Reducing FBA costs requires a comprehensive approach to the entire process: stocking planning, first-leg logistics, FBA warehousing, and inventory turnover. Reducing unnecessary expenses through refined operations is crucial.
In this article, Weefreight will provide a detailed analysis, which we hope will be helpful.
- Stocking Planning: Reducing Redundant Costs at the Source
Stocking is the starting point for cost control. Overstocking can lead to a surge in storage fees, while understocking can result in lost sales. The key lies in “accurate forecasting + rational product selection.”
- Precisely prepare inventory based on data to avoid blindly overstocking.
Use historical data to anchor inventory levels: Use the “Sales Forecast” tool in Amazon’s “Inventory Planning” app, combined with data from the past 3-6 months of historical sales, seasonal fluctuations (such as Black Friday and Prime Day), and promotional plans, to calculate “Safety Stock = Average Daily Sales x Restocking Cycle + Safety Buffer.” The buffer can be set at 10%-20% of sales within the replenishment cycle (this can be increased for non-standard products).
Use small batches for trial and error to reduce the risk of new products: For newly launched ASINs, limit the initial inventory to 30-50 units (adjust based on the category’s turnover rate). Based on 1-2 weeks of market feedback (click-through rate, conversion rate, and add-to-cart rate) to assess demand, gradually increase inventory levels to avoid long-term storage fees incurred by unsold new products.
Beware of “false demand”: If product sales surge due to short-term advertising or platform events, exclude “non-organic traffic sales” before calculating inventory levels to prevent inventory backlogs after the event.
- Select products that comply with FBA regulations to reduce hidden costs
Prioritize “small, light, and high-turnover” products: These products meet the FBA Small and Light program requirements (e.g., US price ≤ $10, weight ≤ 425 grams, dimensions ≤ 40 x 22 x 10 cm), qualify for lower delivery and commission discounts, and have lower long-term storage risks.
Avoid products with “high-cost characteristics”: Avoid stocking bulky and heavy items (such as large household items), as their storage and delivery fees are significantly higher than those for standard items. Also, avoid hazardous and temperature-sensitive items (such as cosmetic liquids and creams), as these products incur additional compliance costs and have more storage restrictions.
- First-Mile Logistics: Balancing Time and Cost to Reduce Hidden Losses
First-mile logistics is the key link between the supply chain and FBA warehouses. Improper logistics choices can lead to high freight costs, slow warehousing, and high losses. The key to optimization is to “match logistics methods and control warehousing costs.”
- Select logistics methods based on replenishment urgency
The costs of different logistics methods vary significantly, so you need to flexibly choose the right one based on inventory turnover:
Slow replenishment (when inventory is sufficient): Choose ocean freight (LB) or ocean freight (LCL). The unit price is only 1/3-1/5 of air freight, suitable for non-seasonal products with stable turnover. For shipments ≥1 CBM, ocean freight is preferred (ocean freight time is approximately 25-35 days for the US and 30-40 days for Europe).
Urgent replenishment (when inventory is at risk): Use dedicated air freight (e.g., US air delivery: 7-12 days) or express delivery (DHL, FedEx: 3-5 days). However, the proportion of urgent replenishment items should be limited (no more than 10% of the total) to avoid high shipping costs eroding profits.
- Optimize warehousing to reduce additional expenses
Choose split/consolidated warehouses: Amazon defaults to splitting inventory (split inventory across multiple warehouses), which may result in higher initial shipping costs. If the shipment volume is 50 or more pieces, you can apply for “consolidated warehouses” (a fee applies, approximately $0.3-0.8 per piece on the US site). However, you need to calculate the difference between the “consolidation fee + initial shipping cost per warehouse” and the “split warehouse initial shipping cost” to choose the most cost-effective option.
Standardized Labeling and Packaging: Apply your own labels (avoiding Amazon’s labeling fees, approximately $0.30 per item) and ensure labels are clear and wrinkle-free. Packaging must meet FBA size requirements (e.g., avoid “oversized packaging” that results in volume-based charges) to reduce the risk of rejection due to substandard packaging (rejection can lead to secondary shipping costs).
III. FBA Warehousing: Optimize Management and Eliminate “Ineffective Expenses”
FBA storage fees include “monthly storage fees” and “long-term storage fees.” The latter is extremely expensive (e.g., $6.90 per cubic foot for items stored on the US site for over 365 days). The core goal is to “accelerate turnover and eliminate redundancy.”
- Reduce Monthly Storage Fees: Reduce Inventory Space
Optimize Product Packaging: Remove redundant packaging (such as excessive foam or gift boxes), use lightweight packaging (such as bubble wrap instead of cardboard), and reduce product volumetric weight (FBA storage fees are calculated based on the greater of “actual weight” and “volume weight.” Volumetric weight = length × width × height / 166, in inches).
Join the SIPP Program: Amazon’s “Shipping in Your Own Packaging Program (SIPP)” allows products to be shipped in their original packaging, eliminating the need for Amazon repackaging. This can save $0.20-$1.32 per item on the North American site and reduce the volume required by packaging materials.
- Avoid Long-Term Storage Fees: Clear Slow-Moving Inventory in a Timely Manner
Establish an Inventory Health Monitoring Mechanism: Check the “Inventory Health” Dashboard Weekly, Focusing on the “Inventory Age” Metric:
Inventory Age 150-180 Days: Launch promotions (e.g., “30% Off Coupons” or “Buy One Get One Free”), or clear out inventory at a low price through Amazon Outlet (discounts must be at least 30% below market price).
Inventory Age Over 180 Days: If the promotion is ineffective, immediately submit a “Removal Order” (shipping inventory back to an overseas warehouse at a cost of approximately $1-2 per item) or a “Disposal Order” (disposal fees are approximately $0.10-0.50 per item, suitable for low-value items) to avoid incurring higher long-term storage fees.
Utilize the Inventory Performance Index (IPI): An IPI score of 400 or higher can help avoid inventory restrictions. If the score is lower, prioritize clearing out slow-moving items (items older than 90 days have the greatest impact on the IPI) while also increasing the inventory share of high-turnover items.
IV. Inventory Turnover: Activate Slow-Moving Items and Improve Capital Efficiency
Inventory turnover efficiency directly impacts storage costs. The faster the turnover, the lower the storage cost per unit time. The key is “market optimization + multi-channel diversion.”
- Increase the turnover rate of slow-moving items
Targeted Clearance Promotions: For items older than 90 days, offer targeted coupons (for users who have added items to cart) or bundle sales (combining them with high-volume items, such as a low-priced “main item + slow-moving item” package) to avoid simply reducing prices and resulting in low profits.
Optimize listings to boost conversions: Check slow-moving items’ titles, keywords, main images (to ensure they clearly showcase their selling points), and A+ content (to ensure they highlight usage scenarios). By optimizing listings, you can increase organic traffic and conversion rates, fundamentally accelerating turnover.
- Diversify traffic across multiple channels to reduce reliance on FBA
Develop a multi-platform/independent website: Sync excess FBA inventory to platforms like Shopify, eBay, and Walmart. Use Multi-Channel Fulfillment (MCF) to ship directly from Amazon (MCF fees are slightly higher than FBA fulfillment fees, but lower than the combined FBA storage fee and unsold inventory losses), thus dispersing inventory pressure.
Develop self-fulfillment from overseas warehouses: Ship some inventory to third-party overseas warehouses in advance. When FBA inventory alerts are raised, restock from overseas warehouses or ship directly from overseas warehouses (shipping from overseas warehouses offers similar timelines to FBA and costs approximately 20%-30% lower), reducing sole reliance on FBA.
- Long-term Optimization: Establish a Cost Monitoring System
Real-time Cost Tracking: Log in to the “Payments” section of Seller Central weekly and review the “FBA Fee Details,” focusing on issues like “abnormal increases in storage fees” and “overcharged delivery fees.” (If errors are discovered, you can file a refund with Amazon.)
Use tools to support decision-making: Leverage the “FBA Cost Calculation” feature of ERP systems (such as Jijia or Captain BI) to automatically calculate the ratio of “storage fees + delivery fees + first-mile fees” for each ASIN. Eliminate “high-cost, low-profit” ASINs and focus on high-value-for-money categories.
In short, reducing FBA costs isn’t about “single-point optimization,” but rather “full-chain collaboration.” From accurate forecasting during stocking, to cost balancing during logistics, to faster turnover after warehousing, every link requires dynamic adjustments based on data to minimize costs and maximize profits.
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