The Hidden Costs of Selling on Amazon

TL;DR

• Many Amazon sellers lose up to 30% of profits due to hidden fees like storage, returns, and prep costs.

• Storage fees increase during peak seasons; long-term storage fees apply for inventory older than 365 days.

• Returns can incur processing fees and damage account health, often caused by unclear listings or product quality issues.

• PPC advertising costs are often underestimated; poor management leads to wasted budget and reduced margins.

• Product prep and labeling fees add up if not handled correctly; non-compliance can cause delays or suspensions.

• Account health issues, including suspensions, can halt sales and cause significant revenue loss; proactive management is essential.

Did you know many Amazon sellers lose up to 30% of their profits because of hidden costs they didn’t expect? 

Selling on Amazon might seem simple—list your product, send it to FBA, and wait for sales. But it’s not that easy. Besides the obvious fees, there are extra costs that quietly reduce your earnings and slow down your growth.

These hidden costs include extra storage fees, costly returns, higher advertising expenses, and strict rules for product prep and labeling. Even problems with your account health can cause delays and losses.

Here are the main hidden costs every Amazon seller should know about. You’ll learn how to use Amazon’s FBA calculator to uncover your real profit margins. Plus, we’ll share simple tips to help you reduce these expenses. Understanding these hidden Amazon fees is essential for any seller who wants to grow their Amazon business wisely and boost profitability.

The hidden costs sellers expect on Amazon 

Hidden cost #1: Storage and long-term FBA fees

When selling on Amazon, most sellers are prepared for obvious costs like referral fees and fulfillment charges. However, one of the biggest hidden expenses that often catches Amazon USA sellers off guard is storage and long-term FBA fees. Understanding these fees is essential to protecting your Amazon profit margins and managing your inventory effectively.

Amazon charges monthly storage fees based on the volume your products occupy in their fulfillment centers. These fees vary by season, typically rising during the peak holiday months of October through December. Including these costs in your Amazon profitability analysis is crucial to ensure you’re accurately tracking margins and avoiding surprises that could impact your bottom line.

For standard-size items, fees can range from about $0.75 to $2.40 per cubic foot monthly, while oversized items cost more. This means that bulky or poorly packaged products can quickly rack up high storage costs.

The more critical expense to watch out for is long-term storage fees. If inventory sits unsold for over 365 days, Amazon charges an additional fee—currently $6.90 per cubic foot or $0.15 per unit, whichever is greater. According to recent Amazon data, thousands of sellers lose substantial profits each year because of slow-moving inventory piling up in warehouses.

For U.S. sellers, this means regular inventory monitoring is vital. Use Amazon’s Inventory Age and Excess Inventory reports to identify products that aren’t selling fast enough. Planning timely promotions or removal orders to clear slow-moving stock can save thousands in fees annually.

In summary, while storage fees might seem minor at first, they add up quickly and can severely impact your bottom line if not managed proactively. Smart inventory control is your best defense against unexpected long-term FBA fees.

Hidden cost #2: Returns and refund-related losses

When selling on Amazon, many U.S. sellers focus heavily on expected costs like referral fees and fulfillment charges. However, one of the most overlooked yet impactful expenses is the cost related to returns and refund-related losses. These can quietly eat into your profits more than you realize.

Returns are a normal part of e-commerce, but on Amazon, they come with additional costs. For sellers using Fulfillment by Amazon (FBA), Amazon handles returns on your behalf, but charges a return processing fee that often matches the original fulfillment cost. 

For example, if it costs you $5 to ship a product, you might pay a similar fee when that item is returned—even if you resell it. For sellers fulfilling orders themselves (FBM), the costs can include return shipping, restocking, and potential product damage.

High return rates can also harm your account health and seller metrics. Negative reviews, A-to-Z claims, and refund disputes linked to returns can lead to penalties or even account suspensions, risking your ability to sell altogether. 

When reviewing your Amazon seller fees breakdown, it’s important to factor in the hidden costs of returns, as they directly affect profitability and long-term account stability.

Product returns often stem from unclear listings, inaccurate product descriptions, or quality issues. According to a 2023 study, nearly 30% of Amazon returns in the U.S. were due to buyer dissatisfaction caused by misleading product information.

To reduce return-related losses, focus on clear, honest listings with accurate images and detailed descriptions. Invest in quality control to minimize defects, and consider using customer feedback to improve your product continuously. By managing returns strategically, you protect both your profits and your brand reputation on Amazon.

Hidden cost #3: Advertising and promotions

When it comes to selling on Amazon, many U.S. sellers expect certain costs like referral fees and fulfillment charges. However, one expense that is often underestimated is advertising and promotions, particularly PPC (Pay-Per-Click) ad spend. 

While PPC can be a powerful tool to boost visibility and sales, many sellers overlook how quickly these costs can add up—and how crucial it is to manage them effectively. Amazon’s advertising ecosystem is highly competitive, and when factored into the overall cost of selling on Amazon USA, poorly managed PPC spend can significantly eat into your profits.

According to recent data, average CPC (cost per click) rates in popular categories like electronics and health can range from $0.50 to $3.00 or more. Without a well-planned strategy, it’s easy to spend hundreds or even thousands of dollars on ads that don’t convert. This results in wasted budget and slimmer profit margins.

Many sellers also fail to track key PPC metrics like ACoS (Advertising Cost of Sales) and ROAS (Return on Ad Spend) consistently. Without this insight, overspending becomes common—especially when campaigns run without regular optimization. 

For example, a poorly targeted campaign might attract clicks but no purchases, draining your advertising budget without meaningful sales. Promotional discounts and deals can further increase costs. While promotions drive traffic, they also reduce your per-unit revenue, which, combined with high ad spend, can squeeze your profits.

For Amazon USA sellers, the takeaway is clear: PPC and promotions are not just an added cost—they’re an investment that requires careful planning, monitoring, and adjustment. By understanding your ad spend and optimizing campaigns, you can turn advertising from a hidden expense into a driver of profitable growth.

Hidden cost #4: Product prep, labeling, and compliance

When selling on Amazon, U.S. sellers often plan for obvious costs like referral fees, fulfillment fees, and advertising spend. These are the expenses most sellers expect and budget for. However, one hidden cost that can catch many off guard is product preparation, labeling, and compliance.

Amazon has strict requirements for how products must be packaged, labeled, and prepped before they enter their fulfillment centers. If these requirements aren’t met, Amazon steps in to handle the prep work — but at a price. 

For example, labeling fees typically run around $0.30 per unit, and prep services such as bubble wrapping or poly-bagging can add additional costs, depending on the complexity. For sellers managing thousands of units, these fees quickly add up and eat into profits.

Beyond the direct fees, non-compliance can cause shipment delays, rejected inventory, or even suspension of your selling privileges, which can cost far more than prep fees alone. According to a recent survey, over 40% of Amazon sellers reported increased prep and labeling costs in 2024 due to updated packaging standards.

For U.S. sellers, handling prep and labeling in-house or working with a trusted third-party prep center can reduce these expenses. Staying informed about Amazon’s packaging guidelines and planning accordingly is key. Proper prep and labeling aren’t just compliance—they’re essential to protecting your margins and maintaining smooth operations.

Hidden cost #5: Account health issues and suspensions

When selling on Amazon, many sellers focus on the obvious costs like referral fees and fulfillment charges. These are the costs you expect and plan for. But one often overlooked—and potentially very costly—expense is related to account health issues and suspensions. For Amazon USA sellers, this hidden cost can have serious financial and operational impacts.

Amazon’s strict policies require sellers to maintain high standards in customer service, product quality, and compliance. If your account falls short—whether due to late shipments, high return rates, policy violations, or negative feedback—you risk warnings, listing suppressions, or even account suspension. 

According to recent Amazon data, over 70% of account suspensions happen due to performance issues, not intentional wrongdoing. When your account is suspended, sales stop immediately. This pause can last days or weeks, causing significant revenue loss.

Plus, the process of reinstating your account often requires time-consuming paperwork, detailed performance plans, and sometimes legal help. For smaller sellers, this disruption can be devastating.

Even if your account isn’t suspended, poor health scores can lower your Buy Box eligibility and reduce your visibility, indirectly affecting sales and profits.

Monitoring metrics like Order Defect Rate (ODR), Late Shipment Rate, and Customer Feedback Score is crucial. Proactively managing your account health—by improving shipping times, responding promptly to customer issues, and following Amazon’s guidelines—can protect your business.

For sellers serious about sustainable growth, investing time and resources into account health management is not just a best practice; it’s a cost-saving strategy that pays off in the long run.

How to calculate your real profit margins? 

Calculating your real profit margins on Amazon is crucial for every U.S. seller who wants to run a successful and sustainable business. While sales numbers and revenue might look good on the surface, hidden costs can quietly shrink your profits if you’re not careful. That’s where Amazon’s FBA calculator becomes an essential tool.

Amazon’s FBA calculator helps you estimate the true costs involved in selling a product through Fulfillment by Amazon. It breaks down fees such as referral fees (a percentage Amazon takes from each sale), fulfillment fees (covering picking, packing, and shipping), and storage fees. 

By entering your product’s price, size, weight, and other details, you get a clear picture of how much each sale actually costs you.

For example, let’s say you’re selling a portable blender for $50. The FBA calculator will show you the referral fee (usually around 15% of the sale price), the fulfillment fee based on weight and size, and estimated monthly storage fees if your product stays in the warehouse. This helps you see whether your current pricing covers all expenses and still leaves room for profit.

Using this tool, you can compare different pricing strategies or packaging options to find ways to reduce fees. It also helps you avoid surprises—like realizing late that storage fees are eating into your margins or that your fulfillment costs are higher than expected.

For Amazon USA sellers, regularly checking your profit margins with the FBA calculator is a smart habit. It ensures your business stays profitable, pricing stays competitive, and growth is sustainable. The key to success on Amazon isn’t just selling—it’s selling smart.

Final tips for minimizing hidden costs

• Remove slow-selling inventory to avoid extra storage fees.

• Make your product and packaging smaller to save on fulfillment costs.

• Watch your ads closely to stop wasting money.

• Do labeling and prep yourself to avoid extra charges.

• Keep your account healthy by quickly handling customer problems.

• Use Amazon’s fee calculator and inventory tools to plan smarter.

Ready to take control of your Amazon costs?

Selling on Amazon offers huge potential, but hidden costs can quietly eat into your profits if left unchecked. From unexpected storage fees and returns to advertising overspend and compliance charges, these expenses add up fast for many U.S. sellers.

To stay ahead, it’s essential to calculate Amazon profit margin accurately, ensuring you account for both visible and hidden costs to protect your bottom line. Using Amazon’s FBA calculator and monitoring your account health regularly can keep your business on track.

For sellers aiming to grow smartly and sustainably, partnering with an experienced Amazon consulting agency can provide expert guidance tailored to your unique challenges. They help you uncover hidden fees, optimize your operations, and boost profitability. 

Ready to take control of your Amazon costs and maximize your earnings? Reach out to an Amazon consulting agency and start growing with confidence today.