New year, new rules. At least according to Amazon. A new fiscal year means companies are making changes to policies that affect their bottom line. Wondering how this year’s fee changes will affect your bottom line? In this episode of Entrepreneur Adventure, Todd breaks down exactly how these changes impact your business while recommending ways to protect your pockets nonetheless. Stick around for insight into the different types of sellers and how to negotiate like a pro. Resources From This Episode
Show Notes & Transcript:
Amazon Wholesale Reverse Sourcing, How to Find Suppliers, Distributors, Manufacturers for FBA 2019:
Coaching Call:
Still Worth It
Beginning February 18th, Amazon is rolling out new fees. While many of these fee changes are fee increases, Amazon’s invested billions of dollars into improving their service for our mutual customers and despite these changes, Amazon remains a fantastic platform to grow your business with benefits like free one-day shipping.
Fee Changes Debunked
So what’s changed? Some fees have actually decreased! Let’s begin with referral fees, or the fees you pay for access to Amazon’s platform and customers. Referral fees are decreasing on shoes, handbags, and sunglasses, outdoor furniture, and personal care appliances.
Keep Your ROI at 30%
Fulfillment fees, or the fees you pay for Amazon handling your order fulfillment, are, for the most part, going up. On average, fulfillment fees are going up 25 cents per unit. If you’re following Todd’s recommendations, your margins shouldn’t be so thin that this increase affects you. As a reminder, we recommend selling products with a 30% ROI and a minimum $3 to $4 profit.
Storage Tetris
For every month your product sits in Amazon’s warehouse unsold, you pay a storage fee. These are going up significantly (69 cents per cubic foot to 75 cents per cubic foot) so keep your inventory supply tight (15-30 days). However, if you’ve got money to work with, you may benefit from a 60-day supply so as not to run out.
Don’t Dispose
Amazon is increasing disposal order fees, or fees incurred when Amazon disposes of your product, to match removal fees, or fees incurred when you remove a product. Because these prices are now equivalent, you may as well remove the product and either resell or donate the item to charity for a tax writeoff to ensure some financial gain.
Types of Sellers
It’s important to understand the different types of sellers you’ll be dealing with to mitigate risk and effectively navigate relationships.
Brands (also known as suppliers) develop their own products. Because brands are more emotionally invested, they’re pickier about who they let sell and you’ll likely only receive a 5% to 10% open rate. When it comes to brands, remember to stress maintaining their product quality over sell rate.
Distributors purchase products from brands and sell to sellers like us. Distributors typically offer better pricing rates than brands and offer open rates of up to 50%. Distributors also carry a variety of established brands that you can add to your Amazon portfolio. Check out this video for tips on finding a distributor!
Wholesalers are third-party distributors that don’t buy from or have relationships with brands. They’re likely purchasing products when stores close and need to lose items or when brands are liquidating. Because wholesalers’ end goal is to sell, they’ll sell to anyone with an open rate of 100%. But buying from a wholesaler can be tricky – you’re at a higher risk of buying fake or damaged products. If you’re just starting out on Amazon, don’t risk it.
Negotiate
Distributors expect you to negotiate! Always ask for discount levels, aim to maintain profit margins, and go below what you’re looking for in the negotiation to improve your chances of landing a sweet deal. Lowering prices by even 25 cents per unit can go a long way in maintaining profitable sales.
Build Rapport
Relationships are an essential aspect of every business, but for those in sales, they’re imperative. Forget email and call your contacts directly. Make friendly small talk, send annual cards, and maintain transparency about order expectations and profitability. Once you establish trust, sellers are more inclined to offer additional discounts.
Overall
Hopefully this helps demystify Amazon’s fee changes, clarify the different sellers, and guide your next negotiation. For individualized attention, schedule a coaching call with Todd!
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