September 10, 2024 • 40 mins
Want to unlock profit potential by cutting Amazon fees in 2024? This Tactics Tuesday episode of Brand Fortress HQ is packed with actionable strategies you can't afford to miss. Learn how to optimize your product dimensions and packaging to slash fulfillment costs, and discover the benefits of using third-party logistics (3PL) for multi-channel fulfillment (MCF). We also explore the invaluable insights from Amazon's new SKU Economics Report, which can elevate your decision-making process regarding products, advertising spend, and overall profitability.
We're not stopping there. Tune in to hear how small adjustments, like folding long sleeves on products, can dramatically reduce shipping costs and boost your margins. We highlight the competitive advantage for smaller brands by redesigning products for cost efficiency and discuss the importance of balancing inventory between Amazon FBA, Amazon Warehouse, and 3PL. Our discussion extends to backup inventory strategies, including the use of staging warehouses and cost-effective storage solutions like Skewdrop in China, ensuring your supply chain remains seamless and penalty-free.
Finally, we tackle the complexities of Amazon's warehousing and fulfillment options, including the limitations of AWD and the benefits of Seller Fulfilled Prime. Discover how combining AWD, FBA, 3PL, and Seller Fulfilled Prime can optimize your inventory management, reduce costs, and maintain stellar sales performance. Emphasizing efficient logistics management, we share tips on utilizing smaller shipments for quicker processing and the advantages of hiring a dedicated logistics manager. This episode is your roadmap to mastering the intricacies of Amazon's marketplace and maximizing profitability.
🚀 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
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome everybody to the Brand Fortress HQ podcast
for another Tactics Tuesday.
We're also live on LinkedIn, soif you have any questions, you
can always leave them either inthe comments or in the chat over
there.
We'd love to answer questionslive.
Today.
What we're talking about isunlocking profit potential and
really a deep dive into loweringfees on Amazon.
It's no big secret that feescontinue to go up on Amazon.
(00:22):
This is one of the things,especially as brands in 2024 on
Amazon are really strugglingwith maintaining profitability,
continuing to grow all thosedifferent things as Amazon fees
go up.
Today, what we're going to dois look at some of those
different strategies, or atleast where to look for that
information and things to thinkabout for your business in order
to lower Amazon fees.
(00:43):
Gentlemen, I know that we werehaving a discussion before we
hit record on this on a coupleof different things.
I guess let's start off withwhere you know.
What do you guys think is maybethe first best place to look
when we talk about loweringAmazon fees for your brand?
Speaker 2 (01:00):
Well, amazon fees are so high everywhere, it's to be
honest, it's a little bit hardto choose and I actually think,
realistically speaking, I thinkit probably depends a lot on the
brand which area becomes thearea that you have yet to really
pay close attention to, becausewhatever area that is, that's
(01:29):
probably the one that you shouldpay attention to that you
haven't been so, you know.
For instance, you know wediscussed the idea of you know
checking your product dimensionsand things like that to see how
you can reduce your fulfillmentfees because, quite frankly,
they're extremely high right now.
You, if you've never paidattention to your product
dimensions, then maybe that's anarea that you should be paying
(01:50):
more attention to, because thereare potential really
significant reductions that youcould see there.
I'd also point out on thatfront that MCF has become
extremely expensive compared towhat it used to be.
Right now, if we're using MCFthrough FBA, the MCF cost is
probably 60% higher than the FBAcost to fulfill that very same
(02:15):
item.
So although it used to be thatgoing through a 3PL would be
more expensive, it's now provingthat if we store a product at
another warehouse and use 3PLthrough somebody else, that for
those MCF shipments we can shipcheaper from a different 3PL
than we can through Amazon, fbavia MCF.
Speaker 1 (02:34):
Just to break down the acronyms there for anybody
who might not be familiar.
So when you're talking MCF,you're talking about
multi-channel fulfillment.
So basically using your AmazonFBA products If you run a
Shopify store or somewhere elseto ship those orders using
Amazon's network is what you'retalking about Multi-channel
fulfillment.
Speaker 2 (02:51):
Yeah, yeah it used to be.
That price has always been alittle bit more than than a
standard FBA fulfillment to acustomer, and but it was close
enough it wasn't a big deal, butnow it's.
It's much, much, much higher,at least for us anyways.
Speaker 1 (03:04):
But now it's much, much, much higher, at least for
us, anyways.
Okay, matt, things that you'reseeing or things that you think
are important for listeners toknow when we think about deep
diving into lowering Amazon fees.
Speaker 3 (03:15):
Yeah, I mean, one of the things that I've been
digging a lot into which is anewer report from Amazon is that
SKU economics report.
And for me, two of my productsare pretty different in terms of
how much it weighs and we'vebeen doing a bit of a cost
analysis to figure out if itmakes more sense to have the
product at Amazon's warehouse orcontinue to fulfill it from our
(03:38):
warehouse.
And that SKU economics reporthas done a lot for us to be able
to really understand at a SKUlevel what our profitability is
both ways.
We've sold a couple FBA, wesold mostly FBM, but now I can
kind of look at that SKUEconomics Report and look to see
and then compare it with theshipping rates that we're
getting from our 3PL.
(03:59):
So it's a lot more completedata now, I feel like.
And that SKU Economics Report,it really gives you a bird's eye
view at the SKU level what usedto have to get from a lot of
different various reports andkind of piece it together.
So, yeah, that SKU economicsreport helped us really
understand at a SKU level whatwe were paying and what it would
have costed if we were FBA asopposed to FDM.
Speaker 1 (04:24):
Yeah, and I just want to kind of double click on that
because I think it's first ofall, I think that report is
fairly new and secondly, I meanthis is something that you know
we've kind of helped do forclients for a long time of
really getting to.
You know what is that net profitcontribution, both from a
dollar perspective and a marginperspective at the SKU level,
and what it really does is ithelps identify, you know, what
(04:47):
is the goal of that product andhow well are you achieving that
goal?
And we've talked about it, youknow, in different episodes on
this podcast of you knowdifferent products have
different roles and so,depending on those roles, let's
say you know it could be atripwire product where your goal
is to break even while havingthat SKU economics tells you
like, hey, are we breaking evenonce we add in our ad costs and
everything else goes along withthe product of not only
(05:09):
producing the product butgetting into Amazon and then
getting into the hands of thecustomer and then also looking
at your hero products to say howprofitable are we on those?
And then you're going to havecertain products that are really
great as complementary productsthat you may not sell a lot of
and so what we've seen a lot inthe past for accounts that we've
taken over adjustments thatwe've seen is where, essentially
(05:31):
, brand owners were wayoverspending on ads for
complimentary products becausethey didn't understand the role
of that product.
And using the SKU economicsreport, really laser focuses on
where you're getting the bestbang for your buck and how that
product fits into your mix foryour brand overall.
Speaker 2 (05:53):
Yeah, I think, I think it's really common,
especially, I mean, let's faceit A lot of, a lot of Amazon
sellers.
They don't necessarily have awhole lot of previous business
experience Obviously some do,but many don't and so you're
coming in flying blind and kindof building the plane as you go.
And so it's important torecognize and be willing to
admit, like there's certainaspects of business that maybe I
(06:16):
don't yet understand and I needto figure out those things, and
one of those is a lot ofsellers don't even know their
profitability overall, whichobviously is super problematic.
But once you've gotten overthat hurdle and you really
understand, you know what yoursay overall contribution margins
are and whatnot for yourbusiness as a whole, then it is
(06:38):
time to break down to that skewlevel and determine, ok, which
of these products are profitable, which of them aren't, how
profitable.
It may be that that you know,say, skew economics report or
whatever other kind of reportthat you want to pull to get
that data.
It may be that you find thatproducts that you thought had
(06:58):
role XYZ really shouldn't havethat role.
Like they don't.
That's not the role they shouldbe.
They should be here Like maybeI didn't think it was going to
be a very profitable product,and so I thought it was.
This Turns out it's been moreprofitable than I thought, for
whatever reason.
But if you don't dig into thedata and you don't look at that
on a per skew basis, then youdon't know those sorts of things
(07:19):
.
And what you don't know iswhat's going to hurt you.
And so you know, evaluatingthat at that level, you know
what are our ad costs on thatproduct, what are our
fulfillment costs on thatproduct, what are our cogs on
that product.
You know all of those differentlevels.
That gives you that.
You know insight that you needto figure out.
Where should I place myemphasis?
You know where can I save themost money?
You know, or maybe it's alreadyyou know, maybe we're already
(07:41):
efficient on that product and Ineed to focus on a different
product.
Speaker 1 (07:45):
Yeah, and I mean I would say that most businesses
at least that would be.
You know that we see on Amazonthere's always, there's always
products that people are overspending on and and and and
again.
That's not always bad in thesense of it may be, like you
said, that you're testing out,like hey, could this
complimentary product be a heroproduct if we gave it the
visibility that it needs?
(08:05):
Or, you know, and see how muchmarket demand there really is
for that product?
So you know you can definitelyhave an investment there and as
long as you're making thosedecisions consciously, like you
said, and with your eyes open, Ithink that that's really what
matters.
You know, not necessarilybecause strategy is going to
change a lot depending on yoursituation.
(08:26):
It's just being intentionalabout it.
Speaker 2 (08:28):
Yeah, I think too.
You know, I mentioned at thebeginning and I think it's it's
probably important to toreiterate it because, I don't
know, I feel like it's the onearea that a lot of times sellers
don't pay any attention to andthat is your product dimensions.
Because I think it's easy tomake the assumption like okay,
we decided to move into thisniche and sell this product.
(08:49):
We found a manufacturer that'sgiving us a decent price and it
has a decent product.
We already know what thepackaging is.
This is it, this is the productright.
So we're selling it.
It's selling well, maybe, maybeit's a very profitable product.
But at the end of the day,there still is a factor of
Amazon's fulfillment fees, orany 3PL for that matter, are
(09:11):
based on dimensions and weight,and so if you can reduce a
certain characteristic of that,you may be able to significantly
reduce the fulfillment fee onthat product.
And let's say, let's say,you're selling a 25, well, let's
say it's a $30 product, right,and let's say that your
fulfillment on it is is 10, youknow.
(09:32):
Let's say it's eight or $9, youknow that that's a pretty
significant amount, you know, onthat $30 product.
Now, maybe your ad costs arelow.
Maybe you're able to get reallygood placement so you don't
have a whole lot of ad costs.
Maybe your cogs are pretty lowon that.
It's a small product, itdoesn't cost much from the
manufacturer, so maybe yourfulfillment fees are the major
expense for that product.
(09:52):
Well, if you can get under it,it's very possible that you're
being classified.
I'll give you a perfect example.
So on our pool nets we in onedimension were outside of the
dimensional requirements forlarge standard, the sizing tier.
So we ended up in oversize.
(10:13):
But it was only one dimensionof the product.
So we eventually realized likewell, this is kind of ridiculous
, like why would we do that?
So I went to the manufacturerand I said, okay, what is a
different way that we canmanufacture this product and so
that we can get under thatdimension?
Cause we were only over like Idon't know an inch a year or
something like that.
(10:34):
And so I said how can weremanufacture this so that we
can get under that?
And it took a little bit of youknow, back and forth but we
finally came up with a way.
And sometimes it's not evenchanging the manufacturing,
sometimes it's changing is theproduct assembled when it's
shipped to the customer.
Maybe it's an easy product toassemble, maybe it's a couple of
minutes for the customer, andif you ship it disassembled you
(10:54):
can get under that dimension.
But if you ship it assembledyou're not over that dimension.
Like our pool brush with theend pieces on, we're over that
18 inch, you know, targetdimension, but we designed it so
the end pieces can be removedand so the customer just
assembles it on site.
Well, now we're under that 18inches and so instead of
spending $10 to ship it, wespend $6 to ship it.
(11:14):
Well, $4 is a lot.
I mean, if your profit marginis only 10 or $15, or even $20,
like an extra $4 in your pocketis pretty significant, and
sometimes that remanufacturingdoesn't necessarily cost you a
whole lot more.
Speaker 3 (11:27):
An even more easier.
Example of that was a pair ofgloves that I sold that had a
long sleeve and instead of thesleeve being in the box full
length, we just folded thesleeve and it didn't affect the
gloves at all and by the time itgot it was a neoprene coated
rubber glove.
I mean, it took a shape onceyou unfolded it, but folding the
(11:49):
gloves and putting them in abox saved us about a buck 80 per
unit, which is significant whenyou're talking about a thousand
units.
You know, 1500 units in a month, yeah for sure.
Speaker 1 (12:01):
Yeah, that's an extra $3,000 to your bottom line, you
know, just for making a smallchange.
And you know, just process wise, what I'd really encourage
sellers out there to do is, atleast every six to 12 months,
look at your different products.
Because here's the other thing.
I mean we were just talkingabout this before we hit record
on it.
You know Amazon has changedtheir tier categories.
(12:21):
I feel like they changed themat least twice a year.
Change their tier categories.
I feel like they changed themat least twice a year.
So even if you maybe optimizedit for one tier category,
they're changing how those tiercategories are calculated and
that type of stuff.
You really have to reevaluateevery six to 12 months to make
sure that you're getting thebest rate possible for your
products.
And this is one of the biggestthings from a cost perspective.
(12:43):
When you're talking about FBA,that you know they we control as
sellers is kind of thatdimensions of the product, and
so, like you said, I mean youcan find an extra, you know,
five, 10% margin sometimes justby making those changes.
Speaker 2 (12:58):
Well, the other thing that's interesting too is that,
depending on the category thatyou're selling in, a lot of
times you're selling againstbrands that are like maybe that
maybe the top of category brandsare actually retail brands that
you normally find on the shelf.
They just happen to also beselling on Amazon now, because
of course you have to sell onAmazon.
So.
But what happens with that isthat a lot of times those bigger
(13:21):
brands, where maybe selling atretail has been their business
model, forever off the shelf,they just take that exact same
product and the exact samepackaging and they funnel it
through Amazon for a sale.
Well, you might be able to takethat and have that product.
You have the option of goingand changing anything about that
product that you like.
They may not really have quitethat flexibility.
(13:44):
So I know there's some productswithin our category where the
products that are being soldthey're just simply the exact
same product that they've solddown at Leslie's Pool Store for
years off the shelf and they'rejust selling the exact same
product on Amazon and the sizingcategory that it's placed in is
(14:04):
really expensive and therewould be really easy ways to
modify that product and move itinto a smaller sizing tier and
save a whole lot.
So this is not just an areawhere you can save on current
products that you're selling.
It's also an area where you caninvestigate categories and say
is that a category where maybe Icould redesign that product
just a little bit and even if Idon't make the product better, I
(14:26):
just make it cheaper to ship it, so that I've got much more
profit than my competitors do,which gives me more room for
advertising or whatever.
Wherever I want to put thatmoney.
Speaker 1 (14:36):
Yeah, well, I mean back to Matt's example.
I mean I imagine that hiscompetitors probably have that
glove full length, because ifthey're selling in a retail
location, that makes a lot ofsense and that's what customers
are going to want to see.
But if you're selling on Amazon, you know you don't necessarily
need that if you're using yourmain images and you know your
listing in order to sell theproduct.
So, yeah, there's, there'sprobably a lot of opportunity
(14:58):
there.
One of the other areas that Iwant to talk about because, mike
, I know you, I, based on ourprevious conversations, have
some kind of strong opinions andexperiences with this as well
is is that, as Amazon has, youknow, essentially forced sellers
to have more inventory, oflooking at that mix of FBA,
amazon warehouse anddistribution that I feel like is
(15:18):
becoming, you know, from a niceto have to almost a have to
have, if you.
What are the things?
So what I think about that,what I see, is, is that that
balance whether it's a 3PL inFBA or AWD in FBA to make sure
(15:58):
that you have essentially theinventory that Amazon wants so
you're not getting dinged.
Speaker 2 (16:03):
I mean, before I jump in, I don't know, Matt, is
there anything that you reallywant to say on that?
Speaker 3 (16:07):
I've got plenty I could say, but Well, let's hear
what you have to say then.
Speaker 2 (16:13):
Well, I think, first of all, awd is interesting in
that, first of all, noteverybody can use it.
To the best of my knowledge atthis point, they still don't
accept oversized products, whichactually technically oversized
isn't even a category anymore.
We were just talking about that.
But Amazon changed their sizingtier so oversized it doesn't
even exist.
It looks like it's just smallstandard, large standard and
(16:33):
then it goes straight to bulk.
But my guess is AWD is stillanything over that large
standard size.
I don't think they're accepting.
So if you have products thatare in that higher size tier,
awd right now at least I don'tthink is even an option.
But for anybody who it is anoption, I think it's definitely
worth considering at a minimum,because I do believe absolutely
(16:55):
that basically any Amazon sellershould have some form of backup
you know, beyond what you haveat Amazon's warehouses Because,
let's face it, their storagefees are high.
But then also now you've gotlow inventory fees.
So you've got to strike thisreally crucial balance right.
And if you don't have some sortof staging warehouse or
(17:18):
something else in the US whereyou're bringing product into
first or at least backupinventory that you have there,
you can ship straight toAmazon's warehouses.
That's probably a good idea.
We do that from Skewdrop inChina and I think it's
absolutely going to help us andactually already is helping us.
But if you don't have someplacein the States where you're also
storing inventory at somestaging warehouse and I would
(17:40):
recommend, on both coasts, ifyou can then that's going to be
problematic Because, again, ifyou run out at Amazon, it's not
just that now you have the lowinventory fees, which is bad
enough, but of course we allknow if you run out of stock at
Amazon, then your BSR is goingto suffer, which means your rank
is going to suffer and it'sgoing to take a while to get
back up to speed.
So if we're talkingprofitability, it's not always
(18:02):
about reducing fees.
Sometimes it's about well,profitability means I stay in
stock and I don't lose rank andI don't deal with those issues.
So we right now have a stagingwarehouse on both coasts.
We've got one in California,we've got one in Pennsylvania.
We do not use AWD because ourproducts won't be accepted.
(18:23):
But also I have heard fromother sellers that even though
there are some benefits to AWDlike, first of all, as long as
you have inventory at AWD, thenAmazon essentially kind of
doesn't consider you out ofstock.
So like if you run out of stockat Amazon FBA, what will happen
(18:44):
is your listing will still stayup.
The delivery times willincrease because then Amazon
knows well, ok, we've got it atAWD, but we're not going to be
able to get it to the customeras quickly as we would have from
an FBA warehouse, so deliverytimes increase.
So you might still lose someCTR and a little bit of
conversion rate on that listing,but at least you're still up.
So that is a huge benefit ofAWD.
(19:08):
It doesn't sound like they'rereally good yet at inventory
forecasting, especially ifyou're a very seasonal product
or something like that wherethere's fluctuations.
So it might still be a fairlycommon situation where your FBA
inventory would be sold out, butat least you still have some at
AWD.
Our strategy as opposed to thatis we have two warehouses that
(19:30):
not only are staging warehousesfor us that we can ship to
Amazon FCs from, but also we canfulfill via FBM from those
warehouses.
So we always have an FBMlisting as a backup to our FBA
listing and we have twodifferent warehouses that we
could potentially ship from todo that and again we also then
use those for our MCF shipmentsWell, in replacement of what
(19:51):
would be an MCF shipment forsales from other platforms,
because now it's less expensivethan MCF is.
Speaker 1 (19:59):
Matt thoughts you want to add to that conversation
?
Talk about.
Speaker 3 (20:07):
AWD and 3PLs.
So I mean I don't know thatI've ever experienced a need and
I haven't really looked intoAWD as much as probably I would
have if I didn't have a 3PL.
But I mean, for me I've alwaysconsidered a 3PL.
Just the fact that just thecost of doing business, I mean
it's a lot easier for me.
(20:27):
I mean I typically end upordering in larger quantities to
get the bulk discount.
And this is before skew drop.
And that's one of the things Iwant to start looking into is
does it make more sense to storeit in China?
I mean, obviously I think itgoes without saying that 3PL
storage is a lot cheaper inChina.
So now that Mike's had a lot ofexperience with skew drop, I
(20:48):
want to start looking to see anddo a cost comparison.
But I've always had a 3PL andI've always had a backup FBM
listing for that reason.
So yeah, I don't know as muchabout AWD as I probably should
or if it's more cost effectivethan the way that I've just
always been doing.
Speaker 1 (21:05):
Yeah, I would say so.
We've had some clients that useAWD.
And just to echo some of thethings that Mike said, the first
is that I, you know, I thinkit'll get better, but right now,
especially if you have aseasonal business, it is not
great at inventory management,forecasting inventory, so you
could very easily be out at FBAand still have AWD inventory.
(21:25):
Now again, the nice thing aboutthat is is that your listing
doesn't go down, However.
You know I would say you know,just be aware that if that
happens, your delivery time isgoing to be significantly longer
.
And one of the things we'vetalked about in previous
episodes is, even if you haveyour products in FBA like, say,
you're shipping it in andAmazon's still waiting to check
it in, they'll still sell yourproduct.
(21:45):
But people who are shopping onAmazon, they want a product in a
day or two.
So if they see that yourproduct has a 5, 7, 10 days in
order to fulfill, yourconversion rate is going to drop
pretty significantly.
Typically, what we see is againdepends on how long that delay
is but 20 to 50% of what yourregular conversion rate is.
So if that's an ongoing thing,I wouldn't rely on AWD in order
(22:08):
to pick up the slack in thatprocess.
The other thing that I wouldsay from an Amazon fees
perspective is it does, at leastright now, essentially Amazon's
incentivizing people to use AWDby, in most cases, waiving the
low inventory fees.
So I would say that's the otherpiece why you might want to
(22:28):
consider it as a part of yourstrategy, and I think you know
there's typically not a like one.
One solution solves allsituations approach.
You know you probably need acombination of things, and that
might be, you know, skew dropwith AWD, with even a 3PL, in
(22:49):
order to solve those problems.
So be aware of that.
And then the other thing that Iwould put out there is that I'm
seeing a lot more of it, andsome of this has to do with just
political climate and that typeof stuff.
Long story short, sellerfulfilled prime has really made
a comeback to where Amazon isopening that back up quite a bit
.
So, as we're talking about, ifyou already have a three PL,
that does a really good job foryou.
(23:11):
If you've taken the time andeffort to have one on the East
Coast and West Coast, it may beworth looking into getting your
product certified for sellerfulfilled prime, and so you can
kind of have some of the bestworld, or best of both worlds,
depending on you know, again,dimensions of your product, your
kind of situation and that typeof stuff.
So definitely don't discountseller fulfilled prime as an
(23:33):
option because that could be away for you to get FBA with a
lot more control over how muchinventory and how much and
paying a lot less for storagefees and other things, but
getting all the benefits of FBA,yeah for sure.
Speaker 3 (23:45):
I'm actually going through that.
I'm going through that rightnow with one of the brands that
I work with.
We just got accepted to theseller fulfilled prime test
trial program.
So what I've learned already inthe first couple of orders that
we've gotten is that shippingbuying the shipping from Amazon
as opposed to through my 3PL ischeaper than shipping through my
(24:08):
3PL, and I didn't actuallythink that was going to be the
case.
I thought that we were going toget better rates through our
3PL how we've been sending, butthe first couple of orders I
think it was about $4 cheaperbuying the shipping through
Amazon as opposed to how we weredoing it before, before we were
Seller Fulfilled Prime.
So we're going to save prettysignificantly on shipping.
(24:28):
And now we have the Prime bagstoo, and now we have the
PrimeBads too.
Speaker 2 (24:31):
So to clarify that for people, what you're
suggesting is you're stillshipping the product from your
3PL, but you're utilizing Amazonshipping rates and using their
carrier, whatever that is.
They come in to pick up andtake out, but you get to pay
Amazon the rate.
Speaker 3 (24:49):
That's exactly right.
Speaker 2 (25:00):
So now we have the PrimeBadge and now we're paying
less for shipping than we werebefore because we're able to
leverage Amazon shipping rates.
There is a tendency with Amazonsellers and again I think a lot
of this comes down to a lot ofus are coming into this business
not having a whole lot ofprevious experience and so
(25:21):
managing some of these thingslooks really scary and we don't
necessarily know what we'redoing.
But I think that because ofthat, we tend to latch onto the
idea that I'm just going to findthe solution and I'm just going
to do that because it's easy,Because once I figure it out and
I know what that solution isand I know how to operate it,
I'm good.
And the problem with that is isthat, as you alluded, do AWD
(25:45):
and you have FBA.
You know like it's multiplethings to manage, but at the
(26:12):
same time, having AWD if it'sopen to you, if you're, if
you've got standard sizeinventory would potentially
eliminate that low storage orlow inventory storage fee, right
, or low inventory fees.
So you don't have to puteverything through AWD, but
having it and utilizing it tosome extent would eliminate that
fee for you.
(26:32):
Having 3PL backup means that,even if AWD doesn't really well
forecast your inventory, you canbe paying attention to
forecasting your inventory andbring it in from that 3PL, from
that staging warehouse.
You still have FBM backup.
You still have maybe sellerfulfilled prime if it's a good
option.
So I guess I would justencourage anybody listening that
(26:56):
if you're taking the simpleapproach simply because it's the
simple approach, consider thepossibility that maybe a more
complex approach may take alittle bit more effort and a few
more man hours on your side anda little bit more of a learning
curve, but you could be savingyourself tens of thousands of
dollars by going that route, orat least increasing your profit,
of course, by that much.
(27:16):
So don't discount thepossibility that the more
complex approach really is theway you should be going.
Speaker 1 (27:23):
Well, I agree with that should be going Well, I
agree with that.
I'll throw even another one onthere that we've been working
recently with a client, which isso they sell everything
merchant fulfilled but, as Mattwas talking about, they buy
their shipping through Amazonbecause Amazon does do a good
job of that.
Of course, they're leveraginghow much they order with UPS,
fedex and the large shippingcompanies and you get a good
(27:46):
rate out of that.
Well, one of the things that weadjusted for them because
Amazon really is pushing a lotof brands towards the
self-fulfilled prime, or atleast those timelines, even if
you're merchant fulfilled andwhat we did was we went into the
backend and actually adjustedsome of their shipping times so
that way they didn't have to payfor, for example, like next day
air and some of those reallyexpensive shipping options as a
(28:09):
part of their merchant fulfilled, because what would happen is
every once in a while, based ontheir settings, you know they
say, hey, yep, we're going toget it to the client or the
customer in two days.
Well, the only option to do thatwas like next day air.
That was, you know, 40 or 50bucks for that product, whereas
if we sent it ground, it waslike 10 bucks.
And so there are actuallyoptions to go in there, and I
(28:31):
think it's worth doing, if yousell quite a bit merchant
fulfilled, to say, hey, I wantto eliminate those options.
They're going to be superexpensive for me Because, again,
if you're FBA, that's one thing, but it's a whole nother thing
If you're a merchant fulfilled.
If a customer has got to waitan extra day in order to get the
product, it's probably notgoing to make that big a
difference on your conversionrates, but it may save you $30
(28:53):
in shipping by taking that extraday to send it by ground versus
by air.
So that's another thing that Iwould really encourage people to
do is, if you're selling quitea bit merchant fulfilled, look
at what those shipping optionsare, because you may be able to
save quite a bit on yourshipping just by eliminating
some of the more expensiveoptions that are in that menu.
Speaker 3 (29:11):
Yeah, no for sure.
Well, I didn't even think.
I assumed by before we evenapplied for the seller fulfilled
program, I was reading in,reading into the requirements
and I assumed that you had tohave it to the consumer two days
after they ordered it, justbased on the documentation that
I was reading online.
And that's actually not thecase.
(29:31):
With Seller Fulfilled Prime, itcan get there up to five days
after, depending on where theyare, where your warehouse is.
There's a bit of an algorithmthat Amazon applies to Seller
Fulfilled Prime orders appliesto seller fulfilled prime orders
, and it turned out because ofthat calculation that we didn't
really have to change anythingin terms of the speed that we
(29:51):
were already shipping outside ofthe seller fulfilled prime
program, where now we're sendingit the same service as we were
before.
But now we're able to get theprime batch because we were
already getting it there underthat certain threshold and it
was for I think it was for likezone four or five, which was
East Coast, based on where ourwarehouse was.
(30:13):
We still qualified for theSeller Fulfilled Prime program,
even though it was getting therein four days, and it was
actually our Amazon rep thatkind of allowed us to understand
that about the Seller FulfilledPrime program, but I didn't
even think we were eligiblebecause I didn't think that we
could get it everywhere in twodays.
But that just wasn't the case.
So it just took a little bitmore digging and some working on
it with our Amazon rep tounderstand that we still can
(30:36):
qualify for it and we don't haveto change anything internally
about how we were shippinganyways.
Speaker 1 (30:40):
Yeah, the other thing I want to bring up here just
before you know, before we wrap,because I think that this was a
really powerful example for me.
So one of the other fees thatAmazon has added is the
placement fees, and so we wereworking with a client and they
had probably something that wasa three-quarter full pallet that
they were going to ship intoAmazon for FBA.
(31:01):
And normally what was the mostcost-effective way was, hey, go
pick up one three quarter palletand ship it into Amazon.
And you know we were workingwith them and what we found out
was is that it was significantlycheaper like half the price to
do small parcel delivery withfive boxes, because then we
(31:23):
didn't have to, because therewas enough boxes to where now we
didn't have to pay theplacement fee, because now
Amazon can ship it to whateverfulfillment centers they want,
compared to shipping in that onepallet.
So I would say the takeaway fromthat is is that you know you
may have a way that you'vealways shipped in your product
to FBA, especially if it's oneof those products where you know
(31:43):
again back to the beginning ofour conversation that's a
complimentary product, wheremaybe you don't sell a ton of
units to that product, and soyou don't have to ship a ton of
inventory in.
But you've always done it oneway.
I would encourage you to lookat the different methods of
getting into Amazon FBA, becausethere may be one way of
(32:03):
shipping in that's significantlycheaper with especially now the
placement fees have takeneffect on Amazon versus how you
may have used to ship something.
Speaker 3 (32:14):
I was actually just reading and I don't know if it
was a LinkedIn post or it was anewsletter, and I think it was a
change that they've justrecently made that you can get
the inbound placement feeswaived if you're sending in at
least five cartons that have thesame configuration inside of
them, so the same SKU and thesame number of SKUs across five
(32:36):
different cartons.
Then it negates the inboundplacement fee altogether.
Is that what you were talkingabout, John, or is that, yeah,
that's very so.
Speaker 1 (32:45):
I'm using small parcel delivery, I think.
I think that's what the case washere, and so basically, instead
of sending in that threequarters I mean so we were
sending in.
They were sending in a fullpallet, but there was about the
pallet was only about threequarters full.
So we broke that down intosmall parcel delivery and ended
up being like you're talkingabout like five boxes that were
identical in how they were laidout and because of that they
(33:09):
were able to ship in withoutpaying that placement fee, and
it made a huge difference.
I mean Huge difference.
Yeah, like I said for them, itcut how much that cost them to
ship in by 50%, which saved thema few hundred bucks.
But then the other piece of itis is just from a processing
perspective.
Usually your small parceldeliveries get processed much
quicker than if you're shippingin a pallet.
(33:30):
Now, obviously you can't shipin everything small parcel
delivery and it doesn't makesense in every case, but in this
case, not only did they savesignificantly on their ship in,
but also their product was nowavailable via FBA a lot faster.
Speaker 2 (33:44):
It's probably also worth mentioning and, just
depending on your situation,every business is a little
different.
You know and obviously somepeople listen to this are, you
know, a one person operation andsome people listen to this, you
know, maybe have 10 or 15employees, but for those of you
that are a much smalleroperation, maybe a single
operator or maybe you've got,you know, a couple of people on
(34:06):
your team, depending on thevalue to your business of moving
to a more complex logisticssystem, it may behoove you to
find somebody to hire on as yourlogistics you know manager,
because it really does getpretty complex when it gets down
(34:30):
to your inventory forecasting.
And then where are we going tostore the inventory?
What warehouses are we going tobring it into?
Do we send it to the 3PL?
Do we send it to AWD?
Do we send it to FBA?
How much are we going to sendhere, there and the other place?
It's a lot to manage for oneperson.
If they have a whole lot ofother things that they're also
(34:50):
managing, if that's all they'redoing, then they can do a much
better job at that, andespecially if you hire somebody
who already has that experiencein logistics and understands all
of the various different waysthat this could be put together.
I would imagine that there'sactually quite a few businesses
out there that could save a lotof money on the logistics side
(35:11):
of things when it comes to feesand the shipping costs and
storage fees and all of that Ifyou had somebody who that was
their job and you stopped doingit as one of the many jobs that
you're doing to manage yourbusiness.
Get somebody who knows whatthey're doing and really figure
out what the best setup is andmake sure that you've got
somebody to manage that.
Speaker 3 (35:30):
I had a very good seller friend of mine who made
what he thought was a verydifficult decision of hiring a
logistics manager and within thefirst two months of hiring
someone that he thought hecouldn't afford, the guy paid
for himself and then some in theincreased profitability that he
was able to eke out of justtheir existing supply chain and
(35:52):
that one person paid for himselffor a whole year in the span of
a month and a half two monthsof him being on staff.
Speaker 2 (36:00):
And even if it's just reducing out of stocks, I mean
the amount of money that you canlose on out of stocks,
especially if it's on a heroproduct or something.
You've got somebody managingthat who's who's going to be
better at that than you, even ifit doesn't mean they are better
at it.
It just means that's the onlything they're doing, you know,
so they can be better at it.
You know, reducing those out ofstocks could easily pay for
that person.
Speaker 1 (36:21):
Yeah, well, I think that's so as we wrap.
I think that's probably a greataction item for listeners to
put on their list of you know,especially if you're spending a
lot of time with these types ofthings, looking at somebody and
it doesn't have to be full time,you know, especially if you're
growing, it could be somethingas little as five to 10 hours a
week where you can find somebodyyou know on Upwork or something
like that.
There are a lot of people outthere that really know this
(36:43):
stuff inside and out and, likeyou said, matt could easily 10x
the investment that you put inthem in a month or two to really
add to your bottom line.
So I think that's a greataction item.
Speaker 3 (36:55):
Other action items based on our discussion today
that you guys would have forlisteners I think a really easy
one, and the one that ended upsaving us almost $2 per unit,
was just look at your currentexisting product and is there a
way that you can make it smaller?
Is there a way that you know,look to see what the different
dimension tiers are and see howclose you are, because I mean,
(37:16):
if it's as easy as folding apair of gloves, that doesn't
affect the integrity of theglove at all and you can save
almost two bucks, I mean that'sa huge win.
So you know, I'd say, lookingand being aware of what the
different dimension tiers areand how close you are is a good
first action step.
Speaker 2 (37:33):
And I would say, even though we haven't made a lot of
use of it yet, the fact thatthat SKU economics report is now
available.
I would say that would beanother, you know, really good
action step, even if it's justto take a glance at it, just to
see, you know where are you oneach of these SKUs and, you know
, pick out some individual SKUsin your list that maybe could
use some attention.
You know, maybe the fees are,you know, really high.
(37:55):
You know one or two products inone or two categories at least.
Then you can pinpoint what theyare and it gives you, you know,
a roadmap to you know wheremight we be able to make the
biggest effect.
And obviously you want to payattention to those products that
are moving the most volume andthat have the highest level of
fees overall and total expense.
(38:16):
You probably want to payattention to those first, make
sure that you're addressingthose, but then just kind of
keep working your way down thatlist.
Speaker 1 (38:23):
Yeah, and I would leave with this tip and kind of
double clicking on that SKUeconomics is look at your
products and think about so.
One of the tests that we'vedone on a regular basis is look
at what happens if we either add20% to the ad spend or we cut
the ad spend by 20% for thatproduct, and how does that
change the SKU economics.
When you have that data, thatcan be really powerful to know,
(38:46):
am I spending the right amountof ad spend on the SKU to get
where I want to go, Especiallyif you kind of have everything
in a happy place but you'relooking at how can we improve?
I would leave that action tipfor people that are looking for
a way to maybe squeeze a littlebit more margin out of their
product, Because ad spend is abig piece where that's a lever
(39:09):
that you have control over, yeahfor sure.
So all right.
Well, great place to wrap fortoday, and I just encourage
listeners again.
You don't have to do, obviously, a lot of things that we talked
about today.
What I would encouragelisteners to do pick out one of
those action items, test it onyour business, and then we'd
love to hear, whether it's onLinkedIn or reach out to us via
(39:29):
email or somewhere else and letus know how it worked out for
you.
So thanks everybody forlistening and we'll see you next
time.
Welcome everybody to the Brand Fortress HQ podcast
for another Tactics Tuesday.
We're also live on LinkedIn, soif you have any questions, you
can always leave them either inthe comments or in the chat over
there.
We'd love to answer questionslive.
Today.
What we're talking about isunlocking profit potential and
really a deep dive into loweringfees on Amazon.
It's no big secret that feescontinue to go up on Amazon.
(00:22):
This is one of the things,especially as brands in 2024 on
Amazon are really strugglingwith maintaining profitability,
continuing to grow all thosedifferent things as Amazon fees
go up.
Today, what we're going to dois look at some of those
different strategies, or atleast where to look for that
information and things to thinkabout for your business in order
to lower Amazon fees.
(00:43):
Gentlemen, I know that we werehaving a discussion before we
hit record on this on a coupleof different things.
I guess let's start off withwhere you know.
What do you guys think is maybethe first best place to look
when we talk about loweringAmazon fees for your brand?
Speaker 2 (01:00):
Well, amazon fees are so high everywhere, it's to be
honest, it's a little bit hardto choose and I actually think,
realistically speaking, I thinkit probably depends a lot on the
brand which area becomes thearea that you have yet to really
pay close attention to, becausewhatever area that is, that's
(01:29):
probably the one that you shouldpay attention to that you
haven't been so, you know.
For instance, you know wediscussed the idea of you know
checking your product dimensionsand things like that to see how
you can reduce your fulfillmentfees because, quite frankly,
they're extremely high right now.
You, if you've never paidattention to your product
dimensions, then maybe that's anarea that you should be paying
(01:50):
more attention to, because thereare potential really
significant reductions that youcould see there.
I'd also point out on thatfront that MCF has become
extremely expensive compared towhat it used to be.
Right now, if we're using MCFthrough FBA, the MCF cost is
probably 60% higher than the FBAcost to fulfill that very same
(02:15):
item.
So although it used to be thatgoing through a 3PL would be
more expensive, it's now provingthat if we store a product at
another warehouse and use 3PLthrough somebody else, that for
those MCF shipments we can shipcheaper from a different 3PL
than we can through Amazon, fbavia MCF.
Speaker 1 (02:34):
Just to break down the acronyms there for anybody
who might not be familiar.
So when you're talking MCF,you're talking about
multi-channel fulfillment.
So basically using your AmazonFBA products If you run a
Shopify store or somewhere elseto ship those orders using
Amazon's network is what you'retalking about Multi-channel
fulfillment.
Speaker 2 (02:51):
Yeah, yeah it used to be.
That price has always been alittle bit more than than a
standard FBA fulfillment to acustomer, and but it was close
enough it wasn't a big deal, butnow it's.
It's much, much, much higher,at least for us anyways.
Speaker 1 (03:04):
But now it's much, much, much higher, at least for
us, anyways.
Okay, matt, things that you'reseeing or things that you think
are important for listeners toknow when we think about deep
diving into lowering Amazon fees.
Speaker 3 (03:15):
Yeah, I mean, one of the things that I've been
digging a lot into which is anewer report from Amazon is that
SKU economics report.
And for me, two of my productsare pretty different in terms of
how much it weighs and we'vebeen doing a bit of a cost
analysis to figure out if itmakes more sense to have the
product at Amazon's warehouse orcontinue to fulfill it from our
(03:38):
warehouse.
And that SKU economics reporthas done a lot for us to be able
to really understand at a SKUlevel what our profitability is
both ways.
We've sold a couple FBA, wesold mostly FBM, but now I can
kind of look at that SKUEconomics Report and look to see
and then compare it with theshipping rates that we're
getting from our 3PL.
(03:59):
So it's a lot more completedata now, I feel like.
And that SKU Economics Report,it really gives you a bird's eye
view at the SKU level what usedto have to get from a lot of
different various reports andkind of piece it together.
So, yeah, that SKU economicsreport helped us really
understand at a SKU level whatwe were paying and what it would
have costed if we were FBA asopposed to FDM.
Speaker 1 (04:24):
Yeah, and I just want to kind of double click on that
because I think it's first ofall, I think that report is
fairly new and secondly, I meanthis is something that you know
we've kind of helped do forclients for a long time of
really getting to.
You know what is that net profitcontribution, both from a
dollar perspective and a marginperspective at the SKU level,
and what it really does is ithelps identify, you know, what
(04:47):
is the goal of that product andhow well are you achieving that
goal?
And we've talked about it, youknow, in different episodes on
this podcast of you knowdifferent products have
different roles and so,depending on those roles, let's
say you know it could be atripwire product where your goal
is to break even while havingthat SKU economics tells you
like, hey, are we breaking evenonce we add in our ad costs and
everything else goes along withthe product of not only
(05:09):
producing the product butgetting into Amazon and then
getting into the hands of thecustomer and then also looking
at your hero products to say howprofitable are we on those?
And then you're going to havecertain products that are really
great as complementary productsthat you may not sell a lot of
and so what we've seen a lot inthe past for accounts that we've
taken over adjustments thatwe've seen is where, essentially
(05:31):
, brand owners were wayoverspending on ads for
complimentary products becausethey didn't understand the role
of that product.
And using the SKU economicsreport, really laser focuses on
where you're getting the bestbang for your buck and how that
product fits into your mix foryour brand overall.
Speaker 2 (05:53):
Yeah, I think, I think it's really common,
especially, I mean, let's faceit A lot of, a lot of Amazon
sellers.
They don't necessarily have awhole lot of previous business
experience Obviously some do,but many don't and so you're
coming in flying blind and kindof building the plane as you go.
And so it's important torecognize and be willing to
admit, like there's certainaspects of business that maybe I
(06:16):
don't yet understand and I needto figure out those things, and
one of those is a lot ofsellers don't even know their
profitability overall, whichobviously is super problematic.
But once you've gotten overthat hurdle and you really
understand, you know what yoursay overall contribution margins
are and whatnot for yourbusiness as a whole, then it is
(06:38):
time to break down to that skewlevel and determine, ok, which
of these products are profitable, which of them aren't, how
profitable.
It may be that that you know,say, skew economics report or
whatever other kind of reportthat you want to pull to get
that data.
It may be that you find thatproducts that you thought had
(06:58):
role XYZ really shouldn't havethat role.
Like they don't.
That's not the role they shouldbe.
They should be here Like maybeI didn't think it was going to
be a very profitable product,and so I thought it was.
This Turns out it's been moreprofitable than I thought, for
whatever reason.
But if you don't dig into thedata and you don't look at that
on a per skew basis, then youdon't know those sorts of things
(07:19):
.
And what you don't know iswhat's going to hurt you.
And so you know, evaluatingthat at that level, you know
what are our ad costs on thatproduct, what are our
fulfillment costs on thatproduct, what are our cogs on
that product.
You know all of those differentlevels.
That gives you that.
You know insight that you needto figure out.
Where should I place myemphasis?
You know where can I save themost money?
You know, or maybe it's alreadyyou know, maybe we're already
(07:41):
efficient on that product and Ineed to focus on a different
product.
Speaker 1 (07:45):
Yeah, and I mean I would say that most businesses
at least that would be.
You know that we see on Amazonthere's always, there's always
products that people are overspending on and and and and
again.
That's not always bad in thesense of it may be, like you
said, that you're testing out,like hey, could this
complimentary product be a heroproduct if we gave it the
visibility that it needs?
(08:05):
Or, you know, and see how muchmarket demand there really is
for that product?
So you know you can definitelyhave an investment there and as
long as you're making thosedecisions consciously, like you
said, and with your eyes open, Ithink that that's really what
matters.
You know, not necessarilybecause strategy is going to
change a lot depending on yoursituation.
(08:26):
It's just being intentionalabout it.
Speaker 2 (08:28):
Yeah, I think too.
You know, I mentioned at thebeginning and I think it's it's
probably important to toreiterate it because, I don't
know, I feel like it's the onearea that a lot of times sellers
don't pay any attention to andthat is your product dimensions.
Because I think it's easy tomake the assumption like okay,
we decided to move into thisniche and sell this product.
(08:49):
We found a manufacturer that'sgiving us a decent price and it
has a decent product.
We already know what thepackaging is.
This is it, this is the productright.
So we're selling it.
It's selling well, maybe, maybeit's a very profitable product.
But at the end of the day,there still is a factor of
Amazon's fulfillment fees, orany 3PL for that matter, are
(09:11):
based on dimensions and weight,and so if you can reduce a
certain characteristic of that,you may be able to significantly
reduce the fulfillment fee onthat product.
And let's say, let's say,you're selling a 25, well, let's
say it's a $30 product, right,and let's say that your
fulfillment on it is is 10, youknow.
(09:32):
Let's say it's eight or $9, youknow that that's a pretty
significant amount, you know, onthat $30 product.
Now, maybe your ad costs arelow.
Maybe you're able to get reallygood placement so you don't
have a whole lot of ad costs.
Maybe your cogs are pretty lowon that.
It's a small product, itdoesn't cost much from the
manufacturer, so maybe yourfulfillment fees are the major
expense for that product.
(09:52):
Well, if you can get under it,it's very possible that you're
being classified.
I'll give you a perfect example.
So on our pool nets we in onedimension were outside of the
dimensional requirements forlarge standard, the sizing tier.
So we ended up in oversize.
(10:13):
But it was only one dimensionof the product.
So we eventually realized likewell, this is kind of ridiculous
, like why would we do that?
So I went to the manufacturerand I said, okay, what is a
different way that we canmanufacture this product and so
that we can get under thatdimension?
Cause we were only over like Idon't know an inch a year or
something like that.
(10:34):
And so I said how can weremanufacture this so that we
can get under that?
And it took a little bit of youknow, back and forth but we
finally came up with a way.
And sometimes it's not evenchanging the manufacturing,
sometimes it's changing is theproduct assembled when it's
shipped to the customer.
Maybe it's an easy product toassemble, maybe it's a couple of
minutes for the customer, andif you ship it disassembled you
(10:54):
can get under that dimension.
But if you ship it assembledyou're not over that dimension.
Like our pool brush with theend pieces on, we're over that
18 inch, you know, targetdimension, but we designed it so
the end pieces can be removedand so the customer just
assembles it on site.
Well, now we're under that 18inches and so instead of
spending $10 to ship it, wespend $6 to ship it.
(11:14):
Well, $4 is a lot.
I mean, if your profit marginis only 10 or $15, or even $20,
like an extra $4 in your pocketis pretty significant, and
sometimes that remanufacturingdoesn't necessarily cost you a
whole lot more.
Speaker 3 (11:27):
An even more easier.
Example of that was a pair ofgloves that I sold that had a
long sleeve and instead of thesleeve being in the box full
length, we just folded thesleeve and it didn't affect the
gloves at all and by the time itgot it was a neoprene coated
rubber glove.
I mean, it took a shape onceyou unfolded it, but folding the
(11:49):
gloves and putting them in abox saved us about a buck 80 per
unit, which is significant whenyou're talking about a thousand
units.
You know, 1500 units in a month, yeah for sure.
Speaker 1 (12:01):
Yeah, that's an extra $3,000 to your bottom line, you
know, just for making a smallchange.
And you know, just process wise, what I'd really encourage
sellers out there to do is, atleast every six to 12 months,
look at your different products.
Because here's the other thing.
I mean we were just talkingabout this before we hit record
on it.
You know Amazon has changedtheir tier categories.
(12:21):
I feel like they changed themat least twice a year.
Change their tier categories.
I feel like they changed themat least twice a year.
So even if you maybe optimizedit for one tier category,
they're changing how those tiercategories are calculated and
that type of stuff.
You really have to reevaluateevery six to 12 months to make
sure that you're getting thebest rate possible for your
products.
And this is one of the biggestthings from a cost perspective.
(12:43):
When you're talking about FBA,that you know they we control as
sellers is kind of thatdimensions of the product, and
so, like you said, I mean youcan find an extra, you know,
five, 10% margin sometimes justby making those changes.
Speaker 2 (12:58):
Well, the other thing that's interesting too is that,
depending on the category thatyou're selling in, a lot of
times you're selling againstbrands that are like maybe that
maybe the top of category brandsare actually retail brands that
you normally find on the shelf.
They just happen to also beselling on Amazon now, because
of course you have to sell onAmazon.
So.
But what happens with that isthat a lot of times those bigger
(13:21):
brands, where maybe selling atretail has been their business
model, forever off the shelf,they just take that exact same
product and the exact samepackaging and they funnel it
through Amazon for a sale.
Well, you might be able to takethat and have that product.
You have the option of goingand changing anything about that
product that you like.
They may not really have quitethat flexibility.
(13:44):
So I know there's some productswithin our category where the
products that are being soldthey're just simply the exact
same product that they've solddown at Leslie's Pool Store for
years off the shelf and they'rejust selling the exact same
product on Amazon and the sizingcategory that it's placed in is
(14:04):
really expensive and therewould be really easy ways to
modify that product and move itinto a smaller sizing tier and
save a whole lot.
So this is not just an areawhere you can save on current
products that you're selling.
It's also an area where you caninvestigate categories and say
is that a category where maybe Icould redesign that product
just a little bit and even if Idon't make the product better, I
(14:26):
just make it cheaper to ship it, so that I've got much more
profit than my competitors do,which gives me more room for
advertising or whatever.
Wherever I want to put thatmoney.
Speaker 1 (14:36):
Yeah, well, I mean back to Matt's example.
I mean I imagine that hiscompetitors probably have that
glove full length, because ifthey're selling in a retail
location, that makes a lot ofsense and that's what customers
are going to want to see.
But if you're selling on Amazon, you know you don't necessarily
need that if you're using yourmain images and you know your
listing in order to sell theproduct.
So, yeah, there's, there'sprobably a lot of opportunity
(14:58):
there.
One of the other areas that Iwant to talk about because, mike
, I know you, I, based on ourprevious conversations, have
some kind of strong opinions andexperiences with this as well
is is that, as Amazon has, youknow, essentially forced sellers
to have more inventory, oflooking at that mix of FBA,
amazon warehouse anddistribution that I feel like is
(15:18):
becoming, you know, from a niceto have to almost a have to
have, if you.
What are the things?
So what I think about that,what I see, is, is that that
balance whether it's a 3PL inFBA or AWD in FBA to make sure
(15:58):
that you have essentially theinventory that Amazon wants so
you're not getting dinged.
Speaker 2 (16:03):
I mean, before I jump in, I don't know, Matt, is
there anything that you reallywant to say on that?
Speaker 3 (16:07):
I've got plenty I could say, but Well, let's hear
what you have to say then.
Speaker 2 (16:13):
Well, I think, first of all, awd is interesting in
that, first of all, noteverybody can use it.
To the best of my knowledge atthis point, they still don't
accept oversized products, whichactually technically oversized
isn't even a category anymore.
We were just talking about that.
But Amazon changed their sizingtier so oversized it doesn't
even exist.
It looks like it's just smallstandard, large standard and
(16:33):
then it goes straight to bulk.
But my guess is AWD is stillanything over that large
standard size.
I don't think they're accepting.
So if you have products thatare in that higher size tier,
awd right now at least I don'tthink is even an option.
But for anybody who it is anoption, I think it's definitely
worth considering at a minimum,because I do believe absolutely
(16:55):
that basically any Amazon sellershould have some form of backup
you know, beyond what you haveat Amazon's warehouses Because,
let's face it, their storagefees are high.
But then also now you've gotlow inventory fees.
So you've got to strike thisreally crucial balance right.
And if you don't have some sortof staging warehouse or
(17:18):
something else in the US whereyou're bringing product into
first or at least backupinventory that you have there,
you can ship straight toAmazon's warehouses.
That's probably a good idea.
We do that from Skewdrop inChina and I think it's
absolutely going to help us andactually already is helping us.
But if you don't have someplacein the States where you're also
storing inventory at somestaging warehouse and I would
(17:40):
recommend, on both coasts, ifyou can then that's going to be
problematic Because, again, ifyou run out at Amazon, it's not
just that now you have the lowinventory fees, which is bad
enough, but of course we allknow if you run out of stock at
Amazon, then your BSR is goingto suffer, which means your rank
is going to suffer and it'sgoing to take a while to get
back up to speed.
So if we're talkingprofitability, it's not always
(18:02):
about reducing fees.
Sometimes it's about well,profitability means I stay in
stock and I don't lose rank andI don't deal with those issues.
So we right now have a stagingwarehouse on both coasts.
We've got one in California,we've got one in Pennsylvania.
We do not use AWD because ourproducts won't be accepted.
(18:23):
But also I have heard fromother sellers that even though
there are some benefits to AWDlike, first of all, as long as
you have inventory at AWD, thenAmazon essentially kind of
doesn't consider you out ofstock.
So like if you run out of stockat Amazon FBA, what will happen
(18:44):
is your listing will still stayup.
The delivery times willincrease because then Amazon
knows well, ok, we've got it atAWD, but we're not going to be
able to get it to the customeras quickly as we would have from
an FBA warehouse, so deliverytimes increase.
So you might still lose someCTR and a little bit of
conversion rate on that listing,but at least you're still up.
So that is a huge benefit ofAWD.
(19:08):
It doesn't sound like they'rereally good yet at inventory
forecasting, especially ifyou're a very seasonal product
or something like that wherethere's fluctuations.
So it might still be a fairlycommon situation where your FBA
inventory would be sold out, butat least you still have some at
AWD.
Our strategy as opposed to thatis we have two warehouses that
(19:30):
not only are staging warehousesfor us that we can ship to
Amazon FCs from, but also we canfulfill via FBM from those
warehouses.
So we always have an FBMlisting as a backup to our FBA
listing and we have twodifferent warehouses that we
could potentially ship from todo that and again we also then
use those for our MCF shipmentsWell, in replacement of what
(19:51):
would be an MCF shipment forsales from other platforms,
because now it's less expensivethan MCF is.
Speaker 1 (19:59):
Matt thoughts you want to add to that conversation
?
Talk about.
Speaker 3 (20:07):
AWD and 3PLs.
So I mean I don't know thatI've ever experienced a need and
I haven't really looked intoAWD as much as probably I would
have if I didn't have a 3PL.
But I mean, for me I've alwaysconsidered a 3PL.
Just the fact that just thecost of doing business, I mean
it's a lot easier for me.
(20:27):
I mean I typically end upordering in larger quantities to
get the bulk discount.
And this is before skew drop.
And that's one of the things Iwant to start looking into is
does it make more sense to storeit in China?
I mean, obviously I think itgoes without saying that 3PL
storage is a lot cheaper inChina.
So now that Mike's had a lot ofexperience with skew drop, I
(20:48):
want to start looking to see anddo a cost comparison.
But I've always had a 3PL andI've always had a backup FBM
listing for that reason.
So yeah, I don't know as muchabout AWD as I probably should
or if it's more cost effectivethan the way that I've just
always been doing.
Speaker 1 (21:05):
Yeah, I would say so.
We've had some clients that useAWD.
And just to echo some of thethings that Mike said, the first
is that I, you know, I thinkit'll get better, but right now,
especially if you have aseasonal business, it is not
great at inventory management,forecasting inventory, so you
could very easily be out at FBAand still have AWD inventory.
(21:25):
Now again, the nice thing aboutthat is is that your listing
doesn't go down, However.
You know I would say you know,just be aware that if that
happens, your delivery time isgoing to be significantly longer
.
And one of the things we'vetalked about in previous
episodes is, even if you haveyour products in FBA like, say,
you're shipping it in andAmazon's still waiting to check
it in, they'll still sell yourproduct.
(21:45):
But people who are shopping onAmazon, they want a product in a
day or two.
So if they see that yourproduct has a 5, 7, 10 days in
order to fulfill, yourconversion rate is going to drop
pretty significantly.
Typically, what we see is againdepends on how long that delay
is but 20 to 50% of what yourregular conversion rate is.
So if that's an ongoing thing,I wouldn't rely on AWD in order
(22:08):
to pick up the slack in thatprocess.
The other thing that I wouldsay from an Amazon fees
perspective is it does, at leastright now, essentially Amazon's
incentivizing people to use AWDby, in most cases, waiving the
low inventory fees.
So I would say that's the otherpiece why you might want to
(22:28):
consider it as a part of yourstrategy, and I think you know
there's typically not a like one.
One solution solves allsituations approach.
You know you probably need acombination of things, and that
might be, you know, skew dropwith AWD, with even a 3PL, in
(22:49):
order to solve those problems.
So be aware of that.
And then the other thing that Iwould put out there is that I'm
seeing a lot more of it, andsome of this has to do with just
political climate and that typeof stuff.
Long story short, sellerfulfilled prime has really made
a comeback to where Amazon isopening that back up quite a bit
.
So, as we're talking about, ifyou already have a three PL,
that does a really good job foryou.
(23:11):
If you've taken the time andeffort to have one on the East
Coast and West Coast, it may beworth looking into getting your
product certified for sellerfulfilled prime, and so you can
kind of have some of the bestworld, or best of both worlds,
depending on you know, again,dimensions of your product, your
kind of situation and that typeof stuff.
So definitely don't discountseller fulfilled prime as an
(23:33):
option because that could be away for you to get FBA with a
lot more control over how muchinventory and how much and
paying a lot less for storagefees and other things, but
getting all the benefits of FBA,yeah for sure.
Speaker 3 (23:45):
I'm actually going through that.
I'm going through that rightnow with one of the brands that
I work with.
We just got accepted to theseller fulfilled prime test
trial program.
So what I've learned already inthe first couple of orders that
we've gotten is that shippingbuying the shipping from Amazon
as opposed to through my 3PL ischeaper than shipping through my
(24:08):
3PL, and I didn't actuallythink that was going to be the
case.
I thought that we were going toget better rates through our
3PL how we've been sending, butthe first couple of orders I
think it was about $4 cheaperbuying the shipping through
Amazon as opposed to how we weredoing it before, before we were
Seller Fulfilled Prime.
So we're going to save prettysignificantly on shipping.
(24:28):
And now we have the Prime bagstoo, and now we have the
PrimeBads too.
Speaker 2 (24:31):
So to clarify that for people, what you're
suggesting is you're stillshipping the product from your
3PL, but you're utilizing Amazonshipping rates and using their
carrier, whatever that is.
They come in to pick up andtake out, but you get to pay
Amazon the rate.
Speaker 3 (24:49):
That's exactly right.
Speaker 2 (25:00):
So now we have the PrimeBadge and now we're paying
less for shipping than we werebefore because we're able to
leverage Amazon shipping rates.
There is a tendency with Amazonsellers and again I think a lot
of this comes down to a lot ofus are coming into this business
not having a whole lot ofprevious experience and so
(25:21):
managing some of these thingslooks really scary and we don't
necessarily know what we'redoing.
But I think that because ofthat, we tend to latch onto the
idea that I'm just going to findthe solution and I'm just going
to do that because it's easy,Because once I figure it out and
I know what that solution isand I know how to operate it,
I'm good.
And the problem with that is isthat, as you alluded, do AWD
(25:45):
and you have FBA.
You know like it's multiplethings to manage, but at the
(26:12):
same time, having AWD if it'sopen to you, if you're, if
you've got standard sizeinventory would potentially
eliminate that low storage orlow inventory storage fee, right
, or low inventory fees.
So you don't have to puteverything through AWD, but
having it and utilizing it tosome extent would eliminate that
fee for you.
(26:32):
Having 3PL backup means that,even if AWD doesn't really well
forecast your inventory, you canbe paying attention to
forecasting your inventory andbring it in from that 3PL, from
that staging warehouse.
You still have FBM backup.
You still have maybe sellerfulfilled prime if it's a good
option.
So I guess I would justencourage anybody listening that
(26:56):
if you're taking the simpleapproach simply because it's the
simple approach, consider thepossibility that maybe a more
complex approach may take alittle bit more effort and a few
more man hours on your side anda little bit more of a learning
curve, but you could be savingyourself tens of thousands of
dollars by going that route, orat least increasing your profit,
of course, by that much.
(27:16):
So don't discount thepossibility that the more
complex approach really is theway you should be going.
Speaker 1 (27:23):
Well, I agree with that should be going Well, I
agree with that.
I'll throw even another one onthere that we've been working
recently with a client, which isso they sell everything
merchant fulfilled but, as Mattwas talking about, they buy
their shipping through Amazonbecause Amazon does do a good
job of that.
Of course, they're leveraginghow much they order with UPS,
fedex and the large shippingcompanies and you get a good
(27:46):
rate out of that.
Well, one of the things that weadjusted for them because
Amazon really is pushing a lotof brands towards the
self-fulfilled prime, or atleast those timelines, even if
you're merchant fulfilled andwhat we did was we went into the
backend and actually adjustedsome of their shipping times so
that way they didn't have to payfor, for example, like next day
air and some of those reallyexpensive shipping options as a
(28:09):
part of their merchant fulfilled, because what would happen is
every once in a while, based ontheir settings, you know they
say, hey, yep, we're going toget it to the client or the
customer in two days.
Well, the only option to do thatwas like next day air.
That was, you know, 40 or 50bucks for that product, whereas
if we sent it ground, it waslike 10 bucks.
And so there are actuallyoptions to go in there, and I
(28:31):
think it's worth doing, if yousell quite a bit merchant
fulfilled, to say, hey, I wantto eliminate those options.
They're going to be superexpensive for me Because, again,
if you're FBA, that's one thing, but it's a whole nother thing
If you're a merchant fulfilled.
If a customer has got to waitan extra day in order to get the
product, it's probably notgoing to make that big a
difference on your conversionrates, but it may save you $30
(28:53):
in shipping by taking that extraday to send it by ground versus
by air.
So that's another thing that Iwould really encourage people to
do is, if you're selling quitea bit merchant fulfilled, look
at what those shipping optionsare, because you may be able to
save quite a bit on yourshipping just by eliminating
some of the more expensiveoptions that are in that menu.
Speaker 3 (29:11):
Yeah, no for sure.
Well, I didn't even think.
I assumed by before we evenapplied for the seller fulfilled
program, I was reading in,reading into the requirements
and I assumed that you had tohave it to the consumer two days
after they ordered it, justbased on the documentation that
I was reading online.
And that's actually not thecase.
(29:31):
With Seller Fulfilled Prime, itcan get there up to five days
after, depending on where theyare, where your warehouse is.
There's a bit of an algorithmthat Amazon applies to Seller
Fulfilled Prime orders appliesto seller fulfilled prime orders
, and it turned out because ofthat calculation that we didn't
really have to change anythingin terms of the speed that we
(29:51):
were already shipping outside ofthe seller fulfilled prime
program, where now we're sendingit the same service as we were
before.
But now we're able to get theprime batch because we were
already getting it there underthat certain threshold and it
was for I think it was for likezone four or five, which was
East Coast, based on where ourwarehouse was.
(30:13):
We still qualified for theSeller Fulfilled Prime program,
even though it was getting therein four days, and it was
actually our Amazon rep thatkind of allowed us to understand
that about the Seller FulfilledPrime program, but I didn't
even think we were eligiblebecause I didn't think that we
could get it everywhere in twodays.
But that just wasn't the case.
So it just took a little bitmore digging and some working on
it with our Amazon rep tounderstand that we still can
(30:36):
qualify for it and we don't haveto change anything internally
about how we were shippinganyways.
Speaker 1 (30:40):
Yeah, the other thing I want to bring up here just
before you know, before we wrap,because I think that this was a
really powerful example for me.
So one of the other fees thatAmazon has added is the
placement fees, and so we wereworking with a client and they
had probably something that wasa three-quarter full pallet that
they were going to ship intoAmazon for FBA.
(31:01):
And normally what was the mostcost-effective way was, hey, go
pick up one three quarter palletand ship it into Amazon.
And you know we were workingwith them and what we found out
was is that it was significantlycheaper like half the price to
do small parcel delivery withfive boxes, because then we
(31:23):
didn't have to, because therewas enough boxes to where now we
didn't have to pay theplacement fee, because now
Amazon can ship it to whateverfulfillment centers they want,
compared to shipping in that onepallet.
So I would say the takeaway fromthat is is that you know you
may have a way that you'vealways shipped in your product
to FBA, especially if it's oneof those products where you know
(31:43):
again back to the beginning ofour conversation that's a
complimentary product, wheremaybe you don't sell a ton of
units to that product, and soyou don't have to ship a ton of
inventory in.
But you've always done it oneway.
I would encourage you to lookat the different methods of
getting into Amazon FBA, becausethere may be one way of
(32:03):
shipping in that's significantlycheaper with especially now the
placement fees have takeneffect on Amazon versus how you
may have used to ship something.
Speaker 3 (32:14):
I was actually just reading and I don't know if it
was a LinkedIn post or it was anewsletter, and I think it was a
change that they've justrecently made that you can get
the inbound placement feeswaived if you're sending in at
least five cartons that have thesame configuration inside of
them, so the same SKU and thesame number of SKUs across five
(32:36):
different cartons.
Then it negates the inboundplacement fee altogether.
Is that what you were talkingabout, John, or is that, yeah,
that's very so.
Speaker 1 (32:45):
I'm using small parcel delivery, I think.
I think that's what the case washere, and so basically, instead
of sending in that threequarters I mean so we were
sending in.
They were sending in a fullpallet, but there was about the
pallet was only about threequarters full.
So we broke that down intosmall parcel delivery and ended
up being like you're talkingabout like five boxes that were
identical in how they were laidout and because of that they
(33:09):
were able to ship in withoutpaying that placement fee, and
it made a huge difference.
I mean Huge difference.
Yeah, like I said for them, itcut how much that cost them to
ship in by 50%, which saved thema few hundred bucks.
But then the other piece of itis is just from a processing
perspective.
Usually your small parceldeliveries get processed much
quicker than if you're shippingin a pallet.
(33:30):
Now, obviously you can't shipin everything small parcel
delivery and it doesn't makesense in every case, but in this
case, not only did they savesignificantly on their ship in,
but also their product was nowavailable via FBA a lot faster.
Speaker 2 (33:44):
It's probably also worth mentioning and, just
depending on your situation,every business is a little
different.
You know and obviously somepeople listen to this are, you
know, a one person operation andsome people listen to this, you
know, maybe have 10 or 15employees, but for those of you
that are a much smalleroperation, maybe a single
operator or maybe you've got,you know, a couple of people on
(34:06):
your team, depending on thevalue to your business of moving
to a more complex logisticssystem, it may behoove you to
find somebody to hire on as yourlogistics you know manager,
because it really does getpretty complex when it gets down
(34:30):
to your inventory forecasting.
And then where are we going tostore the inventory?
What warehouses are we going tobring it into?
Do we send it to the 3PL?
Do we send it to AWD?
Do we send it to FBA?
How much are we going to sendhere, there and the other place?
It's a lot to manage for oneperson.
If they have a whole lot ofother things that they're also
(34:50):
managing, if that's all they'redoing, then they can do a much
better job at that, andespecially if you hire somebody
who already has that experiencein logistics and understands all
of the various different waysthat this could be put together.
I would imagine that there'sactually quite a few businesses
out there that could save a lotof money on the logistics side
(35:11):
of things when it comes to feesand the shipping costs and
storage fees and all of that Ifyou had somebody who that was
their job and you stopped doingit as one of the many jobs that
you're doing to manage yourbusiness.
Get somebody who knows whatthey're doing and really figure
out what the best setup is andmake sure that you've got
somebody to manage that.
Speaker 3 (35:30):
I had a very good seller friend of mine who made
what he thought was a verydifficult decision of hiring a
logistics manager and within thefirst two months of hiring
someone that he thought hecouldn't afford, the guy paid
for himself and then some in theincreased profitability that he
was able to eke out of justtheir existing supply chain and
(35:52):
that one person paid for himselffor a whole year in the span of
a month and a half two monthsof him being on staff.
Speaker 2 (36:00):
And even if it's just reducing out of stocks, I mean
the amount of money that you canlose on out of stocks,
especially if it's on a heroproduct or something.
You've got somebody managingthat who's who's going to be
better at that than you, even ifit doesn't mean they are better
at it.
It just means that's the onlything they're doing, you know,
so they can be better at it.
You know, reducing those out ofstocks could easily pay for
that person.
Speaker 1 (36:21):
Yeah, well, I think that's so as we wrap.
I think that's probably a greataction item for listeners to
put on their list of you know,especially if you're spending a
lot of time with these types ofthings, looking at somebody and
it doesn't have to be full time,you know, especially if you're
growing, it could be somethingas little as five to 10 hours a
week where you can find somebodyyou know on Upwork or something
like that.
There are a lot of people outthere that really know this
(36:43):
stuff inside and out and, likeyou said, matt could easily 10x
the investment that you put inthem in a month or two to really
add to your bottom line.
So I think that's a greataction item.
Speaker 3 (36:55):
Other action items based on our discussion today
that you guys would have forlisteners I think a really easy
one, and the one that ended upsaving us almost $2 per unit,
was just look at your currentexisting product and is there a
way that you can make it smaller?
Is there a way that you know,look to see what the different
dimension tiers are and see howclose you are, because I mean,
(37:16):
if it's as easy as folding apair of gloves, that doesn't
affect the integrity of theglove at all and you can save
almost two bucks, I mean that'sa huge win.
So you know, I'd say, lookingand being aware of what the
different dimension tiers areand how close you are is a good
first action step.
Speaker 2 (37:33):
And I would say, even though we haven't made a lot of
use of it yet, the fact thatthat SKU economics report is now
available.
I would say that would beanother, you know, really good
action step, even if it's justto take a glance at it, just to
see, you know where are you oneach of these SKUs and, you know
, pick out some individual SKUsin your list that maybe could
use some attention.
You know, maybe the fees are,you know, really high.
(37:55):
You know one or two products inone or two categories at least.
Then you can pinpoint what theyare and it gives you, you know,
a roadmap to you know wheremight we be able to make the
biggest effect.
And obviously you want to payattention to those products that
are moving the most volume andthat have the highest level of
fees overall and total expense.
(38:16):
You probably want to payattention to those first, make
sure that you're addressingthose, but then just kind of
keep working your way down thatlist.
Speaker 1 (38:23):
Yeah, and I would leave with this tip and kind of
double clicking on that SKUeconomics is look at your
products and think about so.
One of the tests that we'vedone on a regular basis is look
at what happens if we either add20% to the ad spend or we cut
the ad spend by 20% for thatproduct, and how does that
change the SKU economics.
When you have that data, thatcan be really powerful to know,
(38:46):
am I spending the right amountof ad spend on the SKU to get
where I want to go, Especiallyif you kind of have everything
in a happy place but you'relooking at how can we improve?
I would leave that action tipfor people that are looking for
a way to maybe squeeze a littlebit more margin out of their
product, Because ad spend is abig piece where that's a lever
(39:09):
that you have control over, yeahfor sure.
So all right.
Well, great place to wrap fortoday, and I just encourage
listeners again.
You don't have to do, obviously, a lot of things that we talked
about today.
What I would encouragelisteners to do pick out one of
those action items, test it onyour business, and then we'd
love to hear, whether it's onLinkedIn or reach out to us via
(39:29):
email or somewhere else and letus know how it worked out for
you.
So thanks everybody forlistening and we'll see you next
time.
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