Navigating amazon’s fees – How do agencies optimise for profitability?

As an Amazon agency, we help sellers navigate Amazon’s complex fee structure while maximising profitability. Amazon’s fees significantly impact a seller’s bottom line, making understanding and optimising these costs crucial. The Amazon fee structure must be understood before developing optimisation strategies. As an Amazon agency, we break down these fees into several categories:

1. Referral fees – These are percentage-based fees that vary by product category.
2. Fulfillment fees – For FBA (Fulfillment by Amazon) sellers, these fees cover picking, packing, and shipping.
3. Storage fees – Monthly and long-term storage fees for inventory stored in Amazon’s warehouses.
4. Advertising costs – While not directly fee, advertising expenses impact profitability.
5. Account fees – Monthly fees for Professional Seller accounts.
6. Optional service fees – Costs for additional services like gift wrapping or FBA Label Service.

Let’s explore how Amazon agencies help sellers optimise for each fee category using this framework.

Optimising referral fees – Referral fees are unavoidable, but there are strategies to minimise their impact:

Category optimisation – Some products may fit into multiple categories with different referral fee rates. Amazon agencies analyse product attributes to determine if a lower-fee category is appropriate while ensuring compliance with Amazon’s category definitions.

Bundling strategies – By creating product bundles, sellers sometimes shift into a category with lower referral fees. For example, bundling a high-fee item with accessories might allow categorisation into a lower-fee category.

Mastering FBA fees

For FBA sellers, fulfilment fees often represent a high cost. Here’s how Amazon agencies help optimise these fees:

Product dimensions and weight

Accurate product dimensions and weight are crucial, as overestimating leads to higher fees. Amazon agencies often recommend:

• Regular audits of product measurements
• Challenging Amazon’s measurements if discrepancies are found
• Redesigning packaging to minimise size and weight where possible

FBA vs. FBM Analysis

Not all products are suited for FBA. Amazon agencies conduct detailed analyses to determine whether Fulfillment by Merchant (FBM) might be more cost-effective for certain products, especially:

• Large, heavy items with high fulfilment fees
• Slow-moving inventory that may incur long-term storage fees
• Products with thin margins that can’t absorb FBA costs

Inventory placement strategies

For sellers using FBA, strategically choosing inventory placement reduces fees. This might involve:

• Utilising inventory placement services to reduce cross-country shipping costs
• Optimising for regional fulfilment to reduce shipping zones and associated fees

Minimising storage fees

Storage fees quickly eat into profits, especially for slow-moving inventory. Here’s how Amazon agencies address this:

Inventory forecasting – Accurate inventory forecasting is crucial to avoid overstocking. amazon agency uses advanced tools and historical data analysis to predict demand and optimise inventory levels.

Seasonal inventory management – For products with seasonal demand, agencies help sellers plan for:

• Ramping up inventory before peak seasons to avoid stockouts
• Reducing inventory after peak seasons to minimise storage fees
• Long-Term Storage Fee Avoidance – To avoid hefty long-term storage fees, agencies implement strategies such as:
• Regular inventory age monitoring
• Implementing automated repricing for older inventory
• Creating removal orders for items approaching the long-term storage fee threshold

Strategic keyword targeting – Agencies focus on identifying high-converting keywords to ensure ad spending is directed towards terms most likely to result in sales.

Dayparting and scheduling – By analysing when ads perform best, agencies schedule campaigns during peak performance times, optimising ad spend efficiency.

With the right strategies and expertise, sellers can effectively navigate these costs and build thriving businesses on the world’s largest e-commerce platform.