This publish is by Yoni Mazor, co-founder of GETIDA.
It actually is feasible to decrease your Amazon FBA charges. You gained’t get Amazon to present you a reduction, however you may change the best way you utilize the service so that you aren’t incurring pointless costs. You must also be sure that all of your knowledge is correct, and declare again charges for any undetected errors that Amazon makes.
Small modifications might prevent slightly on each product you retailer in Amazon’s warehouses, and slightly extra once more on each order that Amazon fulfills for you. Multiply that by 1000’s of models saved and 1000’s of orders fulfilled, and people little modifications can add as much as huge financial savings.
Right here’s six key methods that can assist you cut back your FBA charges, and add these financial savings straight again to your backside line.
1. Guarantee product dimensions are recorded precisely
A number of totally different FBA charges are primarily based on measurement and weight, together with success charges and storage charges. Your product dimensions are already on the Amazon system, however they don’t seem to be all the time correct. If Amazon thinks your product is bigger than it really is, then it’ll cost you greater charges.
Why wouldn’t your knowledge be correct? To grasp that, it’s helpful to understand how Amazon units your product dimensions within the first place. While you arrange a brand new ASIN and first ship your product into an FBA warehouse, Amazon will scan the product utilizing their Cubiscan system. Then once in a while, they may re-scan your product to test if the scale has modified.
Regardless of utilizing a hi-tech measuring system, it’s common for Amazon’s measurements to alter significantly between scans. It’s not clear why this occurs, but it surely may very well be right down to bagged objects trapping air, items of tape protruding and complicated the scanner, or simply operator error. Keep in mind that Amazon gained’t inform you if they alter your product dimensions, they are going to simply replace them then begin charging you totally different charges.
So what must you do? First, run a Price Preview Report. In addition to FBA price estimates, this exhibits the complete dimensions and measurement tier for all of your merchandise. Test them in opposition to your personal knowledge and work out if any of the measurements are out of whack with your personal, notably if it pushes them into a better measurement tier.
Then file a case with Vendor Help to get your product re-scanned. Amazon will put your product again via the Cubiscan and (hopefully) right the size. That ought to make sure you get charged the proper charges sooner or later, and you may as well declare again charges which were overcharged on previous orders – there’s extra on that later.
Hold checking your product dimensions frequently, as a result of Amazon can replace them at any time, or signal as much as a list monitoring instrument to maintain on high of any sudden modifications.
2. Optimize merchandise with borderline sizes and weights
FBA success charges are primarily based first on measurement, inside product measurement tiers outlined by Amazon. Merchandise outlined as “standard size” and underneath 3 lb are solely charged primarily based on which weight band they fall into. Merchandise heavier than 3 lb even have a variable weight price utilized. For instance, a small normal measurement product weighing not more than 10 oz will appeal to a success price of $2.50.
Using measurement and weight tiers signifies that merchandise which are just a bit bigger or heavier than the highest finish of a band might be charged greater charges – typically a lot greater charges.
Let’s have a look at one other instance. A big normal measurement product that weighs 16 oz can have a success price of $3.48, whereas a product of the identical measurement weighing 17 oz might be charged at $4.90. That’s a further price of $1.42 and 41% greater than the decrease band. Should you promote 10,000 merchandise a 12 months that may very well be modified slightly so that they fall into the decrease of those bands, you’ll save $14,200.
So, one of many first steps that every one sellers ought to take to decrease their charges is to test which measurement and weight band their merchandise fall into. Right here’s the place to seek out the present product measurement tiers and FBA success charges. An extract is proven beneath.
The very first thing to search for is any merchandise which are proper on the backside finish of a measurement or weight band, as within the instance given above. How are you going to trim these merchandise down?
Promoting merchandise on-line will not be the identical as promoting your merchandise in a conventional bodily retailer, so generally it’s greatest to go for elegant product packaging that’s as small and lightweight as doable.
However to make a fast saving on FBA charges, take a borderline product and see for those who can modify it in one in all these methods:
- Scale back or remove empty house within the field.
- Change cumbersome padding materials with a thinner model.
- Put equipment contained in the product as a substitute of in their very own house.
- Require some consumer meeting so the product matches higher in a field.
It’d take a while and creativity to make these modifications, but it surely’s an funding that may preserve paying so long as you promote the product. Do not forget that total industries have been revolutionized by redesigning packaging and merchandise to attenuate measurement and weight – it’s what IKEA did with furnishings.
3. Do all the required prep prematurely
FBA comes with many, many necessities for a way sellers use the service. These cowl inbound delivery, product packaging, barcode labeling and extra. To provide you an thought of simply how intensive these necessities are, there are 15 pages on Vendor Central for product packaging alone, overlaying common necessities for all merchandise, and particular necessities for liquids, powders, glass, batteries, plush toys, sharp objects, attire, jewellery, child merchandise and so forth.
Many sellers will take the straightforward possibility of paying Amazon to do all of the required packaging and prep for them. There are some huge downsides to this:
- Amazon costs a price for each unit they’ve to organize for you.
- It is going to take longer to your stock to change into obtainable for buy.
- Should you take the choice to make use of producer barcodes as a substitute of making use of an Amazon FNSKU barcode, your stock may be “commingled” with that of different sellers.
How a lot are Amazon’s charges for FBA preparation and labeling? Nicely, prep charges (for companies like bagging and bubble wrap) vary from $0.50 to $2.00 per unit. FNSKU barcode labeling prices $0.30 per unit.
The handbook processing price charged to sellers who don’t present field content material info is $0.10 per unit from January to October, and $0.15 per unit for November and December.
These charges actually add up. Sellers who do as little preparation and labeling as doable can simply pay a further $1.00 or extra for each unit they promote.
Right here’s an instance displaying how sending 490 models to Amazon with out field content material info incurred a $49 price:
In November and December, it will be 50% extra. That’s simply the “manual processing” price for not offering detailed field content material info. Product packaging comparable to poly luggage and bubble wrap, and barcode labeling, is further.
These charges may be simply lowered or prevented totally. Manufacturers and personal label sellers can ask their producer to print Amazon barcodes straight onto the product packaging, and add poly luggage or different packaging to satisfy FBA necessities proper on the manufacturing unit.
If you have already got many merchandise readily available, you are able to do the prep work your self or pay a specialist FBA prep firm to do it for you. There might be prices concerned in that, in fact, however they’ll typically beat Amazon’s charges by a large margin.
Shifting onto field content material info, offering this might be simple for some sellers and fairly troublesome for others. You may fill within the info on-line or by importing a file, or create a reusable template. Should you use a list administration system which handles FBA inbound delivery, it ought to present field content material info to Amazon by way of the API. If none of these choices are sensible for you, there are specialist instruments for dealing with FBA inbound shipments which generate all the data required.
4. Get unfulfillable stock out of FBA
When prospects return merchandise, Amazon will examine them and determine whether or not they are often resold. Merchandise that aren’t in ok situation to be bought once more are referred to as “unfulfillable”. They may keep within the success heart incurring storage charges except you are taking motion.
To search out out if in case you have any unfulfillable stock, run an Stock Well being report in Vendor Central and test the “Total unsellable quantity” column. You probably have any unsellable stock, you may select to have it destroyed or returned to you.
Alternatively, you may need the choice to make use of the brand new “FBA Grade and Resell as Used” or “FBA Liquidations” applications. All of those choices have related charges, however they are going to actually work out cheaper than racking up FBA storage charges indefinitely.
Right here’s a chat from Amazon’s Libby Johnson McKee about these applications:
Going ahead, both test the Stock Well being report each week or two or arrange automated stock removals. That is an FBA setting that you should use to get rid of your unfulfillable stock, or have it returned to you, both instantly or at common intervals.
This manner, not solely will you keep away from normal storage and long-term storage charges, however you even have the potential for recovering some worth out of your unsellable stock.
One other kind of stock to maintain tabs on is “stranded” stock. These are merchandise which are saved in a success heart however should not have an lively supply on Amazon, so no one should purchase them. You may run a stranded stock report back to test for these then both repair the listings to allow them to be purchased, or take away or get rid of them as above.
5. Audit your FBA invoices and file claims
Many FBA sellers should not conscious that there could also be discrepancies within the charges that Amazon has charged them, and that they’ll declare a reimbursement underneath the FBA stock reimbursement coverage. Listed below are the important thing factors to know.
In our expertise, the typical annual price discrepancy ranges between 1% and three% of annual FBA income. In different phrases, for those who declare again all of the FBA reimbursements you might be entitled to, it might add considerably to your internet revenue margin. One other method to take a look at it’s that for each 100 models shipped to FBA, one to 3 models may expertise a discrepancy someplace alongside the best way.
Keep in mind that when Amazon supplies an FBA reimbursement, they pay the retail worth of the affected stock, not simply the price of the stock. So that you get again the revenue you’d have made on that stock, in addition to the cash you spent to purchase it.
You solely get a restricted time to make claims. Amazon permits 9 months to reconcile Amazon FBA inbound shipments within the US, and 6 months within the EU. You get 18 months to assert for misplaced, broken, disposed, or eliminated models, and incorrect buyer refunds. For overcharged success charges, you solely have 90 days to file a declare.
It’s as much as you to audit your stock, transaction and price knowledge to search for discrepancies and file claims earlier than the cut-off dates expire. How do you make these claims? You have to to open circumstances with Vendor Help to carry the discrepancies to their consideration, and supply them with any further info requested. You is likely to be requested to supply documentation comparable to payments of lading, proof of supply, invoices, packing slips, and extra.
Vendor Help may contest your claims, or supply a decrease reimbursement than you claimed. You want a great understanding of the price and reimbursement insurance policies, and how you can precisely reconcile your knowledge, so you may make the case for a full refund.
Auditing your knowledge to seek out FBA price reimbursement alternatives, and submitting claims with Amazon, is a posh and time consuming course of however typically very worthwhile. If it’s not one thing you wish to undertake your self then there are companies specializing in recovering FBA charges for sellers, like my firm GETIDA.
6. Handle your stock to attenuate storage charges
Amazon’s use of storage charges, storage limits and the stock efficiency index metric (IPI) paint a transparent image of how they need sellers to make use of FBA. All these components encourage sellers to maintain stock ranges low, so Amazon can benefit from its warehouse capability. Should you deal with Amazon’s success facilities like a private storage unit, you’ll be closely penalized.
Amazon has three important ranges of storage charges:
- Month-to-month stock storage charges from January to September of $0.75 per cubic foot for normal measurement merchandise.
- Month-to-month stock storage charges from October to December of $2.40 per cubic foot for normal measurement merchandise.
- Lengthy-term storage charges for stock that has been in a success heart for greater than a 12 months, of $6.90 per cubic foot per 30 days, as well as to the charges above.
Notice that there are totally different month-to-month storage charges for oversize merchandise, and long-term storage charges have a $0.15 per unit price which applies if it really works out greater than the volume-based price.
You may see that the overall price for one cubic foot of space for storing varies between $0.75 in January for merchandise which were saved for lower than one 12 months, to $9.30 in October for merchandise which were saved for multiple 12 months. It’s the identical house, however will price you greater than 12 instances as a lot.
Some sellers wish to preserve their stock administration so simple as doable, and ship a big order of inventory into FBA straight from the manufacturing unit. This will show extraordinarily costly, notably if gross sales are slower than you hoped. The excellent news is that decreasing FBA storage charges may be fairly easy.
Step 1: Determine current stock points
First, you must discover any present stock issues. The IPI rating supplies a broad view of how nicely you might be managing your stock, which is helpful. The element comes from the Stock Age, Stock Well being and Beneficial Elimination stories. These assist determine ASINs that are topic to long-term storage charges, or are getting near that time, and precisely what number of objects you should take away to keep away from them.
You may then submit removing or disposal orders to keep away from the charges. Computerized stock removals will also be set as much as get rid of stock that’s topic to long-term storage charges, or return it to you. An alternative choice is solely to scale back your costs or arrange reductions to attempt to speed up gross sales.
You may also wish to take away stock that’s promoting slowly or the storage charges (of all kinds) are more likely to accumulate over time and wipe out your revenue.
In all circumstances, keep in mind that there are additionally FBA removing charges to incorporate in your calculations.
Right here’s a helpful video from Amazon’s Leonora Fink in regards to the IPI rating:
Step 2: Handle stock proactively
Coping with stock which has already been saved in FBA for too lengthy is essential, but it surely’s a lot better to plan forward so that you by no means get to that stage.
That method, not solely will you keep away from long-term storage charges, however you must decrease your normal storage charges as nicely. That is particularly essential throughout the peak purchasing season once they greater than triple. After all, additionally, you will keep away from removing charges by sending much less stock into FBA within the first place.
Listed below are some methods to think about:
- Maintain stock again. Even for those who suppose a product goes to promote nicely, it is likely to be greatest to ship not more than 60-90 days of stock into FBA. You’ll want space for storing of your personal or to make use of a 3PL (third-party logistics) firm to warehouse your extra stock, or negotiate decrease minimal order portions (MOQs) along with your suppliers.
- Change some merchandise to self-fulfillment. You probably have slower-selling merchandise that you simply wish to preserve obtainable on Amazon, it is likely to be higher to ship orders your self or via a 3PL. With Vendor Fulfilled Prime (SFP) you may even preserve the Prime badge on these listings.
- At all times preserve This fall in thoughts. You probably have merchandise that promote little exterior summer season, for instance, it is likely to be greatest to run your inventory down nicely prematurely of This fall. That helps keep away from not solely peak season storage charges, however months of ordinary storage charges throughout the first months of the next 12 months.
The hot button is to run the numbers and suppose creatively about the way you handle your stock.
The extra choices you have got – comparable to decrease MOQs from suppliers, storage capability of your personal, and the companies of a 3PL – the higher it is possible for you to to handle your stock and decrease your FBA storage charges.
This publish was by Yoni Mazor, co-founder of GETIDA, an Amazon FBA knowledge auditing analytics and reimbursement service.