Top 5 Strategies in 2024 to Reduce the Impact of Amazon FBA Fee Updates on Your Business

Okay, so in the last blog, we have explained all the Amazon FBA fee updates and how they can affect sellers and their businesses. After understanding the fee structure and changes, one of our clients came running to us, saying he might need to invest in setting up a storage unit.

That sounded like a hasty decision.

Many sellers might be dealing with chaos after the fee update. So, we considered settling this chaos with our experience and expertise, finding the loopholes to save on Amazon FBA fee.

Amazon sellers are already aware of the multiple charges Amazon levies for selling on its marketplace. The multiple Amazon FBA fees include referral, fulfillment, inventory storage, and more. While necessary for maintaining Amazon’s robust logistics network, these fees can significantly impact sellers’ bottom lines if not appropriately managed. Amazon sellers need to understand how these fees are applied so that they can suggest practical strategies to lower them.

Understanding Different FBA Fees

Let’s first get a quick overview of the Amazon FBA fees before diving into the fee-saving strategies:

• Referral Fee: This is applied as a commission fee, a percentage of total sales, depending on the product category.
• Fulfillment Fee: This fee is for a pick-pack-ship process for each product unit.
• Placement Fee: For receiving FBA inventory from the seller and spreading it across the different Amazon fulfillment centers.
• Inventory Related Fee: Sellers must pay multiple charges for low-level inventory, aged inventory surcharge, and more.
• Return Processing Fee: For every order return, the sellers must pay a return processing fee for each returned unit.
• Inventory Removal & Disposal Fee: This fee is applied to sellers who remove their inventory from the Amazon warehouse.
• Storage Fee: Sellers must pay a storage fee per unit to keep their inventory in the Amazon warehouse.
• Shipment Fee: To ship the order from the Amazon warehouse to the customer’s address.

And more.

Strategies to Reduce Amazon FBA Fee for Sellers

Amazon is a vast e-commerce platform with fierce seller competition for maximum sales and profit. Amid such competition, sellers also have to deal with various Amazon fees, affecting business profitability.

However, sellers can effectively lower their FBA fees with strategic planning and optimization.

So, let’s get you started with tips on saving FBA fees and maximizing Amazon’s profit:

1. Effective Inventory Management

Inventory is the leading player in Amazon’s business and requires a calculated approach. Proper and optimized inventory management assists sellers in lowering the FBA fees associated with Inventory storage and stock levels. Depending on the product sales rate, sellers must keenly monitor their inventory flow and stock levels. This will help sellers avoid paying extra Amazon fees for:

• Low-Inventory-Levels
• Storage Utilisation Surcharge

A custom inventory management solution can also help sellers maintain optimal inventory stock as per the demand to avoid excess inventory changes, identify slow-moving inventory to avoid long-term storage fees, etc. There are many strategies that sellers can follow, such as offering discounts or promotions for slow-moving inventory, bundling or kitting of inventory, and most in-demand inventory to maintain lean stock levels.

2. Regular Price Review & Adjustment

Sellers must adjust their product pricing based on the market trend and Amazon fees. Monitor product prices closely to develop a more logical approach to price adjustment. This may temporarily lower sellers’ margins but helps move stagnant inventory.

Identifying the optimal markdown price for a higher sell-through avoids excess or aged inventory surcharge. Price adjustment as per the Amazon fee helps sellers maintain profitability in their business.

3. Accurate Amazon Product Dimensions Weight

Sellers must ensure minimum product dimensions and weight to avoid additional costs for oversized or overweight loads. Efficient packaging also helps sellers save on FBA shipping costs. Amazon carriers measure dimension weights to calculate the shipping cost of lighter yet larger products.

The pricing is based on weight or size, whichever is larger, so compact packaging, dismantling of the product, and possible dimensional adjustment will all help sellers reduce shipping costs. For such products, sellers can connect with third-party logistic partners and avoid paying unnecessary charges.

Some tips on reducing product dimension weight:

• Optimized product packaging
• Consolidate shipments
• Possibly flattened packaging
• Understand carrier DIM weight pricing rules

4. Product Bundling

Sellers opting for multi-channel fulfillment should consolidate multi-unit orders to qualify for bulk discounts on fulfillment fees. Strategic bundling of related products encourages customers to buy multiple products in each order and helps sellers save on fulfillment fees. There are numerous tips that sellers can follow for logical bundling to manipulate customers’ mindsets:

• Bundling related products at a lower price to increase average order value.
• Cross-selling urges customers to buy other complementary items along with their intended product.
• Encouraging customers to upsell to improve average order value.

Similar product bundling is another excellent way to incentivize customers to add more items to each order, saving on MCF fees.

5. Amazon Discounted Shipping Program

Amazon has a Partnered Carrier Program for sellers who frequently need to send shipments to Amazon fulfillment centers. Sellers need to pay extra shipping costs, especially if they restock often or send products in large volumes, and this program offers competitive shipping rates for cost-effective shipments.

To make the most of the Partnered Carrier Program, sellers should focus on efficient packaging and discounted rates. Tips on reducing shipping costs with PCP:

• Strategic Shipment Planning: Combine shipments in one instead of sending frequent shipments to get bulk shipping discounts. Advance shipment planning can help sellers utilize discounted rates and reduce per-unit shipping costs.
• Observe Shipping Performance: With Amazon-offered tools and reports, sellers can track shipping expenses and performance over time. This data will help refine their shipping approach and identify cost-saving options.
• Monitor Shipping Options: Amazon continues to update its Partnered Carrier Program by adding new services or adjusting rates; monitoring these updates will help sellers plan accurate shipping strategies and leverage the most cost-effective options.

Understanding the Amazon FBA fees requires a proactive approach. Accurate and correct details about the FBA updates help sellers implement effective and cost-saving strategies to reduce the impact of fee increases on their business. We have released these two blogs to help sellers understand the FBA fee changes and how they can address these updates with the right strategy to increase profitability.