How to Reduce Amazon FBA Fees in 2024
Amazon’s global marketplace offers sellers unparalleled access to millions of customers worldwide. However, selling on Amazon can become expensive, particularly if you use the Fulfillment by Amazon (FBA) service. In fact, according to studies, about one-third of the money you make selling on Amazon goes towards fees. Managing these fees is critical to maximize your profits and ensure long-term business success.
This guide will break down the primary fees affecting sellers' profits and provide actionable strategies to reduce FBA fees in 2024.
Key Costs Impacting Amazon Sellers
The main fees impacting your Amazon business include:
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Fulfillment Fees: Charges for picking, packing, and shipping products to customers.
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Referral Fees: A percentage of each item’s sale price charged by Amazon.
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Storage Fees: Monthly fees for storing products in Amazon's warehouses.
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Advertising Costs: Expenses for promoting your products on Amazon's platform.
Let’s explore each of these fees in detail and outline strategies for reducing them.
1. Reducing Amazon Fulfillment Fees
Fulfillment fees are a significant cost factor for Amazon sellers. Starting February 5, 2024, Amazon will introduce changes to its size tiers and fulfillment fees:
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Size Tiers:
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The small standard-size tier will now be measured in 2-ounce intervals.
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The large standard-size tier (up to 20 lbs) will be measured in 4-ounce intervals.
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The existing size tiers (small, medium, large, and special oversize) will be replaced by "large bulky" and "extra-large" size tiers with new weight and dimension definitions.
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Fee Calculation:
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For large standard, large bulky, and extra-large items, fees will be calculated based on the greater of unit weight or dimensional weight (excluding extra-large items over 150 lbs).
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For small standard-size and extra-large items over 150 lbs, fees are based solely on unit weight.
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Peak and Non-Peak Fulfillment Fees:
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During the peak period (October 15, 2024 - January 14, 2025), fulfillment fees will increase.
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For example, the fulfillment fee for a small standard-size item weighing 8 to 10 ounces will increase from $3.43 (non-peak) to $3.64 (peak).
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Plan your inventory and shipping schedules around these peak periods to minimize costs.
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New Hack: Utilize Amazon's Ships in Product Packaging (SIPP) program starting February 5, 2024, to receive discounts on fulfillment fees. Products that meet SIPP guidelines and ship in their original packaging can automatically receive a discounted fulfillment fee. This is especially useful for reducing costs on small and large standard-size items.
By keeping track of these updates, you can better manage your fulfillment costs and enhance your profitability.
2. Reducing Amazon Referral Fees
The referral fee is the largest portion of Amazon's fees, accounting for about 15% of your product's sale price in most categories. However, understanding how referral fees work can help you find ways to reduce them.
Strategies to Lower Referral Fees
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Sell in Niche Categories: Certain categories have lower referral fees. While most categories charge a 15% referral fee, some (e.g., jewelry) can charge up to 20%. Choosing categories with lower referral fees can enhance your profitability.
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Enroll in the Brand Referral Bonus Program: Drive external traffic to your listings (e.g., using Google Ads) to receive a bonus based on the product category and sales price. Bonus rates vary, such as 11% for clothing or 10% for the portion of a furniture item's price up to $200. The bonus is typically credited after a two-month waiting period to account for sales adjustments or returns. For example, if you sell a $100 backpack with a 14% referral fee, a 7% bonus could offset a future referral fee, increasing your net profit. Check the Brand Referral Bonus Help page in Seller Central for specific category rates.
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Be Mindful of Promotions: Referral fees are calculated based on the final sale price after any discounts. For example, if your product sells for $39.99 but you apply a promotion that reduces the sale price to $29.99, the referral fee will be 15% of $29.99.
3. Cutting Amazon Storage Fees
Amazon charges storage fees based on the volume your products occupy in their warehouses. These fees can quickly accumulate, especially for slow-moving inventory or during peak seasons.
2024 Storage Fee Changes:
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Starting in Q4 (October 15, 2024 - January 14, 2025), Amazon will apply holiday peak storage fees, which are significantly higher than non-peak fees. Plan your inventory levels to avoid these inflated costs.
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Amazon has introduced a Low-Inventory-Level Fee starting April 1, 2024, which applies to products with consistently low inventory relative to customer demand. If your historical days of supply are below 28 days, you may incur additional fees.
Strategies to Reduce Storage Fees
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Manage Inventory Efficiently: Use Amazon's Inventory Performance Index (IPI) to maintain a 60-90 day inventory level and avoid overstocking.
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Use Amazon’s FBA Removal Order Service: Clear out slow-moving inventory before it incurs long-term storage fees. This strategy can save costs on products approaching the 365-day storage threshold.
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Understand Seasonal Storage Fees: Avoid storing excess inventory during the holiday peak period (October - December). Use historical data to forecast sales and adjust stock levels accordingly.
Hack: Participate in Amazon's Low-Price FBA Program for products priced under $10, as it offers $0.77 lower fulfillment rates than standard FBA rates, helping to further reduce costs.
Conclusion
Reducing Amazon FBA fees in 2024 is essential for boosting profitability and staying competitive. Regularly audit your fees using Amazon's tools, stay informed about policy changes, and apply the best practices discussed in this guide. This proactive approach will help you keep more money in your pocket and reinvest in growing your Amazon business.
If you need personalized guidance or help fine-tuning your strategies, Superfuel AI can assist. Our AI-powered assistant analyzes 36+ key Amazon metrics to identify and address the root causes of sales fluctuations, helping you optimize your storefront and boost sales. Reach out to us at [email protected].
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Ben Mathew, Amazon Expert
Ben Mathew is a co-founder at Superfuel, a sales assistant for Amazon sellers. In the past, Ben and his team of e-commerce specialists and software engineers have launched 40+ new brands on Amazon, taking them from zero to bestsellers. In his free time, he is either learning from other top sellers or encouraging his 3 daughters in their love for reading. He is reachable at ben [at] superfuel.io.
FAQs
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What are the biggest Amazon fees impacting sellers in 2024?
- The most significant fees include fulfillment fees, referral fees, storage fees (now including low-inventory-level fees), and advertising costs.
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How can I lower my Amazon fulfillment fees?
- Utilize SIPP discounts, optimize product size and weight, bundle products, use Amazon's FBA fee calculator to estimate costs, and regularly audit product measurements for overcharges.
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Are there ways to reduce referral fees on Amazon?
- Yes, sell in categories with lower referral fees, and enroll in Amazon's Brand Referral Bonus Program to earn a bonus on referral fees by driving external traffic to your listings.
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How do I minimize storage fees?
- Avoid overstocking, use removal orders for slow-moving inventory, run promotions to clear out excess stock, and utilize Amazon's IPI score to track inventory health. Also, be mindful of the new Low-Inventory-Level Fee coming into effect in 2024.
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What’s the best way to cut advertising costs on Amazon?
- Set a target ACoS, use high-traffic, low-competition keywords, optimize your product listings, and leverage free marketing strategies like social media to supplement paid advertising.