It’s not uncommon to come across challenges as a business owner. The same can be said for an Amazon FBA seller. In fact, we believe the problems faced by Amazon sellers are unique. Not only do they slow down business, but they could get you in trouble with the platform - or even go as far as get you kicked off the program.
Every business owner deserves to have the right resources when it comes to dealing with any hurdles that come along the way. Keep reading to learn how you can deal with problems faced by Amazon sellers.
Product Returns and Refunds
Dealing with unsatisfied customers - or ones that changed their minds can be difficult. While returns and refunds can have a financial impact on your business, they’re also processed quite differently in different businesses. And when it comes to the Amazon platform, dealing with returns and refunds can be quite a tedious and time-consuming process, given its scale.
High Amazon Fees
Amazon charges medium to high Amazon FBA fees for its services at every step of the process. These charges range from one-time to regular. As these charges pile up, some Amazon FBA sellers have even recorded up to 53% of their entire revenue going to Amazon in the form of various fees and charges. Even for the FBM or Fulfillment-by-merchant model, sellers have had their Amazon-related costs as high as 27% only for the product listing and any search ads they may have run.
First-off, Amazon charges 39.99 for setting up an Amazon seller account for ‘Professional Sellers’. This is a recurring monthly payment irrespective of the number of products and volume of sales. Additionally, merchants must also pay the referral fee or commonly called the commission. This ranges anywhere from 6-45% depending on the retail price and the product category. The referral fee is bound by the ‘Minimum Referral Fee’ which sets the lower threshold for the commission in each category. The Minimum Referral Fee is typically 0-2% depending on the category.
The biggest contributor to the costs is by far the fulfillment fees under the Amazon FBA program. Amazon clubs the picking, packing, and shipping costs as one and it is to be paid for by the merchants. These costs can range anywhere from $2 to $6.8 in the US depending on the size, weight, and category of the products. Additionally, a lot of sellers do fall prey to the storage fees if their inventory is not liquidating quickly enough. Amazon normally charges $.75 per cubic foot for most parts of the year but during the October-December period, the charge is around $2.4 per cubic foot of storage space used. In order to keep up with the demand and the competition during this period, sellers end up paying exorbitant amounts towards storage that hampers their profitability.
Consistency in Storage Fee
Having one’s own warehouse prevents sellers from any fluctuations in storage fees due to seasonality or their previous inventory performance, which Amazon assesses using the IPI.
Packaging Restrictions
Amazon has strict guidelines on how products must be sent to the Amazon Fulfillment Centers. The company has over the years suggested certain box sizes and deviations from them could either slow down the process or worse, may render the entire consignment improper. In the latter case, the items are sent back to the merchant and all costs associated with the activities completed previously are borne by the merchants. The charges for both the delivery and the return from the Amazon warehouse are paid for by the Amazon FBA seller. This also poses a major opportunity cost since the inventory stuck in transit/inspection could have been sold on other channels. There are various other reasons why Amazon could reject shipments such as unaffiliated shipping partners, failing to meet Amazon pallet requirements, cancellation due to delay, etc.
Both FBA and FBM merchants are bound by policies that dictate their packaging process. The packaging process typically consists of two pillars, the labeling and the actual packaging of individual products and the consignments sent out to the Amazon Fulfillment Centers. Amazon expects each merchant to follow international labeling standards for their manufacturing labels, Amazon labels (such as FNSKU), and brand owner labeling (to prevent counterfeiting of high-value items). Amazon sellers also have a choice to let Amazon produce labels for their individual product units. However, the FBA Label Service may turn out to be costly for low-margin products as Amazon charges about £0.15 or $0.20 for each unit it generates and places a label on.
Once the merchant has taken care of the labeling and the barcodes, the next step is to adhere to all the packaging requirements for selling on the Amazon platform. Amazon has rigid guidelines around loose products, sets, boxed units, polybagged units, and case-packed products where each box with the same product must have the same number of units and the same SKUs. This ends up adding to the operational complexity and the costs associated with the fulfillment process.
Merchants do also have the alternate FBA Prep Service, where Amazon prepares the consignments to be sent to the Fulfillment Centers and properly packages the products. However, the cost of this service can range anywhere from $0.95 to $3 and isn’t available for each category of product. Similarly, merchants can also choose to buy the recommended packaging material from providers of Amazon Preferred Packaging, but, this again isn’t cheap and may not be suitable for lower margin products.
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