As one of the world’s e-commerce giants, Amazon has benefited sellers around the world, but in recent years, sellers’ sales costs have also risen, especially for FBA sellers. This article will break down the top four cost factors that affect sellers’ profits.
1. Logistics costs
Amazon FBA’s logistics costs include two parts: product size grade and shipping weight. The size grade is determined by the shipping weight, which is calculated based on the larger data of the unit weight or volume weight.
Amazon and other shipping companies use volumetric weight because their trucks are not only limited by weight, but also by the physical space available on each truck. Therefore, Amazon also charges sellers based on the total volume of the product in the truck transport.
Before sending products to Amazon warehouses, sellers can use Amazon’s FBA revenue calculator to estimate logistics costs. This will help decide which products to sell on Amazon instead of sellers to avoid unexpected fees.
To prevent and recover additional fees, sellers are kindly requested to regularly check Amazon’s measurements with the data provided by the manufacturer, and cross-compare with Amazon data every month by tracking everything in a spreadsheet.
2. Platform Commission
Amazon charges a commission for every item sold on the platform. The sales commission is a percentage of the item’s sales price and may vary by item category.
Sellers can choose a niche market with a low recommendation cost. For example, household goods, kitchen supplies, toys, games, office supplies, etc.
3. Storage Fees
Like logistics costs, storage costs are charged based on the volume that the product occupies in Amazon’s fulfillment centers. However, the best way to save storage costs is not to reduce the size of the product or its packaging, but to process the products that are about to enter and leave the warehouse as quickly as possible. Because every day that unsold products are stored, the storage cost of each item will increase a little.
That’s why sellers should make sure to ship the right amount of inventory to Amazon. To prevent sellers from overstocking inventory, Amazon recently developed the FBA storage capacity system. Sellers should also keep inventory levels low and only send Amazon products that sell quickly.
4. Advertising Fees
Amazon offers a variety of advertising solutions to help sellers promote their products on their platform, including product promotion, brand promotion, and display advertising. The cost of these ads varies depending on keywords, competition, and bidding strategy. To reduce the cost of ad sales, sellers should regularly track ad performance and adjust bidding strategies accordingly. (ACoS).