Selling on Amazon is great but there’s just one issue. The more you sell, the more you lose to Amazon fees.
As it is, one of the most convenient ways to sell through Amazon is with the FBA, Fulfilment By Amazon Program. Once again, however, there’s a bunch of fees associated with this program which you may want to minimise.
Therefore, you might be pleased to know that there are ways to lower those FBA seller fees. Lucky for you, we’re going to tell you how in this GrowTraffic blog.
And just in case you’re not aware of FBA or Amazon’s changes to storage fees, don’t worry. We’ve got the information you need.
What is FBA?
Fulfilment By Amazon is a program that allows businesses to outsource order fulfilment to Amazon. This means that businesses send their products to Amazon fulfilment centres and, when customers make a purchase, Amazon picks, packs, and ships the order to them. For those orders, Amazon can also process returns or provide customer service.
Of course, as your business is sending the products to Amazon, you still have to manage an inventory. Going out of stock isn’t Amazon’s responsibility, it’s yours because you are supplying them.
FBA has a number of benefits, like freeing up your inventory to purchase more product because you have the free space to store it. Then you send products to Amazon, freeing up space again. It’s a very successful cycle.
Not only that but Amazon handles your shipping completely. Perhaps I should have started with that benefit. As long as your products are in Amazon’s centres, everything else is taken care of. So if shipping products would usually take your business longer than a week, Amazon can do it in a few days.
Two days to be exact as your products will be eligible for Prime shipping.
The main drawback is the fees, really.
What Fees Does FBA Have?
Amazon FBA has two main categories for fees: storage space fees and fulfilment fees.
A per-unit-fee, fulfilment fees cover Amazon picking and packing your orders, shipping and handling, and customer service. A fee is also charged on orders where Amazon has provided a customer with free return shipping.
FBA has additional fulfilment options that could have associated fees. There are other fulfilment options: multi-channel fulfilment; small/lightweight inventory item fulfilment; and a subscription service offering eligible customers discounts.
Not based on per-unit but rather a fee that is charged for all items stored in an Amazon fulfilment centre. This fee is also based on the daily average volume of inventory measured in cubic feet.
With inventory fees, there are additionalities, such as long-term storage fees, unplanned services fees, and removal order fees.
Ways to Lower Amazon FBA Seller Fees
Looking at the types of fees with Amazon FBA, it’s easy to see how some of your profits can become the opposite of a profit. So these are some tips for you to reduce the FBA fees charged by Amazon.
As I mentioned, one of the main fees is based on inventory. It’s based on how much space each item take up – pretty much the opposite of how our postal service works (where the cheapest option is the standard option).
Using standard-sized packaging for every item could be where you’re going wrong. Large boxes for small items equals a lot of wasted space inside the box. And Amazon don’t care if that space is empty, they’ll charge for the entire space, not just what your product takes up.
Therefore, you should aim to find the most precise packing size for each product type.
Your business is not the only one selling via Amazon. That means that hundreds, if not thousands, of other products alongside yours are being delivered to fulfilment centres where the orders are being processed.
Selling numerous copies of the same product, among the many other products from other businesses, means that Amazon doesn’t necessarily scan every single item precisely. They take a representative sample of your packages to scan and use that data to calculate storage space for the rest of the products.
Inconsistent packaging has the potential to increase your fees. Amazon chooses a representative sample at random, without following specification. At least if all your packages are consistent in size then no matter what sample they pick, you know what fee they will charge you based on previous.
Combining two items will reduce fees because fees are charged both per-item and per-space. If your products aren’t likely to be bought together, though, it won’t work.
For example, if you were to package a clock, you may also want to include batteries. Products that don’t go together, such as a clock and a pair of tongs, are less likely to be bought. People will need one or the other, but very rarely need both.
Inventory Performance Index, IPI, is a measurement of multiple metrics recorded by Amazon. They give you grades based on your inventory.
Basically, don’t send all your products to Amazon because it may not be sold for a while. And the longer it’s being stored, the longer you’re paying for storage fees.
This post on IPI is very helpful in giving an overview, letting you know how IPI works, and how IPI can influence your fees.
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