Amazon provides the third-party sellers a most convenient way to sell products- FBA. More than half of Amazon sellers use FBA as their main delivery method, however, there are a lot of FBA fees you have to pay.
In order to maximize the profit, you have to understand the cost of selling on Amazon firstly and then you can know how to lower Amazon FBA fees.
Amazon FBA fees
1. Amazon referral fees
For every item sold, sellers pay Amazon a percentage of the total price—including item price, shipping cost, and any gift-wrapping charges—or a minimum amount, whichever is greater.
This fee comes from the fact that Amazon brings or refers users to your business and products through its website and brand reputation.
Referral Fees include Referral fee percentage and Referral fee minimum.
- Referral fee percentage: Your referral fee percentage depends on your item’s category. Rates range from 6% (for personal computers) to 96% (for extended warranties, protection plans, and service contracts).
- Referral fee minimum: The minimum referral fee per item is $0.30. Some item categories, like books, music, and video games, do not carry a minimum referral fee. That means your referral fees will always come from your referral fee percentage.
2. Amazon shipping fees
These costs vary on the product size and weight and depending on which company you are using. Amazon also offers two-day shipping but in order to qualify you must meet certain requirements such as:
- Selling on Amazon for 90 days
- Have less than a 1.5% cancellation rate
- Have 10 orders or more over the last 30 days across all the different shipping options
3. Amazon Variable closing fees
This is a fee that Amazon has invented for items that they consider to fall under the “media” category. The basic breakdown of VCF fees and products which are required to pay this fee are:
- Books $1.35
- DVDs $1.35
- Music $1.35
- Software & Computer/Video Games $1.35
- Video $1.35
- Video Game Consoles $1.35
How to lower Amazon FBA fees?
1. Choose small and light products
First of all, we should take logistics factors into consideration from the product selection process. For products of the same value, between large-volume products and small-volume products, sellers should give more consideration to small-volume products. Because the product is small, the FBA fee will be lower, thereby obtaining a higher profit margin.
If your product sells for less than $10 and is lighter and smaller, you can use Amazon’s FBA Small and Light Program.
The FBA Small and Light program is pretty simple. This fulfillment option is available to sellers with products that meet the following criteria.
- Customer price of $10 or less
- Dimensions of 16″ x 9″ x 4″ or less
- Weight of 15 ounces or less
2. Combining with multiple logistics
In general, there are 3 ways for Amazon sellers to fulfill the orders.
- Self-fulfillment: With Amazon self-fulfillment, you fulfill orders yourself – picking, packing, and shipping.
- Fulfillment by Amazon: Fulfillment by Amazon (FBA) hand over items, picking, packing, and shipping to an Amazon warehouse.
- Outsourced fulfillment: Using an outsourced fulfillment partner to help you fulfill the orders and store the products.
You can try to combine the three methods. For example, If there is a product sells well, you can first take the outsourced fulfillment partner to ship a large number of products, and then put some of them in the outsourced fulfillment partner’s warehouses, and some choose FBA for storage.
Similarly, when the holiday season comes, we can transfer the goods from overseas warehouses to FBA. In this way, it shortens the storage time of FBA products. Or use the FBA door-to-door receiving function to let FBA pick up the goods from overseas warehouses and deliver them to buyers.
3. Monitor IPI
If sellers ship too many products to the FBA warehouse, they will be prone to inventory backlog, extra long-term storage fees, and even difficulty in capital turnover. And if too few goods are sent, they will be out of stock, resulting in a bad user experience and impact account number.
In this way, make use of your Inventory Performance Dashboard. It can let you monitor your inventory activity, plus receive advice and suggestions on how you can streamline things to make better use of your inventory and its management.
By combining product sales, delivery cycle, capital cost, delivery frequency, and other information to develop a more efficient delivery plan.
4. Sell items in bundles
Sell items in bundles can effectively reduce the cost of Amazon FBA. Such as, if you sell 5 items, you need to pay fulfillment fees on 5 items. But if you bundle those 5 items together as a single unit, then you only pay fees for one item, not 5, because the bundle is considered one item.
There are two common methods here to sell items in bundles. One is the same product, and multiple pieces are sold at a discounted price, such as 20% off for 3 pieces, the other is complementary products, which can be recommended for customers to buy together, such as curling irons + air cushion hair combs.
5. Avoid unnecessary losses
Pay attention to the abnormal situation of FBA inventory and reduce economic losses. No one can guarantee that he will not make a mistake, hence FBA will make mistakes in managing your product inventory. Some sellers have found that occasional product loss and inconsistent storage quantities.
Sellers should check the product in detail. For example, Amazon loses goods, buyers return goods that cannot be resold, etc. We must clean up in time, make claims in time, and deal with abnormal situations in time to reduce Amazon FBA cost losses and increase sales profits.