5 Ways to Save on Amazon Fees
Amazon can be an amazing sales channel, but there are plenty of hurdles that can quickly eat away profits starting with Amazon Fees – read this!
The Amazon Marketplace provides a tremendous opportunity for sellers of all sizes. Whether you’re big or small, the amount of traffic and sales you can generate by leveraging the marketplace is second to none.
There is, of course, one problem.
Yep, you probably didn’t hear it here first – you have to pay to be a part of the platform, and there’s quite a few different fee types.
So how can you get all the benefits of the platform, without paying an exorbitant amount of fees like your competitors?
We’re going to dive into just how.
Let’s look into how you can optimize your listings to get the most out of Amazon’s programs, and save as much as you can on Amazon fees – so that you have more money in your pocket.
1. Aim for Smaller Items
The first step to lowering your fee count would be aiming for smaller items.
If you’re selling an item in the Special Oversize category, chances are you’re paying a massive amount of FBA fees. Amazon doesn’t really want super-large items in their warehouses – and as a result, they charge a decent chunk for larger SKUs.
If you absolutely have to send in big SKUs, you can do one of the following:
Optimize Your Packaging
Amazon’s fulfillment fees charge based on item dimensions when they’re received in the warehouse.
Consequentially, this means that if you can minimize these dimensions, you can save on fees.
If your packaging takes up a large amount, or if your packaging has areas that stick out – consider reducing the size of your packaging.
If you can reduce your dimensions by even an inch in some cases, you can save big on fulfillment fees.
Send Limited Quantities
Sending limited quantities is also crucial for larger SKUs.
Amazon charges storage fees, as well as long-term storage fees, on all of your SKUs. These fees are based on the combined storage size that you have in their fulfillment network.
By sending in limited quantities, no more than 1 month of sales velocity per SKU, you can save on storage fees by a good margin.
Remember that Amazon’s fulfillment centers are not meant to be storage facilities, they’re meant to be fulfillment centers – only good for holding the quantity you expect to sell in a short timeframe.
If your item is extremely large, you may actually save by shipping the item out yourself.
Try negotiating discounts with a freight company, UPS, FedEx or another provider.
As Amazon wants to maximize their storage, some of their oversized rates can be high – and rightly so – this is to discourage a lot of larger SKUs taking up the volume that thousands of smaller, faster moving SKUs could cover.
2. Lower Price is Better
This may sound counter-intuitive, but in a certain price bracket, having a lower price actually can be better, and you can benefit from the fee savings.
We’ll dive into the Small and Light program more in a bit, but the general gist is that if your SKU is within the $7 to $8 range, you may see some significant savings utilizing the Small and Light program. You could, in theory, have a lower SKU price and still have a lower fulfillment fee than at the higher price.
You can leverage an Amazon fee calculator such as Sellonaut to determine what your fee costs are and check if Small and Light may be advantageous.
3. Utilize the Small and Light Program Whenever Possible
The Small and Light program is a godsend for small, fast-moving SKUs under $7.
Now, that doesn’t necessarily mean your listing has to be under $7 for it to be a benefit to you.
In fact, you may benefit even in the $8+ range. It’s worth it to experiment with some calculations and see if you might be able to save.
Your ASIN may be a good fit for the Small and Light program if:
- It’s under $8 or so (though test if it’s under $10!)
- It sells more than 24 units a month
- It’s less than 16 x 9 x 4 inches, and
- It weighs less than or equal to 10 ounces
4. Operate in Low-Fee Categories
This may not apply to a particular ASIN you’re trying to lower fees on, but in general, you should definitely look to categories with a lower referral fee if it’s feasible.
Referral fees are commission-based fees at the end of every sale.
Some categories have high referral fees, some have price-tiered referral fees, and some have minimum flat fee commissions if your sale price is lower.
You’ll want to check out the table of applicable referral fees, and note the difference based on the categories you’re looking in to. A few percentage points off your bottom line can be very significant, depending on which categories you’re operating in.
5. Only Keep What You Need in Stock
This should come as a somewhat obvious concept, however, a lot of sellers fail to check a few things in their account that could be costing them a ton in fees over time.
Here’s a few ways to save on fees based on your inventory.
When you’re sending in inventory, never send in too much. Your goal is to go between 2 and 4 weeks of sell-thru, tops. If you bought a large amount from your vendor, or imported yourself, we recommend keeping that extra quantity on-hand.
If you keep a ton of stock in the Fulfillment Centers, you’re likely to incur Amazon storage fees – not only for the month you send them in, but continuously, each month, until it’s all sold out.
The larger volume you have in Amazon FCs, the larger amount you pay in storage fees.
These can add up quickly over time – especially if you’re selling a lot of larger SKUs.
Remove Stale Inventory
Removing or disposing of stale inventory is also crucial.
You don’t want any stale inventory in Amazon FCs – this will lead to hefty long-term storage fees, which continue to accrue until your SKU is removed, sold, or disposed of.
If you’re absolutely certain the SKU will not sell, you can consider donating it or disposing of it.
If you’re confident it’ll sell, or would at least like to take the chance, remove it from the FC temporarily while you sort things out. Removal fees vary by product, but they’re certainly cheaper than the added costs of storage over time.