Once you start to get the ball rolling with your Amazon FBA sales, you’ll notice these expenses that are tapping into your profit margin.
And one expense you cannot avoid is the cost of shipping. Whether you are an Amazon FBA or FBM seller, shipping will hit your bottom line.
So let’s cover some ways you can minimize your shipping costs, and get you to really start padding your income…
Amazon FBA, All-The-Way!
Electing to sell on Amazon FBA will greatly reduce your shipping costs. That’s because you reap the benefit of Amazon’s amazing discount with UPS.
If you’re not familiar with what FBA entails, you can check out my article about FBM vs. FBA.
Basically, when you choose Amazon FBA you ship all of your products to Amazon and then they ship them to the buyers as each purchase is made.
Take for example a product that you have 50 units of. If you sold Amazon FBA you would send one bulk shipment to Amazon and that’s it. When your product sells Amazon picks, packs, and ships it. (We just shipped a 30 pound box to Texas and it only cost us $10. If we had to ship each individual unit to all different parts of the country, not only would the shipping be more expensive but it would take more time and materials.)
With Amazon FBM, however, you would hold onto your inventory and ship each unit as it sells. And as a result, you don’t fully benefit from Amazon’s shipping discounts.
Bottom line, Amazon FBA is convenient and saves you money on shipping.
Stock Up, Ship In Bulk
As much as you want to buy product and get it out the door, it is important to make your shipments as efficient as possible. Pack your boxes to the T! (Obviously, this is geared towards those selling on Amazon FBA.)
The thing is, not many items will fit perfectly into the shipping boxes you are using. And if you want to ship one or two items at a time, you probably won’t be using up all the space in the box and not taking advantage of UPS’ billable weight terms.
In the past, UPS (Amazon’s FBA courier) would charge you based on shipping weight. However, UPS recently changed their pricing to something called billable weight. While this does take weight into consideration, the major factor is the box’s dimensions.
You’ll soon find that shipping a box that is 20x20x20 with 20 lbs in it, versus 20x20x20 with 45 lbs in it is not a huge price difference. So fill those boxes up!
Caution: Just don’t go over 50 lbs. Amazon does not allow you to ship boxes over 50 lbs if you are sending multiple UPCs. It’s not a problem if you are shipping 60 lbs of one unit, but any time you mix SKUs it’s a no-no. Don’t test them. They can reject your shipment!
Inventory Placement Service (IPS)
When you setup your Amazon Seller’s Account, your default shipping setting will be Distributed Inventory Placement. Using this option causes your shipments to often be broken up and racks up the cost of shipping. (Less efficient shipments as we touched on already.)
However, if you go into your settings you can change your shipping settings to Inventory Placement Service. This will allow you to ship all of your products to ONE, maximum TWO warehouses if you are shipping oversized products too. Hallelujah!
What’s the catch?
Amazon obviously charges a fee for this service. For standard sized products, pricing will start at $.30 per unit and go up to $1.30/unit for oversized items. Below is the link to the charges. (Keep in mind that these fees are taken out of your disbursements and are not factored into your shipping charges that are displayed when you print your shipping labels.)
In addition to fees, there’s one other catch with IPS. Unfortunately, using IPS means that your inventory will take a lot longer to be received and listed. That’s because IPS makes you ship all of your product to one warehouse and then Amazon breaks up that shipment and sends it to different FBA warehouses all over the country. (Hence, the fees charged.)
Due to this, Nessa and I go back and forth between using IPS or Distributed Inventory Placement. For us, we simply consider if the savings is worth the longer receiving times. Now, if you want to give it a shot…
How do you set this up?
- From your seller’s dashboard, scroll over “settings” in the upper right hand corner.
- A drop down menu will open and you should see “Fulfillment By Amazon” at the very bottom. Click on that.
- There you will see “Inbound Settings.” And under that, “Inventory Placement Option.”
- Click edit on the right hand side and simply select “Inventory Placement Service.”
Now every time you process a shipment, it will all go to the same FBA warehouse! Woohoo!
Find Your Free Box Source
Last, but certainly not least, are the cost of boxes. While shipping can certainly cost quite a bit in it of itself, the actual materials we use to pack the goods can add on up. Who would think cardboard would be so expensive?
When Nessa and I first got started, we began hoarding boxes. Anywhere we saw a box, we took it. And then, we realized that we started to have a heaping amounts of different boxes and they were TAKING OVER our 400 square foot apartment.
That’s when we decided to just eat the cost and buy them on demand from our local Home Depot. The boxes are sturdy and pretty inexpensive, not to mention that we don’t have to store them in our studio. But, it adds up. With our steady flow of inventory, we found ourselves spending $20-$40/week on boxes. That’s $80-$160/month of profit straight out the door.
Then, a friend told us how she contacted the local Skechers retailer and worked out an agreement where she can go and pick up their broken down boxes a couple of times a week. Although we haven’t done this yet, it is something that we are just about to add to our expense-saving activities.
Right now, we’re looking for a local store that gets a steady flow of large, sturdy boxes. Also, it’s very important that you avoid getting boxes from grocery stores or any places that involve food, as there could be various creepy crawlies lingering around. And you certainly don’t want that contaminating your products. We’ll keep you posted on our box source when we “land” the deal.
So, where are you going to cut your expenses?