When selling products on Amazon, you face two order fulfillment options, Fulfillment by Merchant (FBM) or Fulfillment by Amazon (FBA).
With FBM, you retain complete control of your entire selling process, from storing inventory to shipping orders and handling customer inquiries.
If you choose Amazon FBA, Amazon steps in as your partner in the fulfillment journey. With over 175 fulfillment centers worldwide, Amazon is responsible for storing your items in their warehouses, picking, packing, shipping orders, and managing customer service, refunds, and returns.
However, Amazon charges fees for picking, packing, and shipping for each order as FBA fees that can increase your cost of selling on Amazon.
This article will give you crucial information and proven strategies to reduce Amazon FBA fees.
What are the Fees of Amazon FBA?
Fulfillment fees cover picking, packing, and shipping your products to customers. They are typically calculated based on the product’s size and weight and can vary for standard and oversized items. For example, standard-size items might have a lower per-unit fulfillment fee than oversized items.
Amazon charges FBA storage fees for keeping your inventory in their warehouses. These fees can be paid monthly and are based on the volume of your products. Long-term storage fees apply to items in storage for over 365 days.
Referral fees are charged as a percentage of the item’s sale price and apply to all sellers on Amazon, whether they use FBA or Fulfillment by Merchant (FBM).
High-volume listing fees are for sellers with a large number of active listings; there may be additional fees, especially if those listings need to comply with Amazon’s policies.
Removal and disposal fees to remove inventory from Amazon’s warehouses or have it disposed of, you may incur removal and disposal fees.
Returns processing fees are paid if a customer returns an Amazon-fulfilled item. The amount can vary depending on the category and size of the item.
FBA Prep Service fees for additional preparation or packaging before being stored in Amazon’s fulfillment centers.
How To Reduce FBA Fees?
Generally, three types of FBA fees can impact an Amazon FBA seller’s profit margin.
- Fulfillment fees
- Referral fees
- Storage fees
How to Reduce Amazon Fulfillment Fees?
- Before shipping your products to Amazon, leverage the Amazon FBA revenue calculator. Let’s say you’re selling electronics. By estimating fulfillment fees in advance, you can decide which products are profitable to sell on Amazon, avoiding unexpected expenses.
- Opt for more compact and lightweight packaging. Imagine you’re selling clothing accessories. Reducing packaging size and weight not only lowers shipping costs but also reduces your fulfillment fees.
- Consider bundling related products. Suppose you’re in the beauty industry. Combining skincare items in a set can reduce the number of units Amazon needs to handle, cutting your fulfillment costs.
- Amazon occasionally updates product size data, impacting your fees. Imagine you sell kitchen gadgets. If Amazon’s Cubiscan system detects a size increase, it could mean higher fulfillment fees. Regularly compare Amazon’s measurements with your manufacturer’s data to avoid this. For instance, you can maintain a spreadsheet and cross-reference it with Amazon’s data monthly.
How to Lower Amazon Referral Fees?
Select Lower Fee Categories: One practical approach is to choose product categories with lower referral fees. For instance, categories like Home and kitchen, Toys and games, and Office products have a referral fee of 15% of the sale price. In contrast, categories like jewelry may have a higher referral fee, typically around 20%. By strategically aligning your products with categories that have lower referral fees, you can instantly reduce your cost structure and increase your profit margins.
Explore Niche Markets: Delving into niche markets can also be advantageous. Often, these markets have lower competition and, consequently, lower referral fees. For example, if you’re considering expanding your product line, researching niche categories can help you identify opportunities to lower your fees and enhance your profitability.
Leverage the Brand Referral Bonus Program: If your brand is enrolled in the Amazon Brand Registry, you can tap into Amazon’s Brand Referral Bonus program. Whenever you drive external traffic to Amazon, resulting in a purchase, you’ll receive a 10% discount on the referral fees for that sale.
By implementing these strategies, you can effectively reduce your Amazon referral fees. This bolsters your profitability and strengthens your competitive position on the platform.
How to Reduce FBA Inventory Storage Fees?
- Firstly, it’s crucial to maintain low inventory levels at Amazon’s fulfillment centers. To avoid excessive storage fees, only send products with a history of quick sales. Monitor your Inventory Performance Index (IPI) score diligently. It gauges your inventory performance and helps prevent overstocking of slow-moving items. By doing this, you can ensure that your Amazon inventory remains streamlined and cost-effective.
- Regularly checking your inventory levels is paramount. Don’t overstock. Instead, keep only the inventory expected to sell within 60 to 90 days. Let’s say you’re in the fashion industry. When preparing your next, ensure it aligns with your sales projections for 60–90 days. This practice minimizes storage costs and prevents your products from incurring aged inventory surcharges.
- Leverage Amazon’s Removal Order service. Suppose you have products that are moving slower than you’d like. In that case, this service allows you to remove them from Amazon’s fulfillment centers, avoiding accumulating long-term storage fees. Imagine you’re selling kitchen appliances. Running promotions or offering discounts on slow-moving products can effectively clear them from your inventory and reduce storage costs.
Final Words
It’s important to note that Amazon periodically updates its fee structure, and fees can vary by marketplace (e.g., Amazon.com, Amazon.co.uk, etc.). You should consult Amazon’s official fee schedule or Seller Central account to get the most accurate and up-to-date information on FBA fees for your specific products and marketplace. Additionally, consider using Amazon’s FBA fee calculator to estimate the fees associated with your products.
Frequently Asked Questions About Amazon FBA Fees
How are Amazon FBA fees calculated?
Amazon FBA fees are calculated based on several factors, including the size and weight of your products, their category, and the specific fulfillment services you choose. Referral, storage, and fulfillment fees are standard components of FBA fees.
What is the Amazon FBA Fees Calculator?
The Amazon FBA Calculator is a free tool that displays Amazon fees, sales margins, revenue, and product net profit. You can also call it the Amazon selling fee calculator.
What are Amazon’s FBA storage fees in 2023?
For the year 2023, Amazon FBA storage fees can be broken down as follows:
- Inventory storage fees range from $0.56 to $3.63 per cubic foot.
- Long-term storage fees vary between $1.50 and $6.90 per cubic foot.
- Fulfillment fees encompass a range starting at $3.22 and going up to $179.28, with an additional $0.83 per pound charge beyond the initial 90 pounds of a shipment.
What is the minimum product quantity for Amazon FBA?
There’s no set minimum inventory quantity for Amazon FBA. You can send in as few as one unit if you wish. However, it’s essential to be aware of your restock limits, as there is a maximum quantity you can send in at a given time.
eMarspro Can Help
eMarspro is here to assist you. As a leading Amazon Account Management agency, we aim to empower sellers like you to achieve maximum profits. We do this by strategically reducing your selling costs on Amazon, allowing you to enjoy a seamless and profitable selling journey on the platform. Your success is our mission.
