Amazon FBA expense management and hidden costs revealed
As one of the global e-commerce giants, Amazon benefits sellers all over the world, but in recent years, sellers’ sales costs have also increased, especially FBA sellers. For most sellers, the main costs that impact profit margins include fulfillment fees, sales commissions, warehousing fees, advertising fees, and fees related to returns. This article will delve into these cost factors and introduce how to reduce FBA costs and make business profits more controllable for platform sellers.
Logistics costs
The logistics cost of Amazon FBA includes product size level and shipping weight. Size classes are determined by shipping weight, which is calculated based on unit weight or dimensional weight, whichever is greater. Because trucks are limited not only by weight but also by the physical space available in each truck, Amazon also charges sellers based on the total volume of product in a truck shipment. To prevent and recoup additional costs, ask sellers to regularly check Amazon measurements with data provided by the manufacturer and cross-compare with Amazon data monthly by tracking everything in a spreadsheet.
Platform commission
Amazon charges a commission for each item sold on the platform. The sales commission is a percentage of the item’s sales price and may vary by product category. Sellers can choose a niche market and recommend lower-cost items such as household items, kitchen supplies, toys, games, office supplies, etc.
Warehouse fee
Like logistics costs, warehousing costs are charged based on the volume occupied by the product in Amazon’s fulfillment center. The best way to save on warehousing costs is not to reduce the size of a product or its packaging, but to process incoming and outgoing products as quickly as possible. To do this, sellers should keep inventory levels low, send only fast-selling products to Amazon, and keep a close eye on Inventory Performance Index (IPI) scores.
Advertising fees
Amazon offers a variety of advertising solutions to help sellers promote products on its platform, including Sponsored Products, Sponsored Brands, and display advertising. In order to reduce advertising sales costs, sellers should regularly track advertising performance and adjust bidding strategies accordingly.
Closement fee
In addition to the above explicit fees, there are also closing fees hidden in FBA fees, which are deeply hidden in Amazon reports and can be easily ignored by sellers. Warehousing means that FBA products are concentrated in the same Amazon FBA warehouse, while warehousing separates the same batch of goods and SKU products into 1 to 3 FBA warehouses. Although Amazon’s default setting is divided into warehouses to improve warehouse utilization and save delivery fees, from the seller’s perspective, this increases costs.
Return Fees
After major promotions on the platform, there is usually a wave of returns. The fees for Amazon FBA returned to the seller mainly include return pickup fees and refund management fees. For special category products, Amazon FBA also needs to charge additional fees to sellers when returning products. In addition, whether the buyer receives a partial refund or a full refund, the Amazon platform will deduct a 20% commission as a refund management fee.
In summary, Amazon FBA sellers need to pay attention to controlling the above costs to increase overall profit margins. At the same time, understanding and managing these expenses can help sellers better plan their financial budget and achieve sustainable development.
Reference materials
- Amazon FBA expense management strategy
- Detailed explanation of closing fees hidden in Amazon FBA fees
- What are the fees after Amazon FBA returns it to the seller