FBA cost control is very important for every Amazon seller. The cost of FBA does not remain unchanged, but continues to rise every year. Amazon often adjusts various FBA fees according to the current actual situation. Therefore, even if the seller’s FBA cost is relatively low at present, it cannot be ruled out that it may become very high in the future. From now on, Amazon sellers need to pay attention to FBA cost control.
First, improvement of product size and packaging
The costs of first-leg logistics, warehousing and last-leg distribution of FBA products are determined by the size and weight of the product, and once the product is divided into large items, the various costs of FBA will increase exponentially. Therefore, Amazon sellers need to use their brains and keep in touch with their product suppliers to understand whether the product can be further optimized in terms of its own size and outer packaging, and to reduce the size of the product or outer packaging without affecting the function and appearance. If size optimization can be achieved, then your product will have a very large cost advantage compared with competing products, and the various FBA costs of your product will be much less than those of competing products, which will be of great help to the later operation work. The micro-innovation and transformation of products do not necessarily have to be reflected in the function and appearance. Sometimes the innovation in packaging and product size will give your products a very good price advantage and make your products stand out from many competing products!
In addition, we also need to monitor the size and weight of our products at any time in the Amazon seller background, as well as the actual deduction of FBA. According to past experience, Amazon warehouses often make mistakes when measuring product size and weight, and these measurement errors may cause us to lose a lot of money. Many sellers have not noticed this problem because they trust Amazon’s measurement results too much, coupled with their own negligence, and the money has been lost in vain. It is recommended that all sellers pay attention to the measurement results of the FBA warehouse and the subsequent FBA delivery fee details for new products that have just entered the warehouse. Once they find something wrong, they should immediately apply to Amazon for re-measurement. If Amazon confirms that the previous measurement results are wrong, it will return the overcharged fees in full.
Second, abnormal inventory monitoring
Amazon has always had a 30-day unconditional return and exchange policy. Many consumers will ask Amazon for returns and exchanges for various reasons after receiving the products. If the returned products and the outer packaging are intact, Amazon will help the sellers repack them, and these products can become sellable inventory again. However, if there is a problem with the product itself or the outer packaging is damaged, they will be automatically classified as unsaleable products by the FBA warehouse. According to experience, a large proportion of returned products cannot be resold. Therefore, for this part of unsaleable returns, we can only remove them to overseas warehouses and find ways to deal with them, or let Amazon destroy them directly on the spot. If the refund rate rises as a result, it will have a great impact on our overall profits. We need to monitor the refund rate of products in the Amazon seller backend at any time to ensure that it is within a reasonable range. As for how to view the product refund rate, sellers can enter the Amazon seller backend and view it according to the following path: Data Report → Business Report → “Seller Performance” on the left → Number of refunded products & refund rate. The default viewing interval is one day, and you can also choose multiple days.
If sellers want to reduce the product refund rate, they must know the real reason why buyers choose to refund. So, what are the reasons why consumers choose to return or exchange products?
Reason 1: The product does not match the description
When optimizing the keywords or descriptions of the product page, sellers must ensure that they are based on the real situation and do not deliberately exaggerate the facts.
Reason 2: The color, size, model, specifications and other parameters of the product do not match
Whether it is on the product introduction page or when shipping, sellers must clearly state the parameters of their products to avoid situations like consumers originally wanting to buy an iPhone7 plus phone, but you send them an iPhone7 phone case. In addition, clothing sellers are most likely to have this problem, and the situation in each region is different, which is really difficult to adjust.
Reason 3: Not knowing how to use the product
For products with slightly complex functions or requiring specific operations, there must be detailed instructions for use, and sellers must make necessary reminders on the details of the operation.
Reason 4: Quality Issues
No one wants to buy counterfeit products, but the seller’s purchase channels may not be reliable, which requires the seller to strictly control and do a good job of quality inspection before delivery.
Reason 5: Express Logistics
If the seller wants to solve the problem of returns due to express logistics, it is necessary to let the buyer and himself understand the logistics whereabouts of the product and ensure that the product is delivered to the hands of consumers in the shortest time.
Among the above reasons, except for the express logistics in the fifth point, which is beyond our control (because FBA products are delivered by Amazon), the other four points are the directions we need to continuously rectify and improve. Moreover, we can view the specific reasons for returns from the Amazon seller backend, so as to truly achieve targeted results when reducing the product refund rate! After we log in to the Amazon seller backend, we can query the reasons for returns according to the following path: Data Report → “Buyer Discount” on the left → Amazon Logistics Buyer Return & Exchange, the query time is one day by default, and you can also choose multiple days.
Third, control of FBA storage costs
Once a product is unsalable and exceeds a certain period, Amazon will charge long-term storage fees. Long-term storage fees will bring huge financial pressure to sellers. Sometimes the long-term storage fees are even higher than the total cost of the goods, so sellers must pay attention to the issue of long-term storage fees.
In order to facilitate sellers to better deal with the problem of long-term storage fees, Amazon provides sellers with inventory removal services. Sellers can choose to move their FBA inventory out of the Amazon FBA warehouse. There are two ways to remove, and sellers can choose by themselves in the Amazon backend: on the one hand, we can send the inventory to the designated recipient, such as an overseas warehouse; on the other hand, if you don’t want this inventory, you can request Amazon to recycle the inventory or dispose of it in the operation center, which is equivalent to “sending” the inventory to Amazon, and of course you don’t have to pay expensive storage fees.
If there are products facing the need to pay long-term storage fees, then I suggest that you apply for the inventory removal service immediately. As for the specific removal method, if it is a relatively expensive product, it can be removed to an overseas warehouse and continued to be sold through other platforms or offline channels until the inventory is cleared; if it is a relatively cheap product, it is recommended to choose to let Amazon destroy it on the spot when removing it, so as to stop the loss in time. If you choose to remove it to an overseas warehouse, under normal circumstances, the removal order will be processed within 14 working days. However, during holidays or peak removal periods, it may take 30 working days or longer to process the removal order.
In addition, if there are too many products, I suggest that sellers turn on the automatic removal of inventory setting. Sellers can enable the automatic removal of inventory setting only for unsaleable inventory or inventory that requires long-term storage fees in the Amazon backend, or they can enable this setting for both types of inventory at the same time.
Fourth, optimize the FBA delivery plan
Optimizing the FBA delivery plan is also one of the key links in controlling FBA costs. As for how to scientifically prepare for FBA products, I have already explained in detail in the previous chapter. Here I will only talk about a few key points that need to be paid attention to when shipping FBA. When making an FBA delivery plan, I suggest that sellers ship multiple varieties in small batches for the first time, so as to expand the selection and minimize the risk. After completing the testing work, sellers should stock up more products with low frequency for hot-selling products, because out-of-stock will have a great impact on product rankings. In addition, if the one-time delivery volume is relatively large, it is recommended that sellers do not put all the products into the Amazon FBA warehouse at once, but first enter the overseas warehouse, and then send them to the Amazon FBA warehouse in batches from the overseas warehouse. On the one hand, this arrangement is that the storage fee of the overseas warehouse is much cheaper than that of Amazon. When the sales prospects are unclear, storing the products in the overseas warehouse can save some storage fees and reduce the risk of possible FBA inventory backlog; on the other hand, security is more guaranteed. If your account is blocked, the inventory in the Amazon FBA warehouse must be removed, but there is no such risk in the overseas warehouse, and the overseas warehouse can also take into account the sales of other e-commerce platforms, which is much cheaper than using Amazon FBA multi-channel distribution.
Fifth, the choice of FBA warehouse
Choosing Amazon FBA warehouse joint warehouse or separate warehouse has a greater impact on the overall cost of FBA products. After sellers using Amazon FBA set their products to FBA delivery, Amazon will give the corresponding FBA warehouse address. Generally, there will be several addresses. This is because Amazon FBA warehouses are divided by default. For this reason, sellers’ products are often assigned to different warehouses by Amazon for storage. Of course, for sellers on Amazon’s US site, they can pay additional warehouse consolidation fees in the background to achieve product consolidation, which means that all products only enter one Amazon FBA warehouse.
Amazon’s system defaults to warehouse consolidation because through the warehouse consolidation method, the seller’s products will be stored in different warehouses. When a consumer purchases the seller’s product, Amazon can choose the nearest warehouse for delivery, which can reduce the delivery time of the product and bring better delivery services to consumers. Not only that, different regions have different temperatures and humidity, and different products are also suitable and unsuitable in the storage environment. The warehouse consolidation stores the seller’s products in a more suitable storage environment, which can better protect the products. This is the benefit of the warehouse consolidation.
But why do many sellers not like their products to be divided into warehouses? When the products are divided into warehouses, sellers need to send the products separately when using FBA first-leg logistics, which will undoubtedly increase the seller’s logistics costs. At the same time, logistics distribution also has weight requirements. If the seller’s products originally just meet the weight requirements, the weight of the products in each warehouse is not met due to the warehouse division, which will increase the logistics costs. For this reason, many sellers do not want their products to be divided into warehouses.
So is it a combined warehouse or a separate warehouse? Which method can reduce FBA costs more? Different products have different situations. It is recommended that sellers can compare and choose according to the situation of their products, including quantity, weight, and the cost of using the two methods, and finally come up with a cost-optimal solution.
Sixth, export tax rebate
If the products you sell are regular brands and the buyers can issue regular VAT invoices, then you can consider product export tax rebates. In addition, in order to encourage the development of export cross-border e-commerce, the country has added a customs supervision method code for FBA sellers-9810, which facilitates FBA sellers to follow compliant import and export processes and obtain more subsidies and policy support. Now many freight forwarding companies and logistics companies have this kind of agency business to help increase the seller’s profit. For example, for electronic products, the seller may only need to pay 5% to 6% tax to the supplier, but the state will refund the seller 17% tax. Although this will temporarily increase the seller’s procurement costs, if funds allow, the profit in the later stage is still considerable.