What are Amazon FBA Fees?
Amazon has created a marketplace for sellers to sell a wide range of products to its customers. Third-party sellers can take advantage of Amazon’s platform, reach, and quick shipping speeds by renting space in Amazon’s fulfillment network. In contrast to a first-party relationship, third-party sellers pay a referral fee, monthly storage fees based on space, and a fulfillment fee.
Per Amazon, this fulfillment fee or FBA Fee is based on the “item’s category, size, and weight.” As your item increases in size and weight so do your fulfillment fees. However, these fees are tiered by weight and size. If an item passes into a new tier that could mean an additional +25% in your FBA fees per unit sold.
Why is This Important?
If you can manage the size and weight of your products, you may be able to drastically reduce your FBA Fee which would deliver direct profitability. For fast-moving items this could mean thousands in annual savings.
Client Background & Challenge
Willert Home Products, a Harvest Group client, is a St. Louis based company in the household cleaning and pest prevention category selling on Amazon for over a decade. Faced with higher input costs, Willert requested Harvest Group’s help to optimize their product design for profitability.
The Process
Our goal was to find opportunities for cost savings through product optimization to decrease item dimensions under thresholds to lower FBA Fees.
In one example, we identified a high-volume item that Amazon designated as “large” because its length was over 18” which put it into a significantly higher FBA fee category. Our Amazon Team took this information to the client who shortened the product under that length limit.
Results
Our team re-uploaded the item to Amazon and had the FBA fees reviewed resulting in a $5 reduction in FBA fees per unit – estimated as an annualized savings of $110,000 in profit.
By working with Harvest Group, Willert Home Products will continue to receive an ongoing product analysis and suggestions for optimizing items to increase profitability.
Harvest Group’s Amazon team works closely alongside clients to understand what is needed to increase profitability while meeting the expectations and requirements of the retailer. If you’re interested in learning more about working with Harvest Group to manage and optimize your Amazon business, reach out to us at hello@harvestgroup.com or fill out our Contact Us form here.
