3 Ways to Boost Your Margins on FBA

3 Ways to Boost Your Margins on FBA

Amazon FBA may be a great way to speed up your supply chain and ensure that every order is fulfilled quickly. In fact, the benefits of FBA have proven to be so effective that when Amazon’s CEO Jeff Bezos reported to shareholders, he said “third-party sellers are kicking our first party butt. Badly.”

In 2018, 58% of sales on Amazon were products sold by third-party sellers. While third-party sellers make up the majority of the marketplace, margins on FBA tend to be low, making the decision to sell on Amazon that much more difficult.

But there is good news! Many third-party sellers are unaware of ways with which they can optimize their supply chain logistics and ensure better margins for themselves. The experts at GETIDA have discovered practical ways to secure your bottom line, and have decided to share five tips with us.

3 Tips to Boost Your Margins Using Amazon Fulfillment:

  1. Ensure you’re claiming for discrepancies!

The number one area where sellers lose money is FBA fees: The more you sell on Amazon, the more Amazon fees you will incur. Amazon FBA fees are the largest aggregate expense an online retailer will have selling on Amazon. There are over 20 different types of fees that a seller could pay and each of them requires oversight. The rate of discrepancies amounts to approximately 3% of your annual revenue, meaning you could be losing thousands of Dollars yearly in unclaimed reimbursements

There are two types of discrepancies that can occur with Amazon FBA fees: The first type is transactional, i.e. discrepancies with charging; the second type is physical, i.e. something relating to an actual unit.

Amazon will identify and reimburse for discrepancies on their own about a third of the time. They created a system of detailed reports, a claims department, and an 18-month look back period, in order for retailers to identify and claim the remaining ~66% of the discrepancies on their own.  

Transactional Discrepancies

Transactional discrepancies are based on incorrect charges of fees. For example, there are multiple fees that are dependent on the dimensions of your products. One such fee is the Amazon Fulfillment Fee, which is entirely based on the weight and dimensions of your packaged product.

Amazon does not manually measure your packaging. Instead, they utilize their own system to measure your products, so even a loose piece of tape can alter the dimensions they see. This can result in extra costs incurred on the FBA seller. Inputting the correct weights and dimensions of the boxes and/or pallets being sent is essential for making sure you are getting charged the right fees. These errors can also affect long-term storage fees.
The best way to begin working on correcting any issues in Amazon’s measuring is to have your own record of the correct dimensions of all SKUs. You can use this free template to start tracking packaging dimensions now.

Physical Discrepancies

As part of their FBA policies, Amazon takes responsibility of the entire fulfillment process. Auditing the movement of your inventory over time means finding times where Amazon may have lost, damaged, or disposed of your inventory. Amazon will reimburse sellers when they discover the mistake, either on their own, or through a claim filed by or on behalf of the seller.

For example, a physical discrepancy a seller may encounter is that of accidental disposal of their inventory as a result of an accident during incorrect picking processes in an Amazon FBA center. As they improve their processes, the discrepancy rate will be reduced. Until then, there are chances that your inventory can accidentally be disposed of without your permission.

As Amazon will often reimburse the retail cost of these physical discrepancies, there is a good chance you could raise your bottom line just by identifying these types of physical discrepancies.

2.  Check all of your returns & removals

There are only three instances within the FBA cycle in which you can personally ensure that the status of your inventory is accurate. One of those times is when you receive returns or removals from an FBA warehouse.

When you receive inventory from Amazon, you should go through it and ensure that what you received was what you were expecting, and as Amazon categorized it. When a customer returns a product, they need to provide a reason. If they claimed the product was damaged, there was a missing piece, etc., then make sure that correlates with the inventory shipped back to you.

You may discover inaccuracies in the description of return, you may find that you were sent a product that isn’t actually something you sell, or worse, that the number of items you were supposed to be receiving is inaccurate. Finding these discrepancies can result in the seller being eligible to file a claim and be reimbursed by Amazon. In fact, it can often be more profitable for a seller to do this process and file claims, than disposing of the inventory.

3. Package Smarter:

Sellers are being charged for the way they ship their item, in its packaging. Amazon often uses the example of a ball to illustrate how they measure, and ultimately charge, on dimensions. One seller may be sending an inflated ball while the other may send the same ball, but deflated. These two sellers will pay a different fee for the same exact item.

Most importantly, remember that many of Amazon’s fulfillment fees are based on weight and dimensions. Not only will better packaging save you money, it will help the environment, too!

Hannah Kestenbaum, the author of this blog post, is CMO of GETIDA, the leader in Amazon Reimbursements services.