Costs on Amazon are constantly creeping up, and 2023 is seeming some of the biggest hikes in costs from Amazon that sellers have ever seen.
If you’re not focusing on lowering your costs this year, your margins will be taking a huge hit, to the point where your business's profitability can be at risk.
Storage, removal fees, and fulfillment costs are all going up.
If you want to do well this year, you need to take action and mitigate costs wherever possible.
In this post, we’ll go over some things you can do to lower your costs and get them under control.
Start Dialing in Your Supply Chain and Logistics
Sea freight is seeing big discounts
The one place sellers can see a bit of relief in a world of rising costs is in sea freight.
Prices have dropped to below pre-pandemic levels, which is crazy considering containers were around $15,000 shipped last year, down to below $1,500 currently.
If you want to take advantage of these shipping rates, it could be a good idea to get a decent amount of inventory early this year in anticipation of rates rising throughout the year, although it’s possible it does stay flat.
Figure the lowest cost way to get your items into Amazon’s warehouses
There are many ways to get your items into Amazon’s warehouses.
Let’s go over some of the lower-cost options sellers can utilize.
Have a 3PL / Amazon Prep Service
Many sellers utilize a Third Party Logistics company to feed their products from a warehouse into Amazon’s FBA warehouses.
One way to make savings here is to ensure that your manufacturer prepares your products for Amazon as much as possible so that the only thing your 3PL needs to do is slap an Amazon warehouse label on your boxes, stretch wrap them, and send them off to Amazon.
This will minimize the amount of work the 3PL needs to do and will lower the amount they charge you.
Send directly from your manufacturer to Amazon FBA warehouses
You can ship your products from your manufacturer overseas directly into Amazon FBA warehouses, eliminating the need for a 3PL. However, this option is less popular these days due to Amazon’s constant shifting of warehouse product limits and the need for you to have a very high-turnover, high-selling product inventory even to be able to use this option.
The process here is simple, you prepare a shipment for Amazon as you would if you were sending the products from within America. Still, you use your manufacturer's address as the origin address, and then Amazon will let you know where to send it.
After that, coordinate with your shipping agent, forwarder, or whatever you use for freight shipments and get the pallets sent over to Amazon as best you can.
Your manufacturer will have to get the boxes prepped and ready for an Amazon FBA warehouse, so they’ll need to do the box labeling and the pallet labeling according to Amazon’s standards. However, this is fine as most will know how to accomplish this task.
Store products yourself and ship them to Amazon
This can be the low-cost option if you have a way to store your products within your own house, warehouse, or some storage facility.
Be warned, however, that most product pickups for Amazon FBA warehouses will require a forklift, so this option isn’t that great for most sellers as you would have to be a fully functioning and mature eCommerce brand to have this kind of infrastructure available to you.
When you can figure out the cheapest and most efficient way to get your products from your manufacturer into Amazon FBA warehouses, you stand to save a lot of money, as anything extra you need after your products leave the factory will cost a lot more when you can usually get 99% of your products’ preparation for Amazon done at the factory.
Watch out for Amazon’s changing 2023 Costs
Amazon is making a slew of cost increases, directly affecting sellers’ potential profits.
Be aware of the new changes so you don’t get a surprise hit to your bottom line.
You can see all of the changes on Amazon’s main page for fee changes in 2023, but let’s go over some highlights:
Some of Amazon’s cost changes in 2023 (so far):
Apparel now has a dimensional weight consideration
If you’re unfamiliar with dimensional weight, it’s a number created with a formula applied to the volume of your product.
In Amazon’s case, they divide your product's L x W x H and divide that number by 139, a standard number used for dimensional weight calculations.
The resulting number will typically be pretty close to the actual weight of your product, and carriers will compare the 2 numbers and charge you for the higher of the two.
The goal here is obvious: incentivizing sellers to get their apparel into more compact shipping containers to cut down on the volume taken up in delivery trucks.
If you sell apparel and the boxes you ship out are on the big side, consider shrinking your packaging as much as possible, or you’ll be spending more per unit to ship out in 2023.
Small and Light Threshold now $12, raised from $10
You can take advantage of this if your product is on the smaller side, but you couldn’t justify offering it at such a low price point.
While this won’t affect many sellers, if your product was around $13-$15, you can potentially offer it for $12 and not lose any profit due to the lower fulfillment fees from Amazon now that your product qualifies as “Small and Light.”
Check the Small and Light Page on Amazon (you must be signed in to Seller Central to see it) and see how
Peak storage fees for off and on-season will go up
Even though this is already known by most sellers, it bears repeating, don’t let your inventory sit too long at Amazon.
Storage fees are going up across the board. You might want to consider keeping your product out of Amazon warehouses and keep only 30-90 days worth of inventory at FBA warehouses.
Audit and Manage your PPC Spend Carefully
Amazon will lean heavily into PPC this year, just like they have been doing for the past couple of years.
Since everyone feels like they have to advertise, that automatically raises bids across the board.
Because of this, you must really watch your spend, what keywords you’re targeting, and have advertising campaigns with absolutely no waste in them.
To accomplish this:
- Use negative keywords to not show up on irrelevant searches
- Only bid on keywords that perform and generate sales
- Keep as much separation as you can manage between the keywords you spend on, this allows you to more precisely adjust how you spend on each keyword
- Check in on your keywords at least weekly. If you leave your campaigns unchecked too long, the spend goes up and performance goes down.
PPC will be the key to boosting sales this year, but it will also hurt your business if you let the spend go wild.
It’s all about relevance and checking in.
If you can find a balance between your spend, only bidding on very relevant search terms, and keeping tabs on your advertising campaigns, you should be ahead of most people when it comes to advertising.
Conclusion
Amazon is not a business where you can lack efficiency anymore.
Existing costs are rising, and new costs are being added at an alarming rate.
With all this in mind, however, Amazon is still the best place to be for sellers.
The winners of 2023 will be the most efficient sellers who can get their product into Amazon without incurring too much cost, have the leanest, most efficient PPC campaigns, and build their product catalog with how costs affect profit margins in mind.
