FBA Mastery: Strategies to Slash Fulfilment Costs
Fulfilment by Amazon (FBA) has transformed e-commerce, offering sellers unparalleled convenience, customer reach, and operational efficiency. Yet, for all its benefits, the costs of FBA can quickly add up. Between storage fees, returns, and inventory mismanagement, you might find profits slipping through your fingers.
But here’s the good news: with a smart strategy and a clearer understanding of the system, you can rein in FBA costs while enhancing profitability. Our guide is packed with actionable tips, helping you optimise your FBA usage and slash unnecessary expenses. Let’s get started:
Inventory Placement: Where Should I Store My Products for Optimal Cost Savings?
Making smart choices about where your inventory is stored can have a significant impact on your fulfilment costs. With Amazon's distributed marketplace, you’ll naturally want your products as close to your customers as possible - but how do you achieve this efficiently?
Analysing Inventory Placement Recommendations
Amazon’s recommendations, found in your inventory dashboard, are like a roadmap for cost-effective product distribution. By aligning your stock with these suggestions, you can leverage regional storage to reduce delivery times and shipping charges.
Leveraging Distributed Inventory
If you have a product with nationwide or global demand, distributed inventory (storing stock in multiple fulfilment centres) is worth exploring. While it may involve slightly higher storage costs upfront, the savings on shipping and quicker delivery times can balance the expense. Look for trends in your orders to decide where restocking makes the most sense.
Optimising Regional Fulfilment
For sellers focused on specific regions, working with regional fulfilment centres can lower costs and improve delivery scores. Analyse orders geographically to ensure your products are available in the right areas.
How Can I Understand and Minimise FBA Costs?
Decoding FBA fees is the key to saving money. Here’s how:
Breaking Down Fee Components
These are the two main fee categories for FBA sellers:
Fulfilment fees for picking, packing, and shipping.
Storage fees for holding your stock.
Use Amazon's fee preview tool to examine what you’re being charged for each listing, then assess whether your selling price is leaving room for real profits.
The FBA Revenue Calculator
Before listing a product, always use the FBA revenue calculator. This tool provides estimates for total costs, giving you a clear picture of profitability. Review products with razor-thin margins and adjust pricing, bundling, or fulfilment methods if necessary.
Replacing the Small and Light Programme with Low-Price FBA Rates
Amazon’s Small and Light programme has been replaced by Low-Price FBA rates. This new structure simplifies fulfilment for products priced under £10, offering reduced fees alongside the fast delivery speeds of standard FBA.
Here’s the breakdown:
Automatic Eligibility: Any product priced below £10 qualifies, with no need for extra enrolment.
Lower Fulfilment Costs: Fees are approximately £0.60 less per item compared to standard rates.
Fast Shipping: Customers now enjoy quicker delivery without sacrificing affordability.
Long-Term Storage: What Strategies Can Help Me Avoid Costly Fees?
Amazon’s long-term storage fees can eat into profits quickly. However, planning will help you avoid this headache.
Turning Over Inventory Quickly
Aim to streamline inventory turnover by selling products within 90–120 days. Flash sales, discounts, and limited-time offers can help keep stock moving at a good pace.
Using FBA Removal Orders or Liquidation
For unsold inventory nearing the long-term storage threshold, create a removal order. This ships the items back to you and saves on storage fees. Alternatively, consider FBA Liquidation to recover some of your costs with minimal hassle. We’ve also explored this topic in detail in our Seller’s Guide to FBA Liquidation blog post, where you’ll find more comprehensive tips on clearing excess stock efficiently.
Preventing Overstock with Demand Forecasting
Use Amazon’s demand forecasting tools to avoid overstocking. Pay close attention to product seasonality and order accordingly, keeping your storage bill low and turnover high.
Returns and Damage: How Can I Minimise Associated Costs?
Returns and damaged goods are inevitable, but there are ways to lessen their financial impact.
Packaging and Quality Control
Investing in robust, protective packaging reduces damage during transit. Consider presenting high-quality images and accurate descriptions to minimise return rates due to unmet expectations.
Making the Most of FBA Return Services
Believe it or not, FBA’s return services can actually save you time and money. Amazon’s streamlined return processing takes the complexity out of handling refunds yourself.
Liquidating Damaged Goods
Damaged items piling up? Use FBA Liquidation to recover a portion of the cost instead of writing them off.
FBA Tools and Resources: Am I Using Them to Their Full Potential?
Amazon offers a suite of tools and resources tailor-made for sellers, but are you really making the most of them?
Maximising Reports and Analytics
From inventory performance reports to sales trend data, Amazon’s analytics tools can guide effective decision-making. Use these insights to identify slow-moving inventory, optimise pricing, and adjust stock levels.
Advertising and Promotions
Amazon’s advertising features, like Sponsored Products or Lightning Deals, can drive sales without overextending your budget. Focus on your best-performing SKUs for the best ROI.
Leveraging Customer Service Tools
FBA includes customer support features, enabling you to provide seamless after-sales service. This keeps customers happy and encourages repeat purchases while shielding you from costs associated with direct handling.
FBA Multi-Channel Fulfilment (MCF): What Are the Benefits?
If you’re selling across multiple platforms, Multi-Channel Fulfilment (MCF) can streamline your operations while using Amazon’s powerful logistics network. Whether it’s your own online store, eBay, or another marketplace, tapping into MCF lets you keep everything under one roof while maintaining fast, reliable delivery for your customers.
Why Use MCF?
MCF removes the headache of juggling separate fulfilment processes for different sales channels. You only need to manage one inventory pool, stored in Amazon’s fulfilment centres, and their team handles the picking, packing, and shipping on your behalf.
Here’s why it’s an asset:
Efficiency: Consolidating fulfilment means fewer moving pieces and errors, especially during busy sales seasons.
Cost Savings: By centralising inventory, you avoid the expense and complexity of maintaining multiple storage facilities.
Customer Experience: Amazon’s logistics expertise ensures fast shipping and professional packaging, keeping customers satisfied no matter where they purchased.
Setting Up Multi-Channel Fulfilment
Want to get started with MCF? Follow these steps:
1. Sync Your Inventory
Firstly, ensure all your products are listed in Amazon’s system. For each platform you sell on, connect it to your Amazon inventory for seamless updates. Some third-party tools like Sellbrite or Shopify plug-ins make this even easier, ensuring that stock levels stay accurate and automatically update across channels.
Enable Multi-Channel Fulfilment
2. Log in to Seller Central and head to your fulfilment settings
Activate MCF by selecting the products you want to include and setting up rules for order handling, such as auto-routing non-Amazon sales to the FBA network.
3. Create an MCF Order
When you make a sale on another platform, go to the Create Fulfilment Order section in Seller Central. Enter the order details, including the customer’s information. Alternatively, use an integrated tool to automate this step.
4. Optimise Fulfilment Preferences
Amazon provides shipping speeds ranging from Standard to Expedited and Priority. Assess your sales needs to set an option that balances cost with service expectations. For example, offer Standard on low-value products while using Priority fulfilment for higher-margin or time-sensitive items.
5. Monitor and Analyse Performance
Track fulfilment metrics through Seller Central’s dashboard. Look for trends like delayed shipping or high-cost regions and adjust your process to refine efficiency.
International Expansion: How Can FBA Assist?
Expanding into international markets through FBA opens doors to a global audience. However, crossing borders also introduces unique challenges, from taxes and regulations to customer expectations. Thankfully, with Amazon’s expertise and some careful planning, you can manage these obstacles like a pro.
Unlocking International Markets
Amazon’s extensive global network makes it easier than ever to expand into the UK, Europe, Asia, and beyond. By leveraging Amazon’s international fulfilment centres, you can offer faster and more cost-effective shipping to overseas customers. Plus, the Prime badge on your listings increases conversion rates.
Setting Up an International FBA
Getting started with international FBA requires a few key actions:
Join the Amazon Global Selling Programme
Create International Listings
Choose Fulfilment Locations
Global Inventory
Navigate Tax and Compliance Requirements
Overcoming International Expansion Challenges
While the opportunity is huge, selling internationally has its hurdles. Here are some of the common pain points and solutions:
Navigating Customs Regulations
Understand each region’s import rules, including restricted products or labelling requirements. Work with customs brokers or Amazon’s services wherever possible to minimise delays and penalties.
VAT Compliance
VAT laws can be complex, especially if you’re storing goods in multiple EU countries. Amazon provides VAT calculation services, but you should also consult a specialist if your operation grows significantly.
Customer Expectations
International buyers have different service expectations. For example, customers in Germany might prioritise fast, trackable delivery, while UK buyers expect clarity in pricing and detailed product info. Pay attention to reviews and optimise your listings for each market.
Managing International Returns
Handling returns from abroad might sound daunting, but FBA makes it manageable. They provide local return addresses for customers, streamlining the process. You can also choose between restocking returned items or liquidating them locally if resale isn’t possible.
You’re Ready to Slash Fulfilment Costs
Lowering your FBA fulfilment costs requires a little effort, but it’s well worth it. From understanding fee structures to optimising storage and taking advantage of FBA’s resource tools, these strategies can transform your bottom line.
Why not take the first step towards trimming unnecessary costs today? Conduct an FBA audit, implement some of these strategies, and see the difference it makes. And if you’d like even more actionable advice, subscribe to the This Way Up newsletter, tune in to The Upside podcast series, or get in touch with the team!