Improving Amazon Seller Profitability: Insights from the eComm Breakthrough Podcast

I recently joined the eComm Breakthrough Podcast to discuss practical ways for Amazon sellers to address rising fees, manage inventory more effectively, and improve cash flow. In today's challenging market, these topics are more relevant than ever for sellers looking to maintain and grow their businesses.

You can find the full episode here: eComm Breakthrough Podcast, or listen on Apple Podcasts, Spotify, and YouTube.

In this post, I'll summarize key points and action items from our conversation. We covered strategies for tackling hidden costs, optimizing inventory, and making data-driven decisions to stay profitable on Amazon.

Let's get into the main takeaways and practical steps you can apply to your Amazon business.

Key Points:

1. Challenges for Amazon Sellers
   • Rising fees and economic pressures are squeezing profit margins.
   • Increasing shipping and fulfillment costs pose significant challenges.
2. Hidden Costs and Fees
   • Fees throughout the supply chain (e.g., logistics, storage, aged inventory) are often overlooked.
   • Poor inventory management can lead to costly long-term storage fees.
3. Understanding Unit Economics
   • Sellers must know their total costs (e.g., landed cost, storage) to improve profitability.
   • Business strategies should adapt to changing shipping costs and inventory dynamics.
4. Inventory Forecasting and Financial Planning
   • Accurate forecasting is crucial for avoiding overstocking and stockouts.
   • SoStocked by Carbon6 can help predict future costs and manage cash flow better.
5. Optimizing Packaging and Shipping Strategies
   • Adjusting packaging to meet Amazon’s requirements can lower FBA fees.
   • Resizing products and cartons can lead to significant savings on fulfillment costs.
6. Cash Flow and Supplier Negotiation Strategies
   • Negotiating payment terms with suppliers can help maintain cash flow during longer lead times.
   • Sellers should keep inventory flexible and avoid locking up too much capital in stock.
7. Use of Amazon Warehousing and Distribution (AWD)
   • AWD offers steady storage rates and reduced fees for integrated services.
   • It’s wise to keep some inventory with third-party logistics providers as a backup.
8. Liquidation and Removal Strategies
   • Consider selling through, liquidating or removing inventory that won’t sell within 150 days to avoid high storage fees. Analyze best options based on goals and cost.
   • Amazon’s liquidation and donation programs can be useful for excess inventory.
9. Data-Driven Decision-Making
   • Regularly monitor and measure fees, storage, and shipping costs.
   • Implement systems to track changes in Amazon’s size tiers and adjust accordingly.

Action Items for Amazon Sellers:

1. Negotiate Supplier Terms
   • Explore creative terms, such as paying upfront for raw materials if it will speed up production time or arranging flexible payment terms for finished products.
   • Consider extended payment terms or have suppliers store inventory.
2. Focus on Aged Inventory
   • Actively manage aged inventory to avoid long-term storage fees. Implement plans to sell, remove, or liquidate excess stock before it reaches 180 or 270 days.
   • Use SoStocked by Carbon6 to project aged inventory costs and plan actions accordingly.
3. Optimize Product Packaging and Shipping
   • Reevaluate packaging to ensure it meets Amazon’s requirements and reduces fulfillment fees. Resizing products can significantly lower FBA fees.
   • Regularly request Amazon to remeasure products to ensure they are in the correct size tier.
   • Use the free Product Resizer tool and free Master Carton Calculator to optimize packaging
4. Leverage AWD While Maintaining Flexibility
   • Use AWD for cost-effective storage, but keep a portion of inventory with a third-party logistics provider as a backup.
   • Consider splitting shipments, using AWD for bulk storage, and a 3PL for special orders or other sales channels.
5. Run Regular Fee Audits
   • Utilize tools like Seller Investigators to track changes in FBA fees due to size or weight adjustments and file claims if overcharged.
   • Regular reimbursement audits and inventory audits can reveal opportunities for reducing costs and maximizing profitability.
6. Plan for Future Costs
   • Don’t wait for fee rates to increase—forecast costs based on current data to avoid surprises.
   • Prioritize cost-saving measures based on data-driven strategies, focusing on the largest potential savings first.

These insights can help you better handle costs, improve inventory management, and protect your profitability. Start with one or two that seem most relevant to your business. For more detailed insights, check out the full podcast episode.