillment is $5.50 on the same item, however shipping is only $1.50. Compare this to $3.75 pick and pack plus $9 that I experience at the headquarters warehouse today (varies by destination). That’s $7 vs $12.75, about half. This is a good way to go if you are starting out — but if you can somehow engineer insanely cheap shipping for your products you can beat Amazon out on price.
Storage: this does not vary much across warehouses — Amazon is on the higher end but not astronomical, and of course charges in CM which is more accurate but harder to compare. A typical fulfillment warehouse charges about $12/mo/pallet — I just signed a sweet contract for $4. Amazon is appx $15-$19, depending on your CM/pallet.
Fulfillment with a small warehouse, at small volumes, if you bargain hard and bat your eyelashes, is going to run about $3.75/ship + $0.60 per additional ‘pick’. To get it down farther you need about $30,000 of merchandise running through per month.