How To Control or Minimize Costs When Using Fulfillment By Amazon (FBA)

Amazon’s global marketplace offers an incredible opportunity to showcase your products and brand to a vast audience. Leveraging Amazon can be a valuable addition to an omnichannel strategy, helping to boost sales and increase brand visibility. One of the most convenient ways to fulfill orders on Amazon is through their Fulfillment by Amazon (FBA) service.

However, selling on Amazon can become expensive, particularly when using FBA for fulfillment. While Amazon FBA offers significant benefits such as inventory management, order processing, and the allure of Amazon Prime’s 2-day delivery, these conveniences come at a cost. Understanding and controlling these costs is key to maintaining profitability.

Amazon FBA charges a variety of fees, including:

• Fulfillment costs
• Inventory storage
• Long-term storage
• Inventory removal
• Returns processing

With inflation driving up costs, businesses are now more focused than ever on finding ways to save. Therefore, it’s essential to keep FBA fees under control to safeguard your margins and profitability.

How to Minimize Fulfillment by Amazon Fees

To minimize Fulfillment by Amazon costs, there are several actions you can take to significantly reduce your expenses and make the most of Amazon’s services. Here are some effective ways to control costs when using FBA.

Optimize Inventory Management

Amazon FBA charges monthly storage fees based on the volume and weight of your inventory. To minimize costs, regularly monitor stock levels to maintain an optimal amount at fulfillment centers. Excess inventory may incur long-term storage fees, while low stock levels can lead to penalties. Aim for 60-90 days of inventory to balance customer demand and storage costs effectively.

Amazon FBA shipping costs depend on both the dimensional weight (the space your product occupies) and the actual shipping weight. To control these fees, optimize your product packaging to reduce excess weight and size. Compact, lightweight packaging not only minimizes shipping costs but also maximizes storage efficiency in Amazon’s fulfillment centers.

Ensure Your Product Is Packaged and Labeled Appropriately

Amazon enforces strict guidelines for product packaging and labeling, including rules on packaging materials and barcode placement. To avoid repackaging fees, make sure your products fully comply with these requirements before they reach the fulfillment center. Proper packaging and labeling can save you from unexpected costs and delays in getting your products to market.

Optimize Product Packaging Weight and Size

Amazon FBA shipping costs depend on both the dimensional weight (the space your product occupies) and the actual shipping weight, with charges based on whichever is greater. To control these fees, optimize your product packaging to reduce excess weight and size. Compact, lightweight packaging not only minimizes shipping costs but also maximizes storage efficiency in Amazon’s fulfillment centers.

Optimizing product packaging goes beyond just reducing shipping costs. Amazon calculates fulfillment fees based on the size of your product, so using appropriately sized packaging can significantly lower these fees. Additionally, larger packages occupy more space in Amazon’s fulfillment centers, which leads to higher inventory fees.To minimize costs, consider using smaller, lighter packaging or bundling products where possible. By reducing both the size and weight of your packages, you can keep fulfillment and storage fees in check while making your products more cost-effective to ship.

Evaluate Your Inbound Transportation Strategy

When distributing products to Amazon’s fulfillment centers, you have two options. The first is to ship your products to a single fulfillment center and let Amazon handle the distribution to other locations. While this is convenient, it comes with higher costs due to Amazon’s inbound placement fees.

Alternatively, you can ship your products directly to multiple fulfillment centers. By comparing the costs of these strategies, you can identify the most cost-effective approach for your business and potentially save on transportation fees.

Consider Using FBA for Specific Items

Depending on your product lineup, it might be more cost-effective to use different fulfillment methods for different items. Some products are cheaper to fulfill through FBA, while others may be better suited for alternative options like Amazon Fulfillment by Merchant.

Additionally, consider storage fees—fast-selling items, such as bestsellers or seasonal products, are ideal for FBA. In contrast, out-of-season products may rack up long-term storage fees if they remain in a fulfillment center for too long. Choosing the right fulfillment strategy for each product can help control costs effectively.

Evaluate Alternative Options to Fulfillment by Amazon

Another option when evaluating your costs is to look outside of FBA. While Amazon FBA offers convenience and wide-reaching exposure, its costs can add up. Keeping a close eye on FBA fees is crucial for maintaining profitability. However, it’s equally important to weigh the costs and benefits of Fulfillment by Amazon (FBA) versus Fulfillment by Merchant (FBM) as a strategy to control overall expenses.  Amazon’s other fulfillment strategy, Fulfillment by Merchant, allows you to continue to leverage the Amazon marketplace while having more control over your fulfillment operation.  It could prove to be valuable to evaluate both FBA and FMB strategies, and total cost of each, to determine the right method for your fulfillment.  

Relying on Amazon Fulfillment by Merchant? Let FIDELITONE Handle Your Needs

For brands using Amazon Fulfillment by Merchant, FIDELITONE offers expert third-party fulfillment solutions designed to streamline your operations and reduce costs. Contact FIDELITONE today for a free consultation and discover how we can optimize your fulfillment strategy.