Demand Gen Daily – Ep 43: Amazon – Part 11 – Reducing Operational Costs for Amazon FBA Sellers
In the world of Amazon FBA, reducing operational costs is critical to remain competitive, and a big part of this is reducing logistical costs. These include shipping costs, manufacturing costs, and storage fees. Unfortunately, Amazon is not a seller’s friend, as referral, shipping, and storage fees tend to increase every year. That is why minimizing operational costs is essential.
Here are some key takeaways from this episode:
- Minimizing operational costs is critical to remaining competitive on Amazon FBA. This includes reducing shipping, manufacturing, and storage fees, which tend to increase annually.
- One of the most significant ways sellers lose money is by shipping products by air instead of by sea due to poor sales forecasting. Shipping by sea is much cheaper, but it requires accurate sales forecasting to avoid storage fees or stockouts.
- Partnering with a third-party storage facility can help reduce storage fees and penalties, particularly during the expensive Q4 period. By shipping just enough inventory to Amazon FBA warehouses and storing the rest in a nearby third-party facility, sellers can reduce costs and remain competitive.
Two common ways sellers tend to waste money is by shipping products by air instead of the sea because they lack confidence in their sales forecasting, and by sending too little or too many products, which can cause anxiety and ranking loss. To mitigate these issues, sellers must partner or work with someone competent in sales forecasting or get good at it themselves by basing it on historical sales, volume based on the product category, and making educated guesses.
Once sellers ship by sea, they should not ship directly to the Amazon FBA warehouse because Amazon doesn’t want to be a storage facility anymore. Instead, it’s better to partner with a third-party storage facility located near Amazon FBA warehouses. By shipping just enough inventory to each FBA warehouse and storing the rest in third-party facilities, sellers can reduce their costs. This is especially important during Q4 because Amazon jacks up its storage fees, and sellers should try to negotiate longer-term deals with third-party facilities to save on costs.
Reducing operational costs is vital to stay competitive in Amazon FBA. By minimizing logistical costs and partnering with third-party facilities for storage, sellers can reduce their costs and become more profitable.
Check out all the other episodes within our next series of episodes for more advanced Amazon discussions!
As always, make sure to subscribe on your favourite channel and sign up for the newsletter to get demand gen tips and tricks delivered right to your inbox!