The more you sell on Amazon, the more Amazon fees you will incur. The largest aggregate expense an online retailer will have selling on Amazon are Amazon FBA fees. There are over 20 different types of fees that a seller could pay and each of them require monitoring. Because Amazon sellers are busy growing their business, these fees can really monopolize their time and affect their profit margins.
While it may be difficult to truly conceptualize how many products are being sold a day, Amazon reportedly fulfills 35 orders every second, 1.6 million a day, and about 608 million a year, making Amazon one of the largest fulfillment services in the world. The by-product of this type of movement is that there will be mistakes along their massive supply chain.
There are two types of discrepancies that can occur vis-a-vis 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.
We discovered that the rate of discrepancies amounts to approximately 3% of your annual revenue, meaning you could be losing thousands of dollars yearly in unclaimed reimbursements.
Here is a list of the 5 the most common ways you’re probably paying too much in FBA fees:
Pick and Pack Fees
Another fee you’ll encounter when selling FBA is the fulfillment fee, which is based on the weight and dimensions of the product you’re selling.
Let’s say you initially set your product to be shipped as a small standard size product for a fee of $2.41. However, one time you send new stock of that product to FBA and, for whatever reason, you ship the units in a different box. Amazon measures it, and begins charging you for a large standard size package, which is $4.71 per shipment. You see that the new box was a mistake, and you immediately revert to the small standard size to avoid this extra charge. The problem is, Amazon won’t necessarily remeasure this shipment, and if they don’t, now you’re paying 95% more on every sale and the only way to revert back to your lower fees is to file a claim.
As a side note, this is why we think you should always keep track of the weight and dimensions of each FNSKU before it leaves your warehouse.
Long Term Storage Fees
This past year Amazon began charging more for long-term storage of products. Regardless of the size of your product, you will be charged a minimum of $.50 per unit per month for a product that’s been in an FBA warehouse for more than 365 days. The bigger the product, the more you will be charged. With long-term storage fees currently at $3.45 per cubic foot per month, any discrepancy in the dimensions of your products can cost you thousands of dollars. Just as in the example above, a mismeasured package can be the difference between profit and loss on your FBA sales.
Refunded but Not Returned
You shipped an item to Amazon warehouse and they fulfilled the order to a customer. That customer decides to return the product and Amazon notates your account with a refund. They go ahead and wait to receive the item from the customer until they add it back to your inventory count. Since customer service is Amazon’s responsibility when you use the FBA model, they are responsible for those returns to come back to their warehouse. After some time, if this item does not return from the customer or does get returned but lost in Amazon’s return process, then it is eligible for reimbursement.
Accidental disposal of your inventory is 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.
We also suggest being preemptive in making sure any unfulfillable items are sent back to a receiving warehouse by opting into an automated function Amazon provides on seller central.
Each product category comes with its own referral fee and they are percentage based. But what happens if the category is wrong or gets changed without your permission?
Let’s say you sell watches. You registered to sell a $75 smart watch in the Watches product category, which has a 16% referral fee. Now let’s say that someone selling the same watch comes onto your listing and changes the category to Jewelry. Now all of a sudden your referral fee is 20%, meaning you’re now wrongly being charged an extra 4% on each sale.
Not only are discrepancies like these difficult to identify, the claims process is incredibly cumbersome and overwhelming. Having a service like GETIDA keeping an eye out for those discrepancies and managing the claims process is key to ensuring that your profit margins are as high as possible.