How To Reduce Amazon FBA Fees
Amazon FBA fees can be a significant expense for third-party sellers. That is why reducing your Amazon FBA fees is an important way to increase your profits, gain a competitive advantage, and grow your business. There are a number of ways to lower your FBA expenses and get more money from sales.
This post will discuss the key methods for reducing your FBA fees and give tips to implement them.
Why Is It Important to Reduce FBA Fees?
Fulfillment by Amazon is a convenient service provided to sellers where Amazon takes care of all order fulfillment aspects like picking, packing, and delivering the order to the customers.
However, when you pay for FBA services, these costs reduce your profit from sales. That is why it’s essential to keep FBA fees low. Below, we will show the reasons why it’s necessary.
By reducing their FBA fees, sellers can keep more of the money they make on each sale. That can lead to a significant increase in profits, especially for high-volume sellers.
Example. If you sell a product for $100, your Cost of Goods Sold (COGS) is $40, FBA fees are $10, and shipping to Amazon's Fulfillment Center is $5, then your profit margin will be 45%. If you reduce your FBA fees to $5, your profit margin will increase to 50%. That may not seem a big difference, but it can add up over time, especially if you sell many products.
Sellers with lower FBA fees are more competitive in the Amazon marketplace. They can offer lower prices to customers while still making a profit. That can lead to increased sales and market share.
Example. If you're competing with other sellers who have lower FBA fees, then you may be forced to lower your prices in order to remain competitive. That can reduce your profit margins. However, if you reduce your FBA fees, you can maintain your prices and still be competitive.
Lower FBA fees can help you grow your business by allowing you to invest more in promo campaigns and other initiatives. You can offer promotions and discounts without sacrificing your profits. That can help attract new customers and increase sales.
Example. If you're reinvesting your business profits, lower FBA fees can give you more money to invest. That can help you increase your sales faster.
5 Effective Methods to Reduce FBA Fees
There are several methods to reduce FBA fees. We will describe the five most effective of them in detail.
Method 1. Optimize Product Dimensions
To optimize Amazon product dimensions, you must ensure that the measurements of your products are accurately and consistently listed on Amazon. You must always check if your ASIN’s dimensions in Amazon’s system correspond to actual figures because, from time to time, there may be some mistakes.
That is important because Amazon calculates FBA fulfillment and storage fees using product dimensions. If your product dimensions are inaccurate, you may be overcharged. Additionally, Amazon uses product dimensions to index and rank products in search results. If your product dimensions are inaccurate or incomplete, your products may not be displayed to potential customers searching for them.
Tips to optimize product dimensions
Measure your products accurately
Be sure to measure the products in their packaging and use consistent units of measurement. Amazon typically uses inches and centimeters as the standard units of measurement for product dimensions. List your product dimensions in the correct order: length x width x height.
Reduce packaging weight and size
Select smaller, lighter packaging to lower your dimensional weight and reduce shipping costs. Avoid having unnecessary empty space in the packaging by using the correct box sizes.
Recheck Amazon’s measurements
From time to time, cross-check Amazon’s measurements by comparing them with your manufacturer’s figures. Amazon can sometimes rescan the product’s measurements, which can result in discrepancies.
Method 2. Accurately Calculate FBA Fees
To accurately calculate FBA fees, you need to know the product weight and size. Once you have this information, you must calculate the fulfillment fee based on the weight and size of your product and the storage fee based on the size of your product and the amount of time that your product is stored in Amazon's warehouses. The total FBA fees are the sum of the fulfillment fee and the storage fee.
Note. FBA fees can vary depending on a number of factors, such as the category of your product and the time of year.
Related: Amazon FBA Fees 2023
Tips for calculating FBA fees
Use an FBA fee calculator
An FBA fee calculator can help you to quickly and easily calculate your FBA fees. Seller Assistant App’s FBM&FBA profit calculator displays your ROI and profit margin, Cost of Goods, referral fee, FBA fees, VAT, monthly storage cost, and third-party logistics cost.
Use accurate product dimensions
The accuracy of your FBA fees will depend on the accuracy of your product dimensions. Be sure to measure your products carefully and accurately before listing them on Amazon.
Consider all applicable fees
In addition to fulfillment and storage fees, some other fees may apply to your FBA sales, such as referral fees, pick and pack fees, and weight handling fees. Be sure to factor in all applicable fees when calculating your total FBA fees.
Method 3. Proactively Manage Your Inventory
To proactively manage your inventory, you need to be able to accurately forecast your inventory needs based on your sales volume and other supply chain factors. You can do this manually using spreadsheets or use an Amazon seller tool that will make your life easier.
Tips for effective inventory management
Track inventory levels
Track your sales data and inventory levels regularly. That will help you identify trends and patterns in your sales and any potential stockouts or overstocks.
Set reorder points
A reorder point for your product is the inventory level at which you need to reorder a product to avoid stockouts. You can use your sales data and safety stock levels to set product reorder points.
Use inventory management tools
Inventory management tools help automate inventory handling. A popular inventory management tool is SoStocked. That is a fully customizable Amazon inventory management and forecasting software that uses a new algorithm to help sellers accurately forecast their inventory needs, avoid stockouts and overstocks, improve their order fulfillment efficiency, and reduce their overall inventory costs. SoStocked is especially useful for sellers who sell on multiple marketplaces or who have a large and complex inventory.
Related: Amazon Inventory Management
Method 4. Audit Your FBA Storage Fees
FBA storage fees are charged by Amazon to FBA sellers storing their inventory in Amazon's fulfillment centers. Amazon charges storage fees based on the volume and weight of your inventory, as well as the length of time that your inventory has been stored in Amazon's warehouses.
There are two types of Amazon FBA storage fees. Monthly storage fees are charged for all inventory stored in Amazon's fulfillment centers at the end of the month. Long-term storage fees are charged for inventory stored in Amazon's fulfillment centers for more than 365 days.
Tips for reducing storage fees
Remove slow-moving inventory
Amazon charges higher storage fees for inventory in their warehouses for more than 365 days. You can reduce storage fees by removing slow-moving inventory from Amazon's warehouses. You can sell slow-moving inventory on other marketplaces, donate it to charity, or dispose of it.
Amazon charges storage fees based on the volume and weight of your inventory, so the more you store, the higher your fees will be. To avoid overstocking, you must carefully track your sales data and inventory levels. That will help you identify trends and patterns in your sales and any potential overstocks.
Remove unfulfillable inventory from FBA
Unfulfillable inventory is the items that cannot be sold or shipped for any reason, such as damaged or defective products. Amazon charges storage fees for all inventory, including unfulfillable inventory. To reduce your storage fees, you should regularly review your inventory and remove any unfulfillable inventory.
Watch out for stranded inventory
Stranded inventory is products listed on Amazon but is not available for sale. Stranded inventory can occur for a number of reasons, such as if you have incorrectly listed the product, defective, or expired inventory. Amazon charges storage fees for all items they store, including stranded inventory. To reduce your storage fees, you should regularly review your inventory and identify any stranded items.
Method 5. Claim Reimbursements
Amazon reimbursements are payments that Amazon makes to sellers to compensate them for financial losses related to their Amazon FBA sales. Amazon may reimburse sellers for lost or damaged inventory, incorrect fulfillment, customer returns, and other costs.
Sellers must submit a claim through Seller Central to request an Amazon reimbursement. However, you must remember that Amazon does not reimburse sellers for all losses. You must refer to Amazon’s reimbursement policy to claim reimbursements where applicable.
Tips for claiming reimbursements
Keep accurate records
That will help you to document your losses and support your claims. You should keep records of all of your inventory, sales, and shipping data. You must also keep records of any customer complaints or returns.
Submit claims promptly
Amazon has a deadline for submitting claims. The reimbursement claim must be filed 45 days from the end of the month in which the fees were charged. You should submit your claim as soon as possible after you experience a loss.
Be prepared to provide evidence
Amazon will require you to provide evidence to support your claim. This evidence may include tracking numbers, photos, invoices, and customer communications.
How do I avoid Amazon selling fees?
If you sell on Amazon, you can’t avoid Amazon selling fees altogether. You must always pay account fees or fees per sale. However, you can use the Fulfillment by Merchant (FBM) program, where you fulfill orders yourself.
Is Amazon FBA always profitable?
Amazon FBA can be profitable, but it is not always. To increase your chances of success, it is essential to carefully research the products you sell, set competitive prices, and manage your FBA fees effectively. Seller tools like Seller Assistant App can help with that.
What determines Amazon FBA fee?
Amazon FBA fees are determined by the weight and size of your products, as well as the length of time your products are stored in Amazon's fulfillment centers. You can use Seller Assistant App’s FBM&FBA profit calculator to estimate your FBA fees for different products.
Is Amazon FBA cheaper?
Whether Amazon FBA is cheaper than fulfilling orders yourself depends on a number of factors, such as the volume of your orders, the size and weight of your products, and your shipping costs. However, in general, Amazon FBA can be a more cost-effective option for sellers who sell a high volume of products.
Why do most of the sellers fail in the FBA business?
Most often, Amazon FBA sellers fail because they lack the necessary knowledge and resources to be successful. They may not fully understand how the platform works, how to correctly list their products, or how to sell them for a good profit. Additionally, competition on Amazon is fierce, making it difficult for new sellers to break into the market.
Reducing your Amazon FBA fees is one of the essential ways to increase your profits as an Amazon seller. If left unattended, FBA fees on low-performing inventory can pile up and seriously affect your profits.
Therefore, you must select winning products to sell on Amazon and accurately calculate your FBA fees to get your expected profits. Seller Assistant Аpp can effectively help you with both targets. This product research browser extension shows you if a product is profitable, all related costs, and sales estimates. All of this is available right on the Amazon product search and search pages. It also displays alerts if a product has any sales restrictions or has IP claims. It offers an FBM&FBA profit calculator, Quick View, Stock Checker, and Restrictions Checker in one tool.