1. Go Small & lightweight – Shipping (and Amazon storage) costs go up every year and can represent a huge portion of your income. Just as an exercise I kept a record of all my shipping costs last month. I had a total of 24 inbound shipments and 36 shipments to Amazon. My total cost for inbound shipping was $317.28. The total to ship all my items to Amazon was $313.00. Add those together and you get $650.28. If I annualized that, it comes out to 7,563.36 per year.
If these numbers seem low to you that is because about 1/3rd of my product line is fashion jewelry and other very small items.
The other costs related to size if you use Amazon FBA are weight-based handling fees and storage costs. If you source smaller and lighter merchandise, you will reduce these costs too.
2. Raise your Average Selling Price – Among the many fees Amazon charges for FBA are the – Order handling fee which is a minimum of 2.02 for standard size items (More for larger items).
If you are selling something for $9.95 that $2.02 represents 20.3% of your selling price. But if you sell an item for $39.95 then the $2.02 is only 5% of your selling price. That makes quite an impact on your profit margin.
There are several ways to do this. One simple way is to source and sell higher priced items.
Another good way if you have lots of low-cost goods is to create multi-paks. For example, I sell a line of gourmet spice rubs that sell for $12.95 each. So I sell them in a multi-pak of 3 for $37.95. The other way is to create bundles of complimentary items (see next item).
3. Create Product Bundles – A product bundle is when you create a unique listing by adding complimentary products together. An example of this would be adding a knife sharpener to a set of kitchen knives, or selling a camera with a case and tripod.
I mentioned spices above. In addition to creating multi-paks, you can create bundles. An example is sourcing the four most common spices used in Middle Eastern cooking and selling them as a Middle Eastern Spice Set.
The key is that the items must somehow complement each other. You can also bundle books or DVDs with a related product. (Example – Rachael Ray Cookware with one of her cookbooks). Let’s say you were selling fly rods. You could bundle that with an instructional DVD that shows how to fly cast, or a book on fly-fishing. (Note: When you do this you must list in the category of the main product ‘the fly rod’ -not the book. Amazon does not permit bundling any media products together and you can not list your bundle with the media item as primary.)
Bundling has two main advantages: You raise your selling price, which as you learned above earns you better margins, and since you have created a unique product you are guaranteed to win the buy box every time. When you create a bundle you rarely have any competition, so you don’t have to discount your prices.
4. Save on Shipping Supplies – Shipping supplies, boxes, bubble pak, tape and so on can really add up. Anything you can do to reduce your costs will put dollars on your bottom line. One thing we always try and do is re-using the boxes our products arrive in when sending them into Amazon.
The other thing we do is visit local merchants and ask them for their boxes. Stores such as kitchen stores, Gift stores, office supply stores and so on, get lots of boxes and packing material that they have to pay to have recycled. So they are happy to give them away. Just get in the habit of visiting these stores once a week or so and collecting boxes and bubblepak. Forget the Styrofoam peanuts because Amazon does not allow those to be used in shipments to FBA.
5. Learn how to import directly from overseas – One of my biggest product lines is gun holsters that I import from several countries. I used to buy them from distributors here in the US and I found I could only double the price on Amazon if I wanted to be competitive. But now I import them directly and I can mark them up as much as 4X.
Here is an example. I had one holster that I bought for $9.50 plus shipping that I sell for $21.95. I sent a sample of the holster to my agent in Hong Kong. He sourced it for me and sent me a sample. The quality was just as good as the one I was buying. So now I buy in bulk from his supplier.
So I came up with a private label and sent him the artwork. He puts my card in the package; poly bags it with warning labels and ships them to me. I had to buy 500 at a time, but even with shipping, my landed cost is now only $4.85 instead of $9.50. Since this particular holster sells 5 or 6 a day, ordering 500 was no problem.
But before you decide to do this -make sure you have a product that is already selling or you are 100% sure will sell, as you don’t want to get stuck with 500 pieces of unsellable merchandise.
There are, of course, many other ways to reduce your costs and increase your profits -but I think these 5 represent some of the most important and easiest to implement.