June 25, 2024 • 37 mins
What if you could slash your Amazon FBA fees by simply redesigning your products? Join us on this Tactics Tuesday at Brand Fortress HQ, where we dive into the nitty-gritty of reducing those burdensome fees that eat into your margins. Learn from Mike's eye-opening case study on pool nets, revealing how modular designs can significantly cut down fulfillment costs. We also share valuable insights on collaborating with innovative manufacturers and sourcing creative packaging solutions from platforms like Upwork.
Ever wondered how much your product packaging affects your Amazon FBA fees? This episode sheds light on real-world scenarios, like the hidden costs of extra space in poly bags and the complexities of Amazon's measurement inconsistencies. Tune in for practical strategies to optimize your packaging, from switching to boxes to better understanding dimensional weight. By rethinking your packaging approach, you can make impactful changes that boost profitability.
We're not stopping there; we also break down various fulfillment options to help you find the best fit for your business. Compare SkewDrop, Walmart Fulfillment Services (WFS), and third-party logistics (3PL) providers to understand their benefits and drawbacks. Find out how to leverage these services for reduced shipping rates and improved inventory control. Whether you're looking to sidestep high Amazon fees or seeking a reliable backup, this episode equips you with actionable strategies to enhance your financial performance.
🚀 Transform your brand on Amazon by building a powerful customer list with the After Purchase Funnel Blueprint course. Click here to get the full course for free.
➡️ Ready to go deeper into your Amazon FBA journey to accelerate your success? Get your hands on ALL of the Brand Fortress HQ resources, mentorship, and knowledge base by visiting us at BrandFortressHQ.com
⭐️ Want to help our show grow so we can continue bringing you the very best of guests and actionable content for your Amazon FBA business? We'd greatly appreciate if you took two minutes to give us a five star rating and review. Thank you!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome everyone to a Brand Fortress HQ podcast.
On this Tactics Tuesday episode, we're going to be discussing
how to beat the ridiculous FBAfees that we've been getting
from Amazon.
This is something that sellersare really struggling with as
FBA fees continue to go up, andso today, what we're going to
talk about is, a lot of times,we feel like we don't have a lot
of control over those fees, andso today we're really going to
(00:24):
talk about what we can controland what we can do about those
fees, both on Amazon and alsolooking at some of the other
strategies and options that areout there.
So with that, I think, thefirst thing that I want to pass
over to you, mike, and talk alittle bit about how you guys
are tackling this with one ofyour products as far as making
it more modular in order toreduce some of your FBA fees.
Speaker 2 (00:48):
Yeah for sure.
So one of the things that mostsellers should know this.
But with Amazon, in terms ofFBA and their pricing tiers, in
terms of fulfillment, when youjump from large standard size to
oversize, there is asignificant jump in fulfillment
costs.
And you know, obviously back in15, 16, 17, you know
(01:13):
fulfillment costs really weren'tthat bad.
Amazon was pretty reasonable.
So you don't really worry aboutit a whole lot oftentimes
because your margins were good.
But now, as our margins aregetting squeezed, we have to pay
a lot more attention to that.
And as FBA fees are so muchhigher, now we started looking
at, you know, what can we do?
Because we're getting eaten ontwo ends.
So because we offer thisunlimited free replacement
warranty on all of our pooltools, we not only have the
(01:36):
fulfillment expense on the frontend when we ship the product
out to the customer, but we havethis fulfillment expense on the
back end when we're shippingout replacements.
And in the past, on all of ourpool nets, when somebody would
request a replacement, we wouldsend out an entirely new pool
net.
We wouldn't send out parts, itwas always the full unit which,
again, early on, we could dothat.
(01:57):
The fulfillment fees werereasonable and our margins were
pretty hefty and our marginswere pretty hefty.
We're moving into territory nowwhere that is just not any
longer sustainable, not only onthe front end but also on those
back end warranty replacements.
So we kind of went back to thedrawing board and said, okay,
how can we turn?
And this is specifically on ourHero products.
So some of our nets are alreadyin the standard size, but one
(02:20):
of them that was on the bubblewas our 19 inch.
We were a little bit over onthe length and width dimensions
that we could have.
So 18 inches by 14 inches isthe largest that your product
can be the packaging and stillstay within the large standard
size, which are still fairlyreasonable.
(02:41):
Fulfillment Our product was overthat it was over 18 inches.
It was more like 19 and somechange, I think.
And so we went to themanufacturer and just said we
need to get this into a packagethat's under 18 inches by 14
inches.
How can we do it?
You know, like, can we take thehandle off?
Can we?
You know what's the possibilityhere?
(03:02):
And so one of the things that'sinteresting is that the first
manufacturer essentially told uswe can't do that.
We had two differentmanufacturers that we receive
pool rakes from, or nets samedifference in the pool category
and so we went to the othermanufacturer and said, okay, how
do we do this?
Like we, we need this to happen.
And so they, you know, kind ofput their heads together and
(03:24):
they came out with a differentdesign that would allow us to
get into that packaging.
But in that process we actuallydecided all right, if we're
going to redesign the productanyways, let's just redesign it
so that the entire thing ismodular.
So it wasn't just removing thehandle and changing how we
packaged it.
We took it to that next levelto say, okay, how can we create
a product where now we can dowarranty replacements in parts
(03:48):
instead of in full units, so nowwe can send out just a net or
just a plastic rim or just ahandle, and so our warranty
replacement costs not only willbe less because we don't have to
send out the whole unit so thefulfillment is way less and the
cost of the warranty replacementis less but also just that
fulfillment fee is way less.
We're going to save almost halfof the fulfillment cost on the
(04:09):
initial shipment of that unit bymoving it to large standard
size, but we're also going tosave more than half of our fees
that we pay for warrantyreplacements by doing the same.
And so I guess that the two keys.
There is one how could youpotentially redesign your
product to get it under thatnext threshold in terms of the
shipping tier levels at Amazon?
(04:31):
But also, if you're going to bein that process, what other
design changes might you want tomake if you're going to
redesign it anyways?
And then, beyond that, if youhave a manufacturer that says
that's not possible, then Iwould find another manufacturer
who can do it, or look to find adesigner, you know, on Upwork
or something like that, and say,hey, these are the current.
(04:51):
You know, this is currentlywhat we have.
How can we redesign thisBecause there probably is a way
I can almost guarantee you,there's probably a way for most
products that you could do aredesign and get into a smaller
package.
Speaker 1 (05:03):
Yeah, I think that's a great point of just really
looking at those dimensions andthen thinking outside the box as
far as hey, can we make thismore modular?
Is there a way that we can makeit under those dimensions?
Matt, I know that recentlyyou're working with a couple of
different brands that areworking on really setting a lot
of this stuff up.
What are, or do you have, acouple of things you know really
(05:25):
setting a lot of this stuff up?
What are, or do you have, acouple of things that you look
at or considerations when you'rethinking about setting a
product up to be as efficient aspossible when it comes to FBA
fees?
Speaker 3 (05:33):
Yeah, so you mentioned thinking out of the
box and I love Mike's how hemade his product more modular.
But also it's not just theproduct itself but also the
packaging you know we had.
I worked with the brand and oneof their products is in a poly
bag and the poly bag the waythat they calculate FBA fees and
we found this out actually at aconference that we were at they
(05:55):
will hold the poly bag up andthey'll measure the poly bag,
not the product.
So if you have extra space inyour on your poly bag, if it's
vacuum sealed, that extra spacein that poly bag is getting
measured as dimensions on ofyour product.
And when we realized this andactually I got back from this
conference and I was like, well,wait a second, well, I wonder
(06:16):
if that's what's happening hereand that's why our our FBA fees
are so much higher than whatit's saying our competitors are.
And sure enough, I mean therewas about 12 inches of extra
space on that poly bag that werebeing calculated as the size of
the product.
So it's not just the productitself but it's also the
packaging that the product goesinto that plays a really, really
(06:36):
big part in what your FBA feesare.
Speaker 2 (06:38):
I can attest to that.
I'll second that because we raninto the same issue and this is
well.
It's not exactly the same issuebut essentially results in the
same thing.
We were packing in poly bagsfor quite a while and because of
the way that, first of all,Amazon's not consistent about
how they measure it, so theydon't always measure it that way
.
Some employees will, someemployees don't.
So if you ask for a remeasure,sometimes you can get that
(07:01):
smaller size because they'llmeasure it in kind of the
smallest dimension.
But the interesting thing hereis that if it's kind of hard to
describe, but if you werelooking at our rake, like you've
got the mouth of the rake andthen you've got the handle, that
comes up like this.
So if you were to measure thisway on, this was the smaller
version of our rake, the 18 inchIf you measured it straight
(07:22):
across and you measured it thisway, you would be under that 18
by 14, because it was like 17and a half by 13 and a half or
something like that.
Speaker 1 (07:31):
So for those that are listening, mike's talking about
kind of vertically thedimensions on the rake, versus
horizontally.
Speaker 2 (07:37):
Right.
So, but what's interesting isthat, or actually I should, is
that?
Or actually I should restatethat we actually we weren't, we
were a little bit over.
But if you put this into a boxthe right way, you can place it
into a box because it goesdiagonal, which is really odd.
But as soon as you change thatorientation and you put it
(07:59):
inside of a box, now all of asudden we were under the 18 by
14, same product.
We didn't actually change theproduct at all, we just put it
into a box and we changed how weput it in there and we could
get under the 18 by 14.
So the packaging does matterand sometimes just having it in
an actual package versus a polybag can make that difference.
Speaker 3 (08:18):
Yeah, the same thing happened with I give another
example heat resistant gloves.
The heat resistant gloves werepacked in a way where, if they
were hanging on a retail shelf,you could see the whole glove,
and the differentiator of theglove was that it had longer
sleeves than the typical onesthat you find on Amazon.
But when we started goingthrough and optimizing our FBA
fees and looking to see how wecould minimize those, it was the
(08:41):
simplest fix.
The only thing that we did iswe folded the gloves.
The gloves, we put them in abox that without I mean, who
cares really about seeing theglove through the box?
It's not that big of a deal,because they know what they're
going to get when they see yourlisting images.
We folded that those gloves,put them inside of a smaller box
and instantly lowered our fbafees yeah, and I think so.
Speaker 1 (09:01):
You guys brought up some great examples I do want to
just kind of circle back to,because I think that this is a
topic, even among sellers thathave been on Amazon for years,
of really understanding howthese things are calculated and,
quite frankly, how those arecalculated has changed over the
last few years as well.
So I think one of the mostimportant things to understand
(09:22):
that's already been brought upis what tier your product falls
into, based on the dimensions,and so, falling into the small
standard versus the largestandard versus oversize, the
heavyweights, whatever ithappens to be, those categories
make a huge difference.
In addition to that,understanding dimensional weight
(09:43):
.
So essentially, amazon used tojust charge based off of what
your actual weight of yourproduct is.
The problem with that issomebody gave me this example of
okay, well, if you have, let'ssay, you sell, you know, like
plastic forks, well, you couldfill up an entire truckload of
plastic forks that may only be100 pounds, where if you put
(10:06):
regular products in that, itwould be 10,000 or 50,000 pounds
or whatever it happens to be.
And so if you're a shippingcompany, if you're only charging
by weight, well, you're nowshipping that product in a semi
for, let's call it 500 bucks or$1,000 or whatever it happens to
(10:26):
be, and that's a huge loss.
And so that's why they've goneto this dimensional weight,
where they're looking at allthree of those different
dimensions, and then I think itdepends a little.
There's different calculationsthat are slightly different, for
, like UPS versus FedEx versusAmazon, every company has a
little bit different variationon it.
Amazon does not do a great jobof showing you how to do that.
(10:49):
You really have to dig into thedetails in order to find their
formula, but it is on theirwebsite, I believe.
It's like the three dimensionsmultiplied together, divided by
like 139 or something like that.
Then I'll tell you kind of whatthe dimensional weight is for
your product, and then, ofcourse, they take the best of
which one.
Everyone is higher.
So if you have a product that isvery dense, and let's say that
(11:12):
the dimensional weight for yourproduct is, you know, five
pounds, but if you put in, youknow, but it's heavy, so it
actually weighs seven pounds,well, they're going to charge
you for the seven pounds.
So just understand that they'regoing to charge you for the
seven pounds.
So just understand that they'regoing to charge you whichever
one is more in their favor.
So I think it's important tounderstand, kind of, how those
(11:36):
calculations are made, tounderstand, so that way you can
look at it and say, okay, howcan I optimize my product?
And then look at, am I close tothat next weight threshold, like
, if your product is, you know,3.1 pounds, is there a way you
can get it down to 2.9?
So that way you don't getcharged for that extra pound.
And depending on what categoryyou're in, that might be, you
know, an extra pound, might be,you know, 30 cents, or it could
(11:59):
be a couple of dollarsdifference per item.
So it it a big difference,especially if you're going from
certain categories to others, inhow much you're paying for
fulfillment through FBA.
Speaker 2 (12:14):
Yeah, it's not just dimensional adjustment.
Also, weight adjustment isdefinitely something to pay
attention to, for sure, and Ithink it's also critical to
recognize that the effects of achange like that work their way
all the way downstream.
So, like we talk aboutfulfillment because that's one
of our biggest expenses thesedays, but recognize that up the
chain there are other expensesthat are related to the
(12:37):
dimensional aspects and theweight aspects of your product.
So what's it going to cost toship it here Again,
dimensionally, if you can shrinkyour package by two inches?
Well, that could be the youknow.
Here's the thing that oftentimesI think is forgotten.
Sometimes sellers look at itand they think, well, that
little change in my packagingsize isn't really that
(12:57):
significant.
I wouldn't really be able tofit that much more in a
container.
Because they're thinking of itby percentages right, Like
that's only a 5% reduction ormaybe a 3% reduction in the size
of the package.
But the problem is, dependingon that configuration, how
you're able to actually pack thepallets and then pack the
(13:19):
actual container might changesignificantly.
So it's possible possible thata two or 3% change in your
packaging dimension in one wayor another could add 10 or 15%
to the number of units you canactually get into a container
just simply because of how itcan now be stacked on a pallet
or how the pallets can be putinto the container.
(13:40):
So don't underestimate how muchdifference there could be in
your overall costs by a verysmall change in your packaging
and or in the product itself.
Speaker 1 (13:51):
Yeah, and I would add to that I mean you can go back
and listen to the episode thatwe did with Gatita.
They did a good job ofexplaining it in the sense that
Amazon remeasures your packagingon a regular interval and so if
they decide, essentially ifthey get a bad measurement where
they add, you know, additionalinches for a wide variety you've
(14:13):
, you're aware of that changeand then also to get re to
submit for reimbursement forthat.
So once you get it corrected,you can have Amazon actually
reimburse you for that.
(14:34):
So that's the other importantthing is is that you want to
make sure that you're also havesome sort of system in place in
order to monitor the Amazon iscontinuing to measure your
product correctly.
Speaker 2 (14:45):
And making sure that you're in packaging that's easy
to know how to measure.
Yeah, because that differentialbetween the poly bag and the
box for us even though you knowin this particular case it
changed the angle and so we werebut it also gives them actual,
very concrete dimensions tomeasure when you have it in a
box versus in a poly bag.
So if you're anywhere near thedimensional requirements of one
(15:07):
tier versus another, even thoughit might be more expensive to
put it in a box, you mightactually save money that way and
save hassle, because when wewere in poly bags we were
requesting remeasures by Amazonall the time.
I mean, it was literally weeklywe were having to request
remeasures and of course youhave to do that multiple times
before you actually get theright measurement.
(15:28):
And so just put it in a box andmake it easy to measure.
Speaker 1 (15:32):
Yeah, and a couple of tools that I'd recommend too.
Is that?
So Amazon does offer and I'mgoing to put it in quotes here
their revenue tool.
It does actually give you apretty good, accurate reading on
how much your FBA should becosting you, based on your
dimensions and the weight ofyour product, and if the
product's live, you can alreadyput it in ASIN.
That's probably the most basictool.
(15:52):
And then, of course, you cankind of test some different
dimensions and say, okay, well,if I made it a little bit
shorter here, you know whatever.
And then you can look at thekind of the size categories.
And then there's other tools outthere.
They don't do anything in theoversized category, but I think
they do.
I know they do large standardsize and small standard size.
I think they do small standardsize as well.
But there's tools out there likeSoStocked, where they actually
(16:15):
have free calculators where youcan plug in like okay, here's my
, you know current size of myproduct, and then they'll make
some recommendations as far asyou know here if you can adjust
your size to this.
Here's how you save more onthat palette and here's how you
know you save more on on FBAfees.
So I haven't used them actuallyfor, you know, like inventory
(16:36):
management, necessarily, thecalculator that they have, that
they offer for free, is veryuseful, so I'll give a tip of
the hat for them for that pieceof it as well.
So there are some, some goodtools out there and I really
encourage, you know, listenersto this is one of those things
that should probably be on yourchecklist, like every six months
to look at.
Hey, how can we adjust the sizeof our product in order to
(16:59):
lower FBA fees, because they'rejust going to continue to go up.
So you have to have some sortof plan in place in order to
stay competitive.
Speaker 3 (17:08):
Yeah, it's important to not rest on your laurels and
just complain about the risingFBA fees.
In most cases, there's a way tocombat them and, like you said,
I think it's part.
It's necessary to have that aspart of your checklist.
I mean, we had a student that,for whatever reason it was and
it wasn't a mistake based onlike they had a polybag that
they were measuring wrong, likethey got the weight of his
(17:29):
product completely wrong andlike they added six or seven
pounds.
It was a pillow, it was aflower shaped pillow that they
added like six or seven poundsto the 20 pound pillow.
Right and like and he wasn'tpaying attention to that.
And then so at the end of themonth he starts, you know, he
puts his, puts everything in theQuickBooks and it was like,
well, wait a second, why?
Why are my FBA fees?
(17:50):
But like, that's why it'simportant.
And he learned that lesson thehard way.
And now part of his checklistis every week going in to make
sure are my FBA fees right?
And if they're not, here's whatI need to do.
And it took him.
I mean, it almost shut hisbusiness down and he was only,
you know, two, three months intohis launch, and that's when
that happens.
So it's super important to havethat on your checklist.
Speaker 1 (18:09):
like, you said, john.
Well, and that's a good pointtoo is that one of the things
that I learned in our interviewthat we did with Gatita or in
that episode, was that Amazonchanged the look back window now
to where it's only 90 days.
So had that, you know, he notcaught that in those first
(18:31):
couple of months, he could havebeen completely out of pocket
for that money for a long time.
The other thing that I wantedto bring up for this, too, is
that sometimes I know in a lotof cases you might have somewhat
limited options as far aschanging the packaging size or
making it, breaking it down todifferent components.
(18:52):
But another thing you can lookat is, especially if it's a
product where you're selling itin some sort of pack size, is
really looking at your packsizes to say, okay, currently we
offer this in a six and a 12pack?
What would happen if we offeredit in a four pack or we offered
it in an eight pack orsomething like that, in order to
(19:14):
optimize that weight ordimensional size that we order
to optimize, you know, kind ofthose that weight or dimensional
size that we had talked aboutas well?
Speaker 2 (19:20):
Well, and this might not be obvious too, because when
you think about that strategy,what you, what you immediately
start to assume, is what wouldhappen if I made the package
smaller.
Right, how much would I save?
But you could also think of itin the reverse, like how much
bigger could I make the packageand still keep essentially the
same fulfillment costs, orrelatively the same fulfillment
(19:43):
costs?
So maybe I add two units to asix unit package and I make it
an eight unit package and thefulfillment fee goes up by 20
cents, but I make an extra fivebucks or whatever it is because
I put two more units in there,so don't think about it only in
one direction.
Make sure you're thinking aboutit in both directions.
Speaker 1 (20:00):
Yeah, yeah, Well, and I think one other thing that I
would add to that too is thatanother dimension that may or
may not play, depending on yourbrand, is also thinking about
price, because, weirdly enough,once you start getting down into
the lower priced items, thatalso affects how much you pay
for FBA, because there is acategory of low priced items.
(20:21):
Now, generally, that's not thespace that we spend a lot of
time in, because, quite frankly,it can be kind of a pain in the
butt With that said, if we talkabout tripwire products and
those types of things in orderto bring people into your brand,
to do like samples and thoseyou know and things that are
kind of in that that realm,there are use cases for that and
(20:44):
just being aware of like, hey,if we wanted to do this in a
smaller size so somebody couldtry it out for you know 10 bucks
before they buy.
You know a 50, a hundred $200version of it.
Understanding what those FBAfees, that they're not.
They may not be the same aswhat you think they are, because
the price is the price alsoimpacts it.
(21:04):
So if it's a $10 product, youmight have a lot lower FBA fees
than what you would suspect.
Speaker 2 (21:09):
Yeah, yeah.
So just watching, you know likeif you're priced at $11 and you
could get away with 10, maybeyour FBA fee goes down by $2
with that dollar change.
So certainly pay attention toit.
Speaker 3 (21:23):
Yeah, I work with a bottled water brand and we send
the bottled water to influencersand we have currently how we
launched, we have a 12 and a 24pack and they're heavy.
I mean it's bottled water.
So it was expensive.
It's expensive to ship theseproducts to people.
So what we did is we created asix pack specifically for the
(21:43):
influencers, but in order tosend it through multi-channel
fulfillment on Amazon, it had tobe a live ASIN.
So now that six pack hasactually turned into a bit of a
loss leader for us because, Imean, it's a cheaper price point
.
We're just breaking even onthat.
So I don't, you know, there'shardly any markup, but like that
gives people a chance to orderit at a lower price point, a
(22:03):
smaller fulfillment costs, andthen the goal is to get them on
subscribe and save anyways.
So when they love the water,they love, you know, the
everything that the water standsabout.
They're going to come back andorder it again.
And that's why thatpost-purchase process comes in,
because someone, we're not goingto make any money on the six
pack.
For us it was really justcheaper way to get the bottled
water in the hands ofinfluencers, but now we're able
(22:25):
to use it as get someone's footin the door, then get them on
subscribe and save, and thenthat's where our that's where
we'll make up the margins on thebackend.
Speaker 2 (22:32):
Right.
Speaker 1 (22:33):
So one thing that Amazon has rolled out recently
that I think has a lot ofsellers upset is the low
inventory fee.
So I do want to, before we wrapup, spend a few minutes talking
about some ways to alsomitigate the impact of the
things that we mentioned beforewe started recording with
(22:54):
SkewDrop as a possible solution.
Mike, can you talk a little bitabout your experience so far
with SkewDrop and kind of theprinciple behind or ideas behind
what interested you in it?
Speaker 2 (23:06):
Sure.
So first of all, our experiencewith SkewDrop has been terrific
.
Now we haven't been with themthat long, but they've been very
responsive.
Their customer service isamazing and essentially the idea
behind it is that, for whateverreason I don't know that I
could say what the reason is orwhy they have it set it up this
way, but there seems to bewithin Amazon's ecosystem you
(23:28):
know, in terms of gettingproducts into the warehouse and
you know all of that sort ofthing there seems to be some
sort of preferential treatmentthat they're giving to Chinese
sellers, in other words, productthat's being shipped in
directly from China as opposedto coming in from, say, a
staging warehouse in the Statessomeplace.
So one of the benefits of usingSKUdrop is that you get to take
(23:52):
advantage of those very sameincentives essentially Chinese
sellers are getting by shippingit directly to the warehouse
from Skewdrop.
But also, because you get thesekind of reduced shipping rates
for smaller shipments, you canthen spread them out.
So instead of sending one largecontainer that could get lost
(24:13):
at sea, could be caught in theport, could get caught anywhere
in that process, right?
You instead send in LCLshipments and you just space
them out.
So maybe, whereas before maybeyou sent one container a month
or something like that.
Now you could send a quarter ofa container every week and you
(24:34):
just kind of space them out andthey just kind of run forward
and so the value there is Athere's a lot less risk.
B you're getting a fairlyreduced shipping rate on those
smaller shipments.
But it also allows you tocontrol your inventory better.
So on the Amazon side, one ofthe things that we've run into
is that, for whatever reason,amazon's intake of our products
(24:58):
is having, we're just havingsome major problems in that area
and so if you send one largeshipment to Amazon and it gets
held up, you're stuck becauseAmazon is going to charge you
low inventory fees because theinventory is not actually
available for sale, even thoughit's in their ecosystem.
I'm pretty certain that that'strue.
Somebody could correct me ifI'm wrong, but I believe that's
the way it would end up working.
(25:19):
So they are holding yourproduct hostage but it's not
actually in inventory yet, soyou can get charged those fees.
So by sending it in smallershipments you can control that
better, because at least some ofthose shipments should come in,
even if some of them kind ofget held hostage.
Speaker 1 (25:33):
I believe that is true with the one exception of
some of them kind of get heldhostage.
I believe that is true with theone exception and this is
actually a good transition tothis with the exception of
Amazon warehouse anddistribution.
So, if you have your product inAmazon warehouse and
distribution, amazon waivesthose low inventory fees, which
there's at least what we'veexperienced with clients that
are using this are kind of somepros and cons in the sense of it
(25:56):
is nice that one.
Now you don't really have toworry about the low inventory
fees, and obviously Amazonwarehouse and distribution, or
AWD, is cheaper for storage thanif you have it in FBA.
However, you know and in fact Ithink, mike, you are the one
that's talked the most aboutthis is that, or I think you
mentioned this that AmazonWarehouse and Distribution isn't
(26:20):
incredibly smart about how itreplenishes products.
So by the time it says, oh, Ineed to send more inventory, you
may have enough sales velocityto where you're going to end up
running out at FBA.
Speaker 2 (26:37):
The algorithm is not very good at calculating that.
If your product is a veryconsistent product, you probably
would be fine.
My guess is that it's not thatbig of a deal and so you can
make use of that.
But if you have a lot ofvariability in your sales, your
seasonal or things of thatnature, I would be very careful
with AWD.
I'm not saying don't use it,and I'll be perfectly frank.
(26:59):
We have not used it.
So I'm not speaking fromexperience.
I'm speaking from theexperience of a number of other
sellers that I have spoken withwho have used it, and this has
been their experience that it'snot very good at forecasting.
So even though you're not goingto get those low inventory fees
, you're not like there are somebenefits.
Just be aware it's not aperfect system.
I'm sure it's going to getbetter over time.
(27:20):
Awd is still pretty new, sodon't write it off, but it's not
great right now.
And also, they don't accept tothe best of my knowledge, at
least until last time we checkedthey don't accept oversized
products.
Speaker 3 (27:41):
So that's only going to be an option for you if
you're in that standard orsmaller size tier On top of the
low inventory fees.
Speaker 2 (27:44):
does it also remove the new inbound placement fees
too, if you're using AWD?
I think so.
I think when we were talking toJamie at Screwdrop, I think he
said that that was somethingthat it helps with.
And just another thing onScrewdrop is that their system
is really well integrated, likethey're.
They're integrating a lot ofthings on their end to make that
process very seamless in termsof not only bringing product
(28:04):
into their warehouses, but alsoin terms of shipping out and
choosing the different shippingoptions and integrating with
Amazon system, so they're reallybuilding out a really great
system.
I think if it's anything thatsounds at all like something you
might want to test, you know,like, definitely talk to them,
because they're on the ball.
Speaker 1 (28:22):
Yeah, and I'll add to that just so that way the folks
that are listening to this areaware, like, we don't have any
connection with SKU Drop, otherthan you know, mike, being a
user, we don't get any sort ofaffiliate or anything like that.
Really, we just want, we'rehighlighting them because we
think that they do a great joband offer a great service.
Yeah, for sure.
So the last thing before wewrap up here that I did want to
(28:44):
just touch on real briefly andwe were talking about it before
we hit record was how Amazon FBAcompares to Walmart fulfillment
services.
And well, you know, walmartdefinitely has some more
maturity to go, especially incertain categories, and we're
going to actually be bringingsomebody on soon to talk about
(29:07):
you know what is the opportunityon Walmart, what does that look
like for different categories,different brands, and you know
how can you tell if that's agood opportunity.
But with that said, mike, youtalked about this a little bit.
Can you talk a little bit aboutwhat Walmart Fulfillment
Services looks like compared toFBA as far as the fee structure?
Speaker 2 (29:27):
Yeah, for sure, and I think Matt said that he's got
some experience there too.
But we tested Walmart a whileback.
To be honest, we never reallygave it a super fair shake.
You know, I never reallyexpected it to be a good
platform for us so we probablydidn't invest as much in it as
we should have to really seewhether it could be.
But I had a guy contact merecently from Walmart that I
(29:49):
guess he's kind of running thatside of their you know their
business right now and they'relooking to bring in more of
these larger sellers from Amazonor bring them back to the
platform.
So we were talking a little bitand he was kind of giving me a
rundown of things.
So I went back in after talkingto him because it sounded like
they were going to maybe give usa little bit of preferential
treatment to kind of bring us inthe door.
(30:09):
So I thought, okay, let's seewhat it's all about.
So I started doing somecalculations with their WFS
calculator, the Walmartfulfillment services calculator,
to see what it would cost toship our products to customers
if they bought it on Walmart andhonestly I was absolutely
shocked.
The price for every singleproduct in our entire catalog
(30:33):
was at least half the price ofwhat Amazon FBA is charging us,
and on one of our products it'slike a third of what we pay
Amazon for FBA services to getthis to a customer.
So if you look at that and youthink about what percentage of
your expense on a sale is FBAand for some products it's
(30:55):
exceptionally high you know,using Walmart's fulfillment
service could be one way thatyou can sell much more
profitably there than you can onAmazon, and so I would argue
that for some products, even ifyour sales on Walmart only
amounted to 10% of your overallrevenue, they could be
(31:18):
realistically 15% or more ofyour overall profit, because the
profit margin on the Walmartplatform could potentially be so
much higher.
Again, we're not back on theplatform yet.
I can't speak from experiencein terms of what kind of sales
volume we're going to get thereThat'll be a future episode but
I can tell you for a fact thatour fulfillment costs are going
to be way low on the platform.
Speaker 3 (31:40):
Yeah, I work with a brand that we recorded by
Walmart as well, and they arerolling out the red carpet for
us in terms of onboarding.
And when I was having thatconversation with the onboarding
specialist and she showed methat calculator, I was also
floored and it was more than 50%cheaper.
And for this particular product, I mean I believe that it's
(32:03):
it's a good product for Walmart.
You know, mike, I'm not sureyou you sell a premium pool
tools, so it might not be as asgood, but for this particular
product, I mean it's more of acommodity and I think it's the
perfect place for Walmart.
And I mean I was floored.
And as soon as she told me thatwe started doing some
calculations, I just wished thatthey would allow you to do the
(32:24):
multi-channel fulfillment likethey do on Amazon, because I'm
telling you, a lot of operationsin our business would change
tomorrow if that were the case.
Speaker 2 (32:34):
And I'll say something as kind of a side note
if you are using Amazon andyou're using it the FBA services
for MCF fulfillment you need tolook for a 3PL, because right
now we are like our MCF cost isgenerally 60% higher than our
actual FBA fee to ship that sameproduct to a customer and right
(32:54):
now we found multiple 3PLs thatwe can use that the cost is way
less to ship that product to acustomer.
So if you're using them for MCF, stop.
Find a three PL.
Speaker 1 (33:05):
So, mike, just out of curiosity is do you feel like
that's because your product isoversized, or does that apply
for your standard size?
Speaker 2 (33:15):
We have some standard size products too, and the MCF
cost is still way higher thanFBA.
And going back to the previousconversation, the WFS cost was
about half.
Speaker 1 (33:25):
Okay, so even your standard, like your large
standard size, to havemulti-channel fulfillment is
more expensive than if you hadit at a different 3PL.
Okay, and I think that'simportant for the listeners.
Speaker 2 (33:38):
It used to be the case.
I mean, like a lot of sellersare probably like yeah, I'm sure
it's higher at some other 3PL.
Of course, Amazon's got betterprices is what the assumption
often I think is, and it's nottrue anymore.
Speaker 1 (33:49):
Yeah.
So then it just comes down toyou know, doesn't make sense for
you to have inventory at a 3PLand at Amazon FBA, because
that's, you know, really the bigadvantage of, hey, I can have
all my inventory in one place.
But if I'm paying out the nosefor multi-channel fulfillment,
for orders off my website andthose types of things, then,
(34:09):
like you said, you really haveto crunch the numbers.
Speaker 2 (34:12):
Well, and there's another side to that too, and
we've talked about this before.
But that's really just kind ofhaving a backup source of
inventory available forfulfillment.
Because if you run into aproblem with getting your
inventory into Amazon and peoplecan't buy your product on the
platform, then you're kind ofscrewed because you're going to
lose your BSR.
If you at least have a 3PL thatyou can do FBM fulfillment for
(34:33):
on the Amazon platform, then atleast your listing stays up.
You know, yes, you know,shipping times are going to be a
little bit lower, you're notgoing to get as good a placement
because it's FBM, but at leastyou're up.
So from my perspective I stillthink having that 3PL makes
sense because, a, you have thatbackup source that you can do
FBM fulfillment on your Amazonorders, but then, b, you can
(34:56):
replace your MCF shipments withshipments from that 3PL and I
just think it's a no brainer formost brands.
I'm sure there's somesituations where maybe it
doesn't make sense.
I would be surprised if you'reone of them.
If you're listening, I thinkthese days it doesn't make sense
to not have a 3PL backup.
Speaker 1 (35:11):
Well, I think that's a great, as we kind of wrap up
this episode, a great actionitems for our listeners.
Out there is that if you'reusing MCF, you probably should
compare the numbers and do themath and look at what would that
look like if you were using a3PL instead.
If you haven't looked at thosecosts in a while, Matt, what
(35:31):
would you say for listeners?
Do you have an action item thatyou would give them?
Speaker 3 (35:37):
from this conversation we've had here
today that you would give themfrom this conversation we've had
here today.
Yeah, it's super easy tocomplain about the rising Amazon
FBA fees, and if there's onething that we've all learned
that's not going to change,they're going to figure out ways
to get more fees out of us.
So, instead of complainingabout it, I think we've
presented a lot of really goodaction items to take a look at,
not only just paying attentionto them on a regular basis and
(35:59):
making that part of yourchecklist, but also take some of
the things that we've talkedabout and look to see is are
there ways that you can optimizethose fees and pay less, as
opposed to just griping aboutthem getting bigger?
Speaker 1 (36:10):
Yeah, yeah, and and I'll kind of wrap up here with
the action item of you know,take a look at those, especially
those calculators that we'vetalked about, and do the mental
exercise, either yourself orsomebody on your team, to say
what would it take in order toreduce the size of our product
or our packaging by 10 or 20% inorder to bring down those FBA
(36:31):
fees, and you might be surprisedthat you can come up with some
pretty creative solutions.
That saves you some money andthe most important thing is that
that money that you save onthose FBA fees, that goes right
to the bottom line, so that goesright to your profit number and
can have a big impact onwhether you have a profitable
year or you're in the red at theend of the year.
So I think those are some greataction items and a lot for
(36:54):
listeners to take away on howthey can really combat the FBA
fees that we see increase on anongoing basis.
So, yeah, I would encourageanybody who's listening pick one
of those, take some action andlet us know how it goes, because
we'd love to hear what you wereable to accomplish.
Welcome everyone to a Brand Fortress HQ podcast.
On this Tactics Tuesday episode, we're going to be discussing
how to beat the ridiculous FBAfees that we've been getting
from Amazon.
This is something that sellersare really struggling with as
FBA fees continue to go up, andso today, what we're going to
talk about is, a lot of times,we feel like we don't have a lot
of control over those fees, andso today we're really going to
(00:24):
talk about what we can controland what we can do about those
fees, both on Amazon and alsolooking at some of the other
strategies and options that areout there.
So with that, I think, thefirst thing that I want to pass
over to you, mike, and talk alittle bit about how you guys
are tackling this with one ofyour products as far as making
it more modular in order toreduce some of your FBA fees.
Speaker 2 (00:48):
Yeah for sure.
So one of the things that mostsellers should know this.
But with Amazon, in terms ofFBA and their pricing tiers, in
terms of fulfillment, when youjump from large standard size to
oversize, there is asignificant jump in fulfillment
costs.
And you know, obviously back in15, 16, 17, you know
(01:13):
fulfillment costs really weren'tthat bad.
Amazon was pretty reasonable.
So you don't really worry aboutit a whole lot oftentimes
because your margins were good.
But now, as our margins aregetting squeezed, we have to pay
a lot more attention to that.
And as FBA fees are so muchhigher, now we started looking
at, you know, what can we do?
Because we're getting eaten ontwo ends.
So because we offer thisunlimited free replacement
warranty on all of our pooltools, we not only have the
(01:36):
fulfillment expense on the frontend when we ship the product
out to the customer, but we havethis fulfillment expense on the
back end when we're shippingout replacements.
And in the past, on all of ourpool nets, when somebody would
request a replacement, we wouldsend out an entirely new pool
net.
We wouldn't send out parts, itwas always the full unit which,
again, early on, we could dothat.
(01:57):
The fulfillment fees werereasonable and our margins were
pretty hefty and our marginswere pretty hefty.
We're moving into territory nowwhere that is just not any
longer sustainable, not only onthe front end but also on those
back end warranty replacements.
So we kind of went back to thedrawing board and said, okay,
how can we turn?
And this is specifically on ourHero products.
So some of our nets are alreadyin the standard size, but one
(02:20):
of them that was on the bubblewas our 19 inch.
We were a little bit over onthe length and width dimensions
that we could have.
So 18 inches by 14 inches isthe largest that your product
can be the packaging and stillstay within the large standard
size, which are still fairlyreasonable.
(02:41):
Fulfillment Our product was overthat it was over 18 inches.
It was more like 19 and somechange, I think.
And so we went to themanufacturer and just said we
need to get this into a packagethat's under 18 inches by 14
inches.
How can we do it?
You know, like, can we take thehandle off?
Can we?
You know what's the possibilityhere?
(03:02):
And so one of the things that'sinteresting is that the first
manufacturer essentially told uswe can't do that.
We had two differentmanufacturers that we receive
pool rakes from, or nets samedifference in the pool category
and so we went to the othermanufacturer and said, okay, how
do we do this?
Like we, we need this to happen.
And so they, you know, kind ofput their heads together and
(03:24):
they came out with a differentdesign that would allow us to
get into that packaging.
But in that process we actuallydecided all right, if we're
going to redesign the productanyways, let's just redesign it
so that the entire thing ismodular.
So it wasn't just removing thehandle and changing how we
packaged it.
We took it to that next levelto say, okay, how can we create
a product where now we can dowarranty replacements in parts
(03:48):
instead of in full units, so nowwe can send out just a net or
just a plastic rim or just ahandle, and so our warranty
replacement costs not only willbe less because we don't have to
send out the whole unit so thefulfillment is way less and the
cost of the warranty replacementis less but also just that
fulfillment fee is way less.
We're going to save almost halfof the fulfillment cost on the
(04:09):
initial shipment of that unit bymoving it to large standard
size, but we're also going tosave more than half of our fees
that we pay for warrantyreplacements by doing the same.
And so I guess that the two keys.
There is one how could youpotentially redesign your
product to get it under thatnext threshold in terms of the
shipping tier levels at Amazon?
(04:31):
But also, if you're going to bein that process, what other
design changes might you want tomake if you're going to
redesign it anyways?
And then, beyond that, if youhave a manufacturer that says
that's not possible, then Iwould find another manufacturer
who can do it, or look to find adesigner, you know, on Upwork
or something like that, and say,hey, these are the current.
(04:51):
You know, this is currentlywhat we have.
How can we redesign thisBecause there probably is a way
I can almost guarantee you,there's probably a way for most
products that you could do aredesign and get into a smaller
package.
Speaker 1 (05:03):
Yeah, I think that's a great point of just really
looking at those dimensions andthen thinking outside the box as
far as hey, can we make thismore modular?
Is there a way that we can makeit under those dimensions?
Matt, I know that recentlyyou're working with a couple of
different brands that areworking on really setting a lot
of this stuff up.
What are, or do you have, acouple of things you know really
(05:25):
setting a lot of this stuff up?
What are, or do you have, acouple of things that you look
at or considerations when you'rethinking about setting a
product up to be as efficient aspossible when it comes to FBA
fees?
Speaker 3 (05:33):
Yeah, so you mentioned thinking out of the
box and I love Mike's how hemade his product more modular.
But also it's not just theproduct itself but also the
packaging you know we had.
I worked with the brand and oneof their products is in a poly
bag and the poly bag the waythat they calculate FBA fees and
we found this out actually at aconference that we were at they
(05:55):
will hold the poly bag up andthey'll measure the poly bag,
not the product.
So if you have extra space inyour on your poly bag, if it's
vacuum sealed, that extra spacein that poly bag is getting
measured as dimensions on ofyour product.
And when we realized this andactually I got back from this
conference and I was like, well,wait a second, well, I wonder
(06:16):
if that's what's happening hereand that's why our our FBA fees
are so much higher than whatit's saying our competitors are.
And sure enough, I mean therewas about 12 inches of extra
space on that poly bag that werebeing calculated as the size of
the product.
So it's not just the productitself but it's also the
packaging that the product goesinto that plays a really, really
(06:36):
big part in what your FBA feesare.
Speaker 2 (06:38):
I can attest to that.
I'll second that because we raninto the same issue and this is
well.
It's not exactly the same issuebut essentially results in the
same thing.
We were packing in poly bagsfor quite a while and because of
the way that, first of all,Amazon's not consistent about
how they measure it, so theydon't always measure it that way
.
Some employees will, someemployees don't.
So if you ask for a remeasure,sometimes you can get that
(07:01):
smaller size because they'llmeasure it in kind of the
smallest dimension.
But the interesting thing hereis that if it's kind of hard to
describe, but if you werelooking at our rake, like you've
got the mouth of the rake andthen you've got the handle, that
comes up like this.
So if you were to measure thisway on, this was the smaller
version of our rake, the 18 inchIf you measured it straight
(07:22):
across and you measured it thisway, you would be under that 18
by 14, because it was like 17and a half by 13 and a half or
something like that.
Speaker 1 (07:31):
So for those that are listening, mike's talking about
kind of vertically thedimensions on the rake, versus
horizontally.
Speaker 2 (07:37):
Right.
So, but what's interesting isthat, or actually I should, is
that?
Or actually I should restatethat we actually we weren't, we
were a little bit over.
But if you put this into a boxthe right way, you can place it
into a box because it goesdiagonal, which is really odd.
But as soon as you change thatorientation and you put it
(07:59):
inside of a box, now all of asudden we were under the 18 by
14, same product.
We didn't actually change theproduct at all, we just put it
into a box and we changed how weput it in there and we could
get under the 18 by 14.
So the packaging does matterand sometimes just having it in
an actual package versus a polybag can make that difference.
Speaker 3 (08:18):
Yeah, the same thing happened with I give another
example heat resistant gloves.
The heat resistant gloves werepacked in a way where, if they
were hanging on a retail shelf,you could see the whole glove,
and the differentiator of theglove was that it had longer
sleeves than the typical onesthat you find on Amazon.
But when we started goingthrough and optimizing our FBA
fees and looking to see how wecould minimize those, it was the
(08:41):
simplest fix.
The only thing that we did iswe folded the gloves.
The gloves, we put them in abox that without I mean, who
cares really about seeing theglove through the box?
It's not that big of a deal,because they know what they're
going to get when they see yourlisting images.
We folded that those gloves,put them inside of a smaller box
and instantly lowered our fbafees yeah, and I think so.
Speaker 1 (09:01):
You guys brought up some great examples I do want to
just kind of circle back to,because I think that this is a
topic, even among sellers thathave been on Amazon for years,
of really understanding howthese things are calculated and,
quite frankly, how those arecalculated has changed over the
last few years as well.
So I think one of the mostimportant things to understand
(09:22):
that's already been brought upis what tier your product falls
into, based on the dimensions,and so, falling into the small
standard versus the largestandard versus oversize, the
heavyweights, whatever ithappens to be, those categories
make a huge difference.
In addition to that,understanding dimensional weight
(09:43):
.
So essentially, amazon used tojust charge based off of what
your actual weight of yourproduct is.
The problem with that issomebody gave me this example of
okay, well, if you have, let'ssay, you sell, you know, like
plastic forks, well, you couldfill up an entire truckload of
plastic forks that may only be100 pounds, where if you put
(10:06):
regular products in that, itwould be 10,000 or 50,000 pounds
or whatever it happens to be.
And so if you're a shippingcompany, if you're only charging
by weight, well, you're nowshipping that product in a semi
for, let's call it 500 bucks or$1,000 or whatever it happens to
(10:26):
be, and that's a huge loss.
And so that's why they've goneto this dimensional weight,
where they're looking at allthree of those different
dimensions, and then I think itdepends a little.
There's different calculationsthat are slightly different, for
, like UPS versus FedEx versusAmazon, every company has a
little bit different variationon it.
Amazon does not do a great jobof showing you how to do that.
(10:49):
You really have to dig into thedetails in order to find their
formula, but it is on theirwebsite, I believe.
It's like the three dimensionsmultiplied together, divided by
like 139 or something like that.
Then I'll tell you kind of whatthe dimensional weight is for
your product, and then, ofcourse, they take the best of
which one.
Everyone is higher.
So if you have a product that isvery dense, and let's say that
(11:12):
the dimensional weight for yourproduct is, you know, five
pounds, but if you put in, youknow, but it's heavy, so it
actually weighs seven pounds,well, they're going to charge
you for the seven pounds.
So just understand that they'regoing to charge you for the
seven pounds.
So just understand that they'regoing to charge you whichever
one is more in their favor.
So I think it's important tounderstand, kind of, how those
(11:36):
calculations are made, tounderstand, so that way you can
look at it and say, okay, howcan I optimize my product?
And then look at, am I close tothat next weight threshold, like
, if your product is, you know,3.1 pounds, is there a way you
can get it down to 2.9?
So that way you don't getcharged for that extra pound.
And depending on what categoryyou're in, that might be, you
know, an extra pound, might be,you know, 30 cents, or it could
(11:59):
be a couple of dollarsdifference per item.
So it it a big difference,especially if you're going from
certain categories to others, inhow much you're paying for
fulfillment through FBA.
Speaker 2 (12:14):
Yeah, it's not just dimensional adjustment.
Also, weight adjustment isdefinitely something to pay
attention to, for sure, and Ithink it's also critical to
recognize that the effects of achange like that work their way
all the way downstream.
So, like we talk aboutfulfillment because that's one
of our biggest expenses thesedays, but recognize that up the
chain there are other expensesthat are related to the
(12:37):
dimensional aspects and theweight aspects of your product.
So what's it going to cost toship it here Again,
dimensionally, if you can shrinkyour package by two inches?
Well, that could be the youknow.
Here's the thing that oftentimesI think is forgotten.
Sometimes sellers look at itand they think, well, that
little change in my packagingsize isn't really that
(12:57):
significant.
I wouldn't really be able tofit that much more in a
container.
Because they're thinking of itby percentages right, Like
that's only a 5% reduction ormaybe a 3% reduction in the size
of the package.
But the problem is, dependingon that configuration, how
you're able to actually pack thepallets and then pack the
(13:19):
actual container might changesignificantly.
So it's possible possible thata two or 3% change in your
packaging dimension in one wayor another could add 10 or 15%
to the number of units you canactually get into a container
just simply because of how itcan now be stacked on a pallet
or how the pallets can be putinto the container.
(13:40):
So don't underestimate how muchdifference there could be in
your overall costs by a verysmall change in your packaging
and or in the product itself.
Speaker 1 (13:51):
Yeah, and I would add to that I mean you can go back
and listen to the episode thatwe did with Gatita.
They did a good job ofexplaining it in the sense that
Amazon remeasures your packagingon a regular interval and so if
they decide, essentially ifthey get a bad measurement where
they add, you know, additionalinches for a wide variety you've
(14:13):
, you're aware of that changeand then also to get re to
submit for reimbursement forthat.
So once you get it corrected,you can have Amazon actually
reimburse you for that.
(14:34):
So that's the other importantthing is is that you want to
make sure that you're also havesome sort of system in place in
order to monitor the Amazon iscontinuing to measure your
product correctly.
Speaker 2 (14:45):
And making sure that you're in packaging that's easy
to know how to measure.
Yeah, because that differentialbetween the poly bag and the
box for us even though you knowin this particular case it
changed the angle and so we werebut it also gives them actual,
very concrete dimensions tomeasure when you have it in a
box versus in a poly bag.
So if you're anywhere near thedimensional requirements of one
(15:07):
tier versus another, even thoughit might be more expensive to
put it in a box, you mightactually save money that way and
save hassle, because when wewere in poly bags we were
requesting remeasures by Amazonall the time.
I mean, it was literally weeklywe were having to request
remeasures and of course youhave to do that multiple times
before you actually get theright measurement.
(15:28):
And so just put it in a box andmake it easy to measure.
Speaker 1 (15:32):
Yeah, and a couple of tools that I'd recommend too.
Is that?
So Amazon does offer and I'mgoing to put it in quotes here
their revenue tool.
It does actually give you apretty good, accurate reading on
how much your FBA should becosting you, based on your
dimensions and the weight ofyour product, and if the
product's live, you can alreadyput it in ASIN.
That's probably the most basictool.
(15:52):
And then, of course, you cankind of test some different
dimensions and say, okay, well,if I made it a little bit
shorter here, you know whatever.
And then you can look at thekind of the size categories.
And then there's other tools outthere.
They don't do anything in theoversized category, but I think
they do.
I know they do large standardsize and small standard size.
I think they do small standardsize as well.
But there's tools out there likeSoStocked, where they actually
(16:15):
have free calculators where youcan plug in like okay, here's my
, you know current size of myproduct, and then they'll make
some recommendations as far asyou know here if you can adjust
your size to this.
Here's how you save more onthat palette and here's how you
know you save more on on FBAfees.
So I haven't used them actuallyfor, you know, like inventory
(16:36):
management, necessarily, thecalculator that they have, that
they offer for free, is veryuseful, so I'll give a tip of
the hat for them for that pieceof it as well.
So there are some, some goodtools out there and I really
encourage, you know, listenersto this is one of those things
that should probably be on yourchecklist, like every six months
to look at.
Hey, how can we adjust the sizeof our product in order to
(16:59):
lower FBA fees, because they'rejust going to continue to go up.
So you have to have some sortof plan in place in order to
stay competitive.
Speaker 3 (17:08):
Yeah, it's important to not rest on your laurels and
just complain about the risingFBA fees.
In most cases, there's a way tocombat them and, like you said,
I think it's part.
It's necessary to have that aspart of your checklist.
I mean, we had a student that,for whatever reason it was and
it wasn't a mistake based onlike they had a polybag that
they were measuring wrong, likethey got the weight of his
(17:29):
product completely wrong andlike they added six or seven
pounds.
It was a pillow, it was aflower shaped pillow that they
added like six or seven poundsto the 20 pound pillow.
Right and like and he wasn'tpaying attention to that.
And then so at the end of themonth he starts, you know, he
puts his, puts everything in theQuickBooks and it was like,
well, wait a second, why?
Why are my FBA fees?
(17:50):
But like, that's why it'simportant.
And he learned that lesson thehard way.
And now part of his checklistis every week going in to make
sure are my FBA fees right?
And if they're not, here's whatI need to do.
And it took him.
I mean, it almost shut hisbusiness down and he was only,
you know, two, three months intohis launch, and that's when
that happens.
So it's super important to havethat on your checklist.
Speaker 1 (18:09):
like, you said, john.
Well, and that's a good pointtoo is that one of the things
that I learned in our interviewthat we did with Gatita or in
that episode, was that Amazonchanged the look back window now
to where it's only 90 days.
So had that, you know, he notcaught that in those first
(18:31):
couple of months, he could havebeen completely out of pocket
for that money for a long time.
The other thing that I wantedto bring up for this, too, is
that sometimes I know in a lotof cases you might have somewhat
limited options as far aschanging the packaging size or
making it, breaking it down todifferent components.
(18:52):
But another thing you can lookat is, especially if it's a
product where you're selling itin some sort of pack size, is
really looking at your packsizes to say, okay, currently we
offer this in a six and a 12pack?
What would happen if we offeredit in a four pack or we offered
it in an eight pack orsomething like that, in order to
(19:14):
optimize that weight ordimensional size that we order
to optimize, you know, kind ofthose that weight or dimensional
size that we had talked aboutas well?
Speaker 2 (19:20):
Well, and this might not be obvious too, because when
you think about that strategy,what you, what you immediately
start to assume, is what wouldhappen if I made the package
smaller.
Right, how much would I save?
But you could also think of itin the reverse, like how much
bigger could I make the packageand still keep essentially the
same fulfillment costs, orrelatively the same fulfillment
(19:43):
costs?
So maybe I add two units to asix unit package and I make it
an eight unit package and thefulfillment fee goes up by 20
cents, but I make an extra fivebucks or whatever it is because
I put two more units in there,so don't think about it only in
one direction.
Make sure you're thinking aboutit in both directions.
Speaker 1 (20:00):
Yeah, yeah, Well, and I think one other thing that I
would add to that too is thatanother dimension that may or
may not play, depending on yourbrand, is also thinking about
price, because, weirdly enough,once you start getting down into
the lower priced items, thatalso affects how much you pay
for FBA, because there is acategory of low priced items.
(20:21):
Now, generally, that's not thespace that we spend a lot of
time in, because, quite frankly,it can be kind of a pain in the
butt With that said, if we talkabout tripwire products and
those types of things in orderto bring people into your brand,
to do like samples and thoseyou know and things that are
kind of in that that realm,there are use cases for that and
(20:44):
just being aware of like, hey,if we wanted to do this in a
smaller size so somebody couldtry it out for you know 10 bucks
before they buy.
You know a 50, a hundred $200version of it.
Understanding what those FBAfees, that they're not.
They may not be the same aswhat you think they are, because
the price is the price alsoimpacts it.
(21:04):
So if it's a $10 product, youmight have a lot lower FBA fees
than what you would suspect.
Speaker 2 (21:09):
Yeah, yeah.
So just watching, you know likeif you're priced at $11 and you
could get away with 10, maybeyour FBA fee goes down by $2
with that dollar change.
So certainly pay attention toit.
Speaker 3 (21:23):
Yeah, I work with a bottled water brand and we send
the bottled water to influencersand we have currently how we
launched, we have a 12 and a 24pack and they're heavy.
I mean it's bottled water.
So it was expensive.
It's expensive to ship theseproducts to people.
So what we did is we created asix pack specifically for the
(21:43):
influencers, but in order tosend it through multi-channel
fulfillment on Amazon, it had tobe a live ASIN.
So now that six pack hasactually turned into a bit of a
loss leader for us because, Imean, it's a cheaper price point
.
We're just breaking even onthat.
So I don't, you know, there'shardly any markup, but like that
gives people a chance to orderit at a lower price point, a
(22:03):
smaller fulfillment costs, andthen the goal is to get them on
subscribe and save anyways.
So when they love the water,they love, you know, the
everything that the water standsabout.
They're going to come back andorder it again.
And that's why thatpost-purchase process comes in,
because someone, we're not goingto make any money on the six
pack.
For us it was really justcheaper way to get the bottled
water in the hands ofinfluencers, but now we're able
(22:25):
to use it as get someone's footin the door, then get them on
subscribe and save, and thenthat's where our that's where
we'll make up the margins on thebackend.
Speaker 2 (22:32):
Right.
Speaker 1 (22:33):
So one thing that Amazon has rolled out recently
that I think has a lot ofsellers upset is the low
inventory fee.
So I do want to, before we wrapup, spend a few minutes talking
about some ways to alsomitigate the impact of the
things that we mentioned beforewe started recording with
(22:54):
SkewDrop as a possible solution.
Mike, can you talk a little bitabout your experience so far
with SkewDrop and kind of theprinciple behind or ideas behind
what interested you in it?
Speaker 2 (23:06):
Sure.
So first of all, our experiencewith SkewDrop has been terrific
.
Now we haven't been with themthat long, but they've been very
responsive.
Their customer service isamazing and essentially the idea
behind it is that, for whateverreason I don't know that I
could say what the reason is orwhy they have it set it up this
way, but there seems to bewithin Amazon's ecosystem you
(23:28):
know, in terms of gettingproducts into the warehouse and
you know all of that sort ofthing there seems to be some
sort of preferential treatmentthat they're giving to Chinese
sellers, in other words, productthat's being shipped in
directly from China as opposedto coming in from, say, a
staging warehouse in the Statessomeplace.
So one of the benefits of usingSKUdrop is that you get to take
(23:52):
advantage of those very sameincentives essentially Chinese
sellers are getting by shippingit directly to the warehouse
from Skewdrop.
But also, because you get thesekind of reduced shipping rates
for smaller shipments, you canthen spread them out.
So instead of sending one largecontainer that could get lost
(24:13):
at sea, could be caught in theport, could get caught anywhere
in that process, right?
You instead send in LCLshipments and you just space
them out.
So maybe, whereas before maybeyou sent one container a month
or something like that.
Now you could send a quarter ofa container every week and you
(24:34):
just kind of space them out andthey just kind of run forward
and so the value there is Athere's a lot less risk.
B you're getting a fairlyreduced shipping rate on those
smaller shipments.
But it also allows you tocontrol your inventory better.
So on the Amazon side, one ofthe things that we've run into
is that, for whatever reason,amazon's intake of our products
(24:58):
is having, we're just havingsome major problems in that area
and so if you send one largeshipment to Amazon and it gets
held up, you're stuck becauseAmazon is going to charge you
low inventory fees because theinventory is not actually
available for sale, even thoughit's in their ecosystem.
I'm pretty certain that that'strue.
Somebody could correct me ifI'm wrong, but I believe that's
the way it would end up working.
(25:19):
So they are holding yourproduct hostage but it's not
actually in inventory yet, soyou can get charged those fees.
So by sending it in smallershipments you can control that
better, because at least some ofthose shipments should come in,
even if some of them kind ofget held hostage.
Speaker 1 (25:33):
I believe that is true with the one exception of
some of them kind of get heldhostage.
I believe that is true with theone exception and this is
actually a good transition tothis with the exception of
Amazon warehouse anddistribution.
So, if you have your product inAmazon warehouse and
distribution, amazon waivesthose low inventory fees, which
there's at least what we'veexperienced with clients that
are using this are kind of somepros and cons in the sense of it
(25:56):
is nice that one.
Now you don't really have toworry about the low inventory
fees, and obviously Amazonwarehouse and distribution, or
AWD, is cheaper for storage thanif you have it in FBA.
However, you know and in fact Ithink, mike, you are the one
that's talked the most aboutthis is that, or I think you
mentioned this that AmazonWarehouse and Distribution isn't
(26:20):
incredibly smart about how itreplenishes products.
So by the time it says, oh, Ineed to send more inventory, you
may have enough sales velocityto where you're going to end up
running out at FBA.
Speaker 2 (26:37):
The algorithm is not very good at calculating that.
If your product is a veryconsistent product, you probably
would be fine.
My guess is that it's not thatbig of a deal and so you can
make use of that.
But if you have a lot ofvariability in your sales, your
seasonal or things of thatnature, I would be very careful
with AWD.
I'm not saying don't use it,and I'll be perfectly frank.
(26:59):
We have not used it.
So I'm not speaking fromexperience.
I'm speaking from theexperience of a number of other
sellers that I have spoken withwho have used it, and this has
been their experience that it'snot very good at forecasting.
So even though you're not goingto get those low inventory fees
, you're not like there are somebenefits.
Just be aware it's not aperfect system.
I'm sure it's going to getbetter over time.
(27:20):
Awd is still pretty new, sodon't write it off, but it's not
great right now.
And also, they don't accept tothe best of my knowledge, at
least until last time we checkedthey don't accept oversized
products.
Speaker 3 (27:41):
So that's only going to be an option for you if
you're in that standard orsmaller size tier On top of the
low inventory fees.
Speaker 2 (27:44):
does it also remove the new inbound placement fees
too, if you're using AWD?
I think so.
I think when we were talking toJamie at Screwdrop, I think he
said that that was somethingthat it helps with.
And just another thing onScrewdrop is that their system
is really well integrated, likethey're.
They're integrating a lot ofthings on their end to make that
process very seamless in termsof not only bringing product
(28:04):
into their warehouses, but alsoin terms of shipping out and
choosing the different shippingoptions and integrating with
Amazon system, so they're reallybuilding out a really great
system.
I think if it's anything thatsounds at all like something you
might want to test, you know,like, definitely talk to them,
because they're on the ball.
Speaker 1 (28:22):
Yeah, and I'll add to that just so that way the folks
that are listening to this areaware, like, we don't have any
connection with SKU Drop, otherthan you know, mike, being a
user, we don't get any sort ofaffiliate or anything like that.
Really, we just want, we'rehighlighting them because we
think that they do a great joband offer a great service.
Yeah, for sure.
So the last thing before wewrap up here that I did want to
(28:44):
just touch on real briefly andwe were talking about it before
we hit record was how Amazon FBAcompares to Walmart fulfillment
services.
And well, you know, walmartdefinitely has some more
maturity to go, especially incertain categories, and we're
going to actually be bringingsomebody on soon to talk about
(29:07):
you know what is the opportunityon Walmart, what does that look
like for different categories,different brands, and you know
how can you tell if that's agood opportunity.
But with that said, mike, youtalked about this a little bit.
Can you talk a little bit aboutwhat Walmart Fulfillment
Services looks like compared toFBA as far as the fee structure?
Speaker 2 (29:27):
Yeah, for sure, and I think Matt said that he's got
some experience there too.
But we tested Walmart a whileback.
To be honest, we never reallygave it a super fair shake.
You know, I never reallyexpected it to be a good
platform for us so we probablydidn't invest as much in it as
we should have to really seewhether it could be.
But I had a guy contact merecently from Walmart that I
(29:49):
guess he's kind of running thatside of their you know their
business right now and they'relooking to bring in more of
these larger sellers from Amazonor bring them back to the
platform.
So we were talking a little bitand he was kind of giving me a
rundown of things.
So I went back in after talkingto him because it sounded like
they were going to maybe give usa little bit of preferential
treatment to kind of bring us inthe door.
(30:09):
So I thought, okay, let's seewhat it's all about.
So I started doing somecalculations with their WFS
calculator, the Walmartfulfillment services calculator,
to see what it would cost toship our products to customers
if they bought it on Walmart andhonestly I was absolutely
shocked.
The price for every singleproduct in our entire catalog
(30:33):
was at least half the price ofwhat Amazon FBA is charging us,
and on one of our products it'slike a third of what we pay
Amazon for FBA services to getthis to a customer.
So if you look at that and youthink about what percentage of
your expense on a sale is FBAand for some products it's
(30:55):
exceptionally high you know,using Walmart's fulfillment
service could be one way thatyou can sell much more
profitably there than you can onAmazon, and so I would argue
that for some products, even ifyour sales on Walmart only
amounted to 10% of your overallrevenue, they could be
(31:18):
realistically 15% or more ofyour overall profit, because the
profit margin on the Walmartplatform could potentially be so
much higher.
Again, we're not back on theplatform yet.
I can't speak from experiencein terms of what kind of sales
volume we're going to get thereThat'll be a future episode but
I can tell you for a fact thatour fulfillment costs are going
to be way low on the platform.
Speaker 3 (31:40):
Yeah, I work with a brand that we recorded by
Walmart as well, and they arerolling out the red carpet for
us in terms of onboarding.
And when I was having thatconversation with the onboarding
specialist and she showed methat calculator, I was also
floored and it was more than 50%cheaper.
And for this particular product, I mean I believe that it's
(32:03):
it's a good product for Walmart.
You know, mike, I'm not sureyou you sell a premium pool
tools, so it might not be as asgood, but for this particular
product, I mean it's more of acommodity and I think it's the
perfect place for Walmart.
And I mean I was floored.
And as soon as she told me thatwe started doing some
calculations, I just wished thatthey would allow you to do the
(32:24):
multi-channel fulfillment likethey do on Amazon, because I'm
telling you, a lot of operationsin our business would change
tomorrow if that were the case.
Speaker 2 (32:34):
And I'll say something as kind of a side note
if you are using Amazon andyou're using it the FBA services
for MCF fulfillment you need tolook for a 3PL, because right
now we are like our MCF cost isgenerally 60% higher than our
actual FBA fee to ship that sameproduct to a customer and right
(32:54):
now we found multiple 3PLs thatwe can use that the cost is way
less to ship that product to acustomer.
So if you're using them for MCF, stop.
Find a three PL.
Speaker 1 (33:05):
So, mike, just out of curiosity is do you feel like
that's because your product isoversized, or does that apply
for your standard size?
Speaker 2 (33:15):
We have some standard size products too, and the MCF
cost is still way higher thanFBA.
And going back to the previousconversation, the WFS cost was
about half.
Speaker 1 (33:25):
Okay, so even your standard, like your large
standard size, to havemulti-channel fulfillment is
more expensive than if you hadit at a different 3PL.
Okay, and I think that'simportant for the listeners.
Speaker 2 (33:38):
It used to be the case.
I mean, like a lot of sellersare probably like yeah, I'm sure
it's higher at some other 3PL.
Of course, Amazon's got betterprices is what the assumption
often I think is, and it's nottrue anymore.
Speaker 1 (33:49):
Yeah.
So then it just comes down toyou know, doesn't make sense for
you to have inventory at a 3PLand at Amazon FBA, because
that's, you know, really the bigadvantage of, hey, I can have
all my inventory in one place.
But if I'm paying out the nosefor multi-channel fulfillment,
for orders off my website andthose types of things, then,
(34:09):
like you said, you really haveto crunch the numbers.
Speaker 2 (34:12):
Well, and there's another side to that too, and
we've talked about this before.
But that's really just kind ofhaving a backup source of
inventory available forfulfillment.
Because if you run into aproblem with getting your
inventory into Amazon and peoplecan't buy your product on the
platform, then you're kind ofscrewed because you're going to
lose your BSR.
If you at least have a 3PL thatyou can do FBM fulfillment for
(34:33):
on the Amazon platform, then atleast your listing stays up.
You know, yes, you know,shipping times are going to be a
little bit lower, you're notgoing to get as good a placement
because it's FBM, but at leastyou're up.
So from my perspective I stillthink having that 3PL makes
sense because, a, you have thatbackup source that you can do
FBM fulfillment on your Amazonorders, but then, b, you can
(34:56):
replace your MCF shipments withshipments from that 3PL and I
just think it's a no brainer formost brands.
I'm sure there's somesituations where maybe it
doesn't make sense.
I would be surprised if you'reone of them.
If you're listening, I thinkthese days it doesn't make sense
to not have a 3PL backup.
Speaker 1 (35:11):
Well, I think that's a great, as we kind of wrap up
this episode, a great actionitems for our listeners.
Out there is that if you'reusing MCF, you probably should
compare the numbers and do themath and look at what would that
look like if you were using a3PL instead.
If you haven't looked at thosecosts in a while, Matt, what
(35:31):
would you say for listeners?
Do you have an action item thatyou would give them?
Speaker 3 (35:37):
from this conversation we've had here
today that you would give themfrom this conversation we've had
here today.
Yeah, it's super easy tocomplain about the rising Amazon
FBA fees, and if there's onething that we've all learned
that's not going to change,they're going to figure out ways
to get more fees out of us.
So, instead of complainingabout it, I think we've
presented a lot of really goodaction items to take a look at,
not only just paying attentionto them on a regular basis and
(35:59):
making that part of yourchecklist, but also take some of
the things that we've talkedabout and look to see is are
there ways that you can optimizethose fees and pay less, as
opposed to just griping aboutthem getting bigger?
Speaker 1 (36:10):
Yeah, yeah, and and I'll kind of wrap up here with
the action item of you know,take a look at those, especially
those calculators that we'vetalked about, and do the mental
exercise, either yourself orsomebody on your team, to say
what would it take in order toreduce the size of our product
or our packaging by 10 or 20% inorder to bring down those FBA
(36:31):
fees, and you might be surprisedthat you can come up with some
pretty creative solutions.
That saves you some money andthe most important thing is that
that money that you save onthose FBA fees, that goes right
to the bottom line, so that goesright to your profit number and
can have a big impact onwhether you have a profitable
year or you're in the red at theend of the year.
So I think those are some greataction items and a lot for
(36:54):
listeners to take away on howthey can really combat the FBA
fees that we see increase on anongoing basis.
So, yeah, I would encourageanybody who's listening pick one
of those, take some action andlet us know how it goes, because
we'd love to hear what you wereable to accomplish.
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