Amazon’s Fulfillment Centers place your items on any empty shelf, making the process seems like chaos
FBA Business is very tricky and you have to understand it all before you jump all in.
Let's discuss how amazon sorts the items that you send to their warehouse:
Here is a breakdown of the receiving process:
A case-packed box of toys arrives at the Amazon fulfillment center
Each individual item is removed from the box
Items are placed wherever there’s available space, with no rhyme or reason
Both the item and the shelf barcodes are scanned and a relationship is created
The system can now instantly identify which shelf the SKU is at.
With such a random inventory management system, it does make more sense that more free space can be created for smaller items than bigger ones, and that's why it's cheaper to fulfill smaller items.
The Research of a Private Label Product
So you found a private label product that has a fancy large package, The first thing you need to do before you start buying the product is to check its actual weight, and its package size.
You need to check if you can get the package size to be within its weight tier,
Let's have a look at Amazon FBA fees:
If your item weighs 0.75lb, It's a smart move to see if it can fit in its weight tier,
a 0.75lb item will fall into the (6-12oz) tier as seen here:
and its fulfillment fee is $3.96
But we have to check its size, because if the size is bigger than a certain threshold, Amazon starts calculating dimensional weight instead.
How Amazon calculates the Weight of a Product
The Maximum of either the actual weight or the dimensional weight. dimensional weight is calculated as (length x width x height) divided by 139.
Here is ASIN Amazon FBA Calculator for estimating how much fulfillment fees would cost (for existing and uncreated ASINs):
Example:
So if you have a 0.75 lbs item with dimensions of (L x W x H) (4 x 3 x 8) in, from the table above, the FBA fees are supposed to be $3.96 (12-16 oz tier)
But a 0.75 lbs item with dimensions (L x W x H) of (5 x 3 x12) is calculated as:
5 x 3 x 12 / 139 = 1.3 lbs
And the FBA fees for this item are $5.4
So, if you can manage to fit the item in a package of a maximum of 16oz, we can have the following benefits:
FBA fees will be reduced from $5.4 to $3.96 with $1.44 savings
Shipping to Amazon will be reduced by shipping price * 0.6 lb around with savings ranging from $0.5 to $1.5
Savings on the materials for about $0.1
So, with this little modification, we can save from ~ $2 to $3.5 on each item!
Imagine that this item sells 1000pcs a month, that's at least $2000 savings each month.
Put these numbers in the calculator and here are the results:
The unoptimized package gave us $2,696 monthly profit.
While the optimized package gave us $4,756 monthly profit!
Plus, here are other business benefits:
You can fit more items in one box.
You have more control over the price, you can spend more on Ads.
You can create more discounts, promotions, or deals.
You have a price edge over competitors.
Bags and Odd-Shaped Packages
in short, stay away from such packaging types, and stay with regular boxed packages.
When you send items packed in bags, the problem is Amazon will calculate the size based on the biggest bagged item you had in that shipment, so assuming you sent 100 items well packed in bag packaging type, and one of them was full of air or looked a little odd, the system will calculate the size based on that one odd item, and your fees will be higher for the rest of the 99 items.
For Odd shaped items, for example, a triangle or circular package size will be converted as if it was a square or a rectangle box, so you are losing on the extra size Amazon added to your smaller package.