How to Reduce Amazon Shipping Cost?

Recent fee increases on Amazon‘s Fulfillment by Amazon (FBA) program have left many sellers scrambling to find ways to optimize their shipping costs. This begs the question about how to reduce Amazon shipping cost?

While FBA offers a convenient and comprehensive fulfillment solution, with services like storage, pick and pack, and order fulfillment, it may not always be the most cost-effective option for every seller. 

Understanding the cost structure of FBA fees and exploring alternative fulfillment approaches can significantly help you understand how to avoid Amazon shipping charges.

How to Reduce Amazon Shipping Cost

Amazon FBA Shipping Costs Breakdown

FBA fees consist of several components that can impact your overall Amazon shipping costs. 

Pick and Pack Fees

These fees are charged for each unit Amazon picks, packs, and preps for shipment. 

The cost is determined by the item’s size (determined by volume or weight), weight, and product category. For instance, large or heavier items will lead to higher pick and pack fees compared to smaller, lightweight items. 

Additionally, products in specific categories, such as apparel or hazardous materials, may have higher pick and pack fees due to special handling requirements. 

Inventory Storage Fees

These fees are based on the amount of space your inventory occupies in Amazon’s fulfillment centers and the duration of storage. 

Understanding inventory storage fees encourages sellers to optimize their inventory management practices. By implementing strategies like forecasting demand and avoiding overstocking, sellers can minimize shipping costs. 

Furthermore, Amazon offers incentives like removal order discounts to encourage sellers to remove slow-moving or inactive inventory, further reducing storage fees. 

Order Fulfillment Fees

Order fulfillment fees cover the costs associated with picking, packing, shipping, and customer service for each order. 

These fees vary depending on the item’s weight and the destination zone to which it’s shipped. Heavier items will naturally cost more to ship due to increased weight and potential dimensional weight charges. 

Similarly, shipping costs will vary depending on the distance the item needs to travel.

Efficient Packaging

Using the right size packaging materials minimizes the dimensional weight, a significant factor in FBA fees. 

Invest in appropriately sized boxes, void fill materials, and other packaging supplies to optimize space utilization. 

Consider employing techniques like dimensional weight optimization software or box-in-a-box methods to further reduce dimensional weight and associated shipping costs. 

Discounted Shipping Rates

While Amazon’s FBA program offers convenience, exploring alternative shipping options can lead to significant cost savings for sellers. 

Negotiating with Carriers

Sellers with high-volume shipments can potentially negotiate discounted rates with carriers like UPS or FedEx, leading to significant cost savings compared to relying solely on Amazon’s fulfillment network. 

By leveraging their high-volume shipping needs, sellers can negotiate more competitive rates with carriers. 

Some sellers may find success in partnering with regional carriers that specialize in specific geographic areas, potentially offering even lower rates for targeted destinations. 

Amazon’s Shipping Programs

Consider alternative Amazon shipping programs like Seller Fulfilled Prime (SFP) or Fulfillment by Merchant (FBM)

SFP allows you to fulfill Prime orders yourself while maintaining the Prime badge, potentially offering cost savings compared to FBA. 

FBM gives you complete control over fulfillment, enabling you to leverage your own shipping strategies and potentially reduce costs. 

Implementing Technology Solutions

Technology plays a vital role in streamlining shipping processes and reducing costs: 

Multi-Carrier Shipping Software

These tools integrate with Seller Central and allow you to compare rates from various carriers in real-time. 

With a single interface, you can compare options from Amazon Buy Shipping, negotiated carrier rates, and other third-party shipping providers, ensuring you select the most cost-effective option for each order. 

Dimensional Weight Optimization Software

These software solutions help you optimize your packaging based on dimensional weight, a significant factor in FBA fees

By analyzing your product dimensions, the software recommends appropriate box sizes and void fill materials to minimize weight and associated shipping costs. 

Automated Order Processing Software

Automating order processing tasks like order picking, packing, and label generation minimizes errors and streamlines fulfillment. 

This reduces the likelihood of incorrect shipments and unnecessary fees associated with returns. Furthermore, automation can improve efficiency, allowing you to process orders more quickly and potentially reduce fulfillment times. 

Order Processing

Maintain accurate inventory levels in Seller Central. Discrepancies can lead to picking errors and result in incorrect shipments. 

Regular inventory audits and implementing a robust inventory management system are crucial for accuracy. 

Implement barcode scanning during picking and packing processes, ensuring the correct items are selected for each order, minimizing the risk of errors and potential returns due to incorrect fulfillment. 

Ensure clear and concise labeling on all outgoing packages. 

This includes accurate recipient information, tracking numbers, and any special handling instructions. Clear labeling minimizes delays and potential returns due to delivery issues. 

Exploring Multi-channel Fulfillment

A multi-channel fulfillment (MCF) strategy involves storing inventory in multiple locations across the country. 

This approach can significantly reduce Amazon shipping cost for geographically dispersed customers.

Reduced Shipping Costs

By storing inventory closer to your customer base, you can leverage lower Amazon shipping rates for shorter distances. This is particularly beneficial for bulky or heavy items where shipping costs can significantly impact profitability. 

Faster Delivery Times

By strategically placing inventory in multiple locations, you can offer faster delivery times to customers across the country. 

faster delivery can improve customer satisfaction and potentially lead to increased sales. 

Working with 3PL Fulfillment Services

This-party logistics (3PL) providers offer fulfillment and warehousing services to businesses like Amazon sellers. 

Partnering with a 3PL provider can be a cost-effective solution for sellers with high-volume or specialized inventory needs: 

Cost Savings: 3PL providers often have established relationships with major carriers, allowing them to negotiate lower shipping rates than individual sellers can achieve. These bulk discounts can translate into significant cost savings for you. 

Expertise and Scalability: 3PL providers have the expertise and infrastructure to handle large-scale fulfillment operations. They can offer services like warehousing, picking and packing, and shipping, allowing you to focus on other aspects of your business, beneficial for sellers experiencing rapid growth or seasonal spikes in demand. 

Specialized Inventory Management: Some 3PL providers specialize in handling specific types of inventory, such as bulky or hazardous materials. These providers have the necessary equipment and expertise to safely store and ship these types of items, potentially reducing your liability and associated costs.