(More tips for my fellow e-commerce pros, feel free to ask questions)
You can, in fact, lower your Amazon FBA fees. You won't be able to get Amazon to give you a discount, but you can change how you shop to avoid paying for items you don't require. You should also double-check that all of your information is correct, and ask for compensation if any Amazon errors go unnoticed.
Small adjustments could save you money on each product you store in Amazon's warehouses, as well as on each purchase Amazon fulfills for you. When thousands of pieces are kept and thousands of orders are completed, small changes add up to large savings.
Here are six critical ideas to help you cut your FBA fees and put the money back into your business.
1. Ensure that product dimensions are accurately documented.
Fulfillment and storage fees are two types of FBA fees that are depending on size and weight. The Amazon system already has your product dimensions, but they aren't always precise. If Amazon believes your product is larger than it is, you will be charged a greater fee.
What makes you think your data isn't correct? To grasp this, it's helpful to understand how Amazon determines your product's dimensions in the first place. When you create a new ASIN and ship your goods to an FBA warehouse for the first time, Amazon will scan it with their Cubiscan system. They may then re-scan your merchandise from time to time to see if the size has altered.
Despite using a sophisticated measuring technology, Amazon's measurements are known to vary significantly across scans. It's unclear why this happens, although it could be due to air trapped in bagged products, tape that sticks out and confuses the scanner, or just operator error. Keep in mind that if Amazon changes your product measurements, they will not notify you; instead, they will simply update them and begin charging you alternative fees.
So, what are your options? Run a Fee Preview Report first. This reveals the full measurements and size tier for all of your products, as well as FBA fee estimations. Check them against your own data to see if any of the measures are off, especially if it puts them in a larger size tier.
Then, to have your goods re-scanned, create a case with Seller Support. Amazon will run your goods through the Cubiscan again, hopefully resulting in the correct dimensions. That should ensure that you are charged the correct prices in the future, and you can also request a refund for fees that were overcharged on previous orders — more on that later.
Keep an eye on your product measurements because Amazon can modify them at any time, or utilize a listing monitoring tool to stay on top of any unexpected changes.
2. Improve items with a wide range of sizes and weights.
FBA fulfillment fees are determined first and foremost by the size of the product, as specified by Amazon's product size tiers. Products under 3 lb that are categorized as "regular size" are simply paid according to the weight band they fall within. A variable weight fee is also charged to products weighing more than 3 lb. A fulfillment fee of $2.50 will be charged for a small standard size product weighing no more than 10 oz.
Because of the usage of size and weight tiers, products that are slightly larger or heavier than the top of a band may be charged additional rates – sometimes significantly higher prices.
Let's take a look at another scenario. A fulfillment cost of $3.48 will be charged for a big standard size product weighing 16 oz, while a product of the same size weighing 17 oz would be charged $4.90. This is a $1.42 premium above the bottom band and a 41 percent increase. You will save $14,200 if you sell 10,000 products per year that might be slightly adjusted to fall into the lower of these ranges.
As a result, one of the first actions all sellers should take to reduce their fees is to determine which size and weight band their products belong in. The current product size tiers and FBA fulfillment fees may be seen here. Below is an excerpt from the book.
The first item to search for are things that are at the very bottom of a size or weight range, such as those in the example above. How can you reduce the size of such items?
Because selling things online differs from selling them in a typical physical store, it's vital to choose elegant product packaging that's as tiny and light as feasible.
However, if you want to save money on FBA costs quickly, try modifying a borderline product in one of the following ways:
- Empty space in the box should be reduced or eliminated.
- Substitute a thinner cushioning material for the bulkier one.
- Instead of having accessories in their own area, put them into the product.
- Require some user assembly in order for the product to fit into a box better.
Making these adjustments may require some effort and effort, but it's an investment that will pay off as long as you sell the product. Remember, entire industries have been transformed by revamping packaging and goods to reduce size and weight — just look at IKEA's furniture.
3. Complete all essential preparations ahead of time.
FBA comes with a slew of guidelines for how merchants should use the service. Inbound shipping, product packing, barcode labeling, and other topics are covered. To give you an idea of how broad these regulations are, consider that there are 15 pages dedicated to product packaging on Seller Central, with basic standards for all products as well as specialized criteria for liquids, powders, glass, batteries, soft toys, sharp goods, clothes, jewelry, baby products, and so on.
Many sellers may opt for the convenient option of paying Amazon to handle all of their packaging and preparation. There are a number of significant drawbacks to this:
- Every unit that Amazon has to prepare for you is charged a price.
- Your inventory will take longer to become available for purchasing.
- Your inventory may be "commingled" with that of other sellers if you choose to use manufacturer barcodes rather than an Amazon FNSKU barcode.
What are Amazon's FBA preparation and labeling fees? Preparation fees (such as bagging and bubble wrap) run from $0.50 to $2.00 per unit. The cost of FNSKU barcode labeling is $0.30 per unit.
From January to October, vendors who do not give box content information will be charged a $0.10 per unit manual processing fee, and $0.15 per unit in November and December.
These charges mount up quickly. Sellers who perform the least amount of preparation and labeling might easily earn an extra $1.00 or more for each unit they sell.
Here's an example of a $49 cost for delivering 490 units to Amazon without box content information:
It would be 50% higher in November and December. That's only the "manual processing" cost for failing to provide detailed information on the contents of the box. Packaging, such as poly bags and bubble wrap, as well as barcode labeling, are optional.
These costs can easily be reduced or eliminated. Brands and private label sellers can request that their manufacturer print Amazon barcodes directly on product packaging, as well as add poly bags or other packaging to meet FBA criteria, right at the factory.
You can conduct the prep work yourself or hire a specialist FBA prep business to perform it for you if you already have a lot of products on hand. Of course, there will be costs associated, but they can typically outbid Amazon's rates by a large margin.
Moving on to box content information, some sellers will find it simple to provide this information, while others will find it tough. You can either fill out the information online or upload a file, or you can construct a reusable template. If you utilize an inventory management system to handle FBA inbound shipment, it should send Amazon information about the contents of the boxes via the API. If none of those choices suit your needs, there are specialized solutions for handling FBA inbound shipments that create all of the necessary data.
4. Remove undeliverable inventory from FBA
When buyers return items, Amazon inspects them and determines whether or not they can be resold. Unfulfillable products are those that are not in good enough shape to be sold again. Unless you take action, they will remain at the fulfillment facility and incur storage fees.
Run an Inventory Health report in Seller Central and look at the "Total unsellable quantity" column to see if you have any unfulfillable inventory. You can choose to have unsellable inventory destroyed or returned to you if you have any.
You might be able to use the new "FBA Grade and Resell as Used" or "FBA Liquidations" systems instead. All of these choices have with costs, but they'll all be less expensive than paying FBA storage fees eternally.
Check the Inventory Health report every week or two going forward, or set up automatic inventory removals. This is an FBA setting that you may utilize to either dispose of or have your unfulfillable inventory returned to you, either immediately or on a regular basis.
Not only will you save money on conventional storage and long-term storage, but you'll also be able to recover some value from your unsaleable goods.
“Stranded” inventory is another sort of inventory to keep track of. These are items that are held in a fulfillment center but do not have an active Amazon listing, making them unavailable for purchase. You can check for these with a stranded inventory report, then either modify the listings so they can be bought, or delete or dispose of them as described above.
5. Review and file claims for your FBA invoices.
Many FBA sellers are unaware that there may be inconsistencies in Amazon's fees and that they are eligible for repayment under the FBA inventory reimbursement policy. The following are the most important details to be aware of.
The average annual charge discrepancy, in our experience, varies between 1% and 3% of yearly FBA sales. In other words, claiming all of the FBA reimbursements you're eligible for could boost your net profit margin dramatically. Another way to look at it is that out of every 100 units shipped to FBA, one to three will have a discrepancy along the route.
Keep in mind that Amazon pays the retail value of the affected inventory, not only the cost of the inventory, when providing an FBA reimbursement. As a result, you receive both the profit you would have made on that inventory and the money you spent to purchase it.
You only have a certain amount of time to file claims. In the United States, Amazon allows 9 months to reconcile Amazon FBA inbound shipments, and 6 months in the European Union. For lost, damaged, discarded, or removed units, as well as improper customer refunds, you have 18 months to file a claim. You only have 90 days to file a claim for overpriced fulfillment fees.
It is your responsibility to review your inventory, transaction, and fee data for irregularities and make claims before the deadlines pass. What evidence do you have to back up your claims? You'll need to file cases with Seller Support to alert them to the discrepancies and supply any extra information they need. Documentation such as bills of lading, proof of delivery, invoices, packing slips, and more may be requested.
Seller Support may dispute your claims or pay a lower compensation than you requested. To establish the case for a full refund, you'll need a clear understanding of the charge and reimbursement regulations, as well as how to effectively reconcile your data.
Auditing your data for FBA charge recovery chances and filing claims with Amazon is a time-consuming and difficult procedure, but it's typically well worth it. If you don't want to do it yourself, there are companies who specialize in recovering FBA costs on behalf of sellers.
6. Keep track of your goods to cut down on storage costs.
Storage fees, storage constraints, and the inventory performance index statistic (IPI) are all examples of how Amazon wants merchants to use FBA. All of these considerations push vendors to maintain inventory levels low in order for Amazon to maximize its warehouse capacity. You will be greatly penalized if you treat Amazon's fulfillment hubs like a personal storage unit.
Storage fees on Amazon are divided into three categories:
For standard size products, monthly inventory storage fees of $0.75 per cubic foot are charged from January to September.
For standard size products, monthly inventory storage fees of $2.40 per cubic foot are charged from October to December.
At addition to the fees listed above, there are long-term storage fees of $6.90 per cubic foot per month for merchandise that has been in a fulfillment center for more than a year.
Note that larger products have varying monthly storage prices, and long-term storage rates have a $0.15 per unit fee that applies if the volume-based price is higher.
The total charge for one cubic foot of storage space ranges from $0.75 in January for products stored for less than one year to $9.30 in October for products held for more than one year. It's the same space, but it'll set you back more than $12,000.
Some merchants prefer to keep inventory management simple by sending a large order of merchandise directly from the factory to FBA. This can be very costly, especially if sales aren't as strong as you had intended. The good news is that reducing FBA storage fees is rather simple.
Step 1: Determine whether or not there are any existing inventory difficulties.
To begin, you should look for any present inventory issues. The IPI score is beneficial since it gives you a broad picture of how well you're managing your inventory. The inventory age, inventory health, and recommended removal reports provide the details. These can assist you identify ASINs that are or will be subject to long-term storage costs, as well as how many goods you need to remove to avoid them.
To avoid the fines, you can submit removal or disposal orders. Automatic inventory removals can also be set up to either dispose of or return to you inventory that is subject to long-term storage fees. Another method is to simply lower your prices or offer discounts in order to boost sales.
You may also want to get rid of slow-moving merchandise, as storage fees (of all kinds) would certainly add up over time and wipe out your profit.
Always keep in mind that FBA removal fees must be factored into your calculations.
Step 2: Manage inventory proactively
Dealing with inventory which has already been stored in FBA for too long is crucial, but it’s much better to plan ahead so you never get to that stage.
That way, not only will you avoid long-term storage fees, but you should minimize your standard storage fees as well. This is especially important during the peak shopping season when they more than triple. Of course, you will also avoid removal fees by sending less inventory into FBA in the first place.
Here are some strategies to consider:
- Hold inventory back. Even if you think a product is going to sell well, it might be best to ship no more than 60-90 days of inventory into FBA. You’ll need storage space of your own or to use a 3PL (third-party logistics) company to warehouse your excess inventory, or negotiate lower minimum order quantities (MOQs) with your suppliers.
- Switch some products to self-fulfillment. If you have slower-selling products that you want to keep available on Amazon, it might be better to ship orders yourself or through a 3PL. With Seller Fulfilled Prime (SFP) you can even keep the Prime badge on those listings.
- Always keep Q4 in mind. If you have products that sell little outside summer, for example, it might be best to run your stock down well in advance of Q4. That helps avoid not only peak season storage fees, but months of standard storage fees during the first months of the following year.
The key is to run the numbers and think creatively about how you manage your inventory.
The more options you have – such as lower MOQs from suppliers, storage capacity of your own, and the services of a 3PL – the better you will be able to manage your inventory and lower your FBA storage fees.