FBA remains one of the most attractive services for Amazon sellers. It allows products to be stored in Amazon’s fulfillment centers, while the marketplace takes care of all logistics — from storage to shipping and customer service. However, participation in the program is far from free. For many sellers, the costs of storage, packaging, and shipping become a significant expense. And when you factor in additional fees and regular rate increases, even a well-planned strategy can stop being profitable.
Without a thoughtful approach to cost management, it’s easy to lose part or even all of your profit margin. In this article, we’ve compiled 10 practical tips to help reduce Amazon FBA fees and make your business more resilient to change.
- 1. Optimize Your Packaging
- 2. Bundle Similar Products
- 3. Optimize Inventory Management
- 4. Monitor the Inventory Performance Index (IPI)
- 5. Eliminate Unprofitable SKUs
- 6. Plan Your Shipping Wisely
- 7. Use Amazon Advertising Tools
- 8. Sell Outside of Amazon Using the Capabilities of MCF
- 9. Regularly Review Terms of Cooperation with Suppliers and 3PL Providers
- 10. Adapt to FBA Fee Changes in a Timely Manner
Amazon uses dimensional weight pricing to calculate shipping costs under FBA. This means that the larger the product’s packaging, the higher the shipping cost may be — even if the item itself is lightweight.
Extra centimeters in packaging can literally cost you money. For example, a small textile item packed in a bulky box might be classified as “Large Standard-Size” or even “Oversize,” whereas vacuum-sealed, it could fall under “Small Standard-Size” with significantly lower FBA fees.
To reduce Amazon FBA costs, it’s important to optimize both the packaging and the internal arrangement of the product. Here’s what you can do:
- Analyze your current packaging dimensions. Check if they are truly as small as possible. Reducing the size by even 1–2 cm can lower the dimensional weight category.
- Analyze the internal packaging contents. An overly thick layer of bubble wrap, excessive padding, or inefficient product placement inside the box can increase the overall dimensional weight. Reevaluate the internal configuration — you might be able to use more compact filler materials, reduce empty space, or arrange the items more tightly.
- Use foldable designs. If the product can be folded compactly (such as bags, collapsible boxes, or soft goods), it can help reduce the overall dimensions.
At the same time, it’s important to maintain a balance between compactness and packaging reliability. Cost savings should not lead to an increase in damaged goods during shipping. Returns and replacements can end up being much more expensive than the money saved on packaging.
The main idea behind this method is to create thoughtful product combinations that encourage an increase in the average order value. With each additional item in the customer’s cart, you’ll incur proportionally lower logistics costs per unit.
Advantages of bundling products:
- You pay lower Amazon fees. Instead of paying a fee for processing each individual item, you pay for a single bundled product.
- You save on packaging and shipping. Shipping multiple items in one box is cheaper than sending each item separately.
- Customers typically spend more when purchasing bundles. For example, if you’re selling kitchen knives, you can create a set of various knives with a cutting board. This bundle will be priced higher than a single knife, increasing your average order value.
How does this work in practice? Create logical product combinations that complement each other. For example:
- For cosmetics: shampoo + conditioner + hair mask
- For home goods: a set of kitchen towels in different colors
- For electronics: smartphone + case + screen protector
It’s a winning strategy that works in virtually any product category.
Effective inventory management is one of the key factors in saving costs on Amazon FBA. The marketplace charges additional fees for storing products in the fulfillment center for more than 180 days. On the other hand, stock shortages lead to lost sales, a decline in ratings, and reduced visibility in search results. Finding the right balance is crucial.
How to optimize inventory management:
- Monitor inventory turnover closely. Remove slow-moving items from FBA or switch them to FBM (Fulfilled by Merchant) to avoid paying for storage fees.
- Use demand forecasting tools. Modern analytics platforms allow you to accurately predict sales peaks and troughs based on seasonality and market trends. Maintain inventory levels sufficient to meet demand for 60-90 days — this is the optimal balance between product availability and storage costs.
- Implement a Just-In-Time (JIT) inventory replenishment system. Work with suppliers who can provide regular small shipments instead of large, infrequent batches. This will help minimize the time products are stored in Amazon warehouses.
- Periodically conduct an “inventory clean-up.” Analyze which products are selling slowly and develop strategies for their quick sale — such as promotions or discounts. Remember, sometimes it’s more profitable to get rid of unsellable inventory, even at a minimal profit, rather than pay for its prolonged storage.
The Inventory Performance Index (IPI) is a key metric by which Amazon evaluates the efficiency of your inventory management in FBA warehouses. This index directly impacts your storage limits, available shipping volumes, and even fee amounts. If your IPI falls below the minimum threshold (usually 350 points), Amazon may impose restrictions on placing new products and charge additional fees for exceeding limits.
Why IPI is important:
- It affects your available storage volume: the higher your IPI, the more products you can send to the warehouse without restrictions.
- It helps avoid penalties and additional fees: with a low IPI, Amazon may impose higher storage fees.
- It improves internal logistics: a high IPI means that your products are moving well, you’re not holding excess inventory in the warehouse, and you don’t have issues with product availability.
How to improve your IPI:
- Continuously monitor your inventory levels. Avoid both excess stock and shortages of popular items. Use Amazon’s forecasting tools for more accurate supply planning.
- Improve your “Sell-Through Rate.” This component of the IPI shows how quickly your products sell compared to your inventory levels. The higher this rate, the better it is for your IPI.
- Address the issue of slow-moving inventory. Products that haven’t sold in over 90 days negatively impact your IPI. Use promotions, price reductions, or Amazon’s removal program to clear out stale stock.
- Prevent stockouts of popular products. Out-of-stock situations for in-demand items lower your IPI and result in lost sales. Set up automatic low-stock alerts to stay on top of inventory levels.
- Use Amazon reports. In Seller Central, there is a detailed IPI report that shows which factors are lowering your score — this will help you adjust your strategy in time.
As we’ve already pointed out, storing slow-moving and unprofitable products in an FBA warehouse is one of the most common sources of hidden costs. These products not only take up valuable space, but they also lead to higher storage fees. If products aren’t selling for months and their profitability is close to zero or negative, it’s crucial to get rid of them in a timely manner.
For products that are showing weak performance, you have several options:
- Complete removal from the assortment. Sometimes the best solution is to completely stop selling an underperforming product. Request a return of the remaining stock or arrange for its disposal through Amazon. While this may incur one-time costs, in the long run, you’ll save on storage fees and be able to focus on more profitable items.
- Sale through Amazon Outlet. This is a special section of the marketplace for discounted products, helping you quickly sell off excess inventory. To participate in the Amazon Outlet program, you must offer a discount of at least 20% off the regular price. Although this reduces profitability, this approach allows you to quickly free up working capital and warehouse space.
- Marketing optimization. For products with potential but low sales, try improving the listing, updating photos, revising keywords, or launching an advertising campaign. Sometimes the issue isn’t with the product itself, but with how it’s presented on the platform.
- Switch to FBM. If logistics allow, move slow-moving products to Fulfilled by Merchant (FBM). This will eliminate storage fees while keeping the product available for sale on Amazon.
- Price adjustment. Review the pricing strategy for unprofitable products. In some cases, even a small price change can significantly impact sales frequency and overall profitability.
When you create a shipment, Amazon may distribute your products across different warehouses, increasing shipping costs. However, with proper planning, you can minimize these expenses. Send products in optimal batches, use the appropriate warehouses, and reduce internal Amazon costs for redistribution.
Use the Amazon Partnered Carrier program for shipping products. This is an Amazon partner program that offers sellers discounted shipping rates to send products to FBA warehouses when using approved carriers. This way, you can reduce FBA fees and additionally benefit from a number of advantages:
- Faster delivery. The program works with experienced carriers who are familiar with Amazon’s requirements and regularly deliver goods to FBA warehouses. This reduces the likelihood of delays, returns, and issues with receiving products.
- Simplified booking process. Payments are made directly through Seller Central, without the need to sign separate contracts, issue invoices, or contact carrier representatives. Everything is done with just a few clicks from the Amazon interface.
- Convenient pallet pickup scheduling. If you are shipping goods on pallets, you can schedule the pickup directly through Seller Central. This saves time and allows you to manage logistics flexibly without additional calls or correspondence.
- Integration with label printing and tracking. For shipping smaller parcels, the program allows you to print labels and track delivery status directly from your seller account. This simplifies internal processes and reduces the risk of mistakes during packaging and shipping.
At first glance, it may seem that advertising is an additional expense. However, with the right approach, Amazon’s promotion tools help accelerate sales, which in turn reduces the time products spend in FBA warehouses and lowers storage fees.
Amazon offers a whole range of advertising solutions that can be adapted to different goals and budgets. These include Sponsored Products, Sponsored Brands, and Sponsored Display. Sponsored Products works more effectively for new products, while Sponsored Brands is better for increasing brand awareness. For products with a long storage period, Sponsored Display campaigns are especially effective. This format allows ads to be shown not only on Amazon but also on third-party websites, increasing reach and accelerating sales of stagnant items.
To make the advertising truly effective and spend less on it:
- Track the ACoS (Advertising Cost of Sale) metric. This key indicator shows how much you spend on advertising relative to the revenue generated. Set a target ACoS for each product category based on their profit margins. For high-margin products, a higher ACoS (20-30%) is acceptable, while for low-margin products, aim for a range of 10-15%.
- Monitor keywords. Regularly analyze the performance of each keyword in your campaigns. Pause or lower bids for keywords with high costs and low conversions. At the same time, increase the budget for keywords that generate consistent sales with an acceptable ACoS.
- Use the “product funnel” strategy. Allocate your advertising budget so that the majority (60-70%) goes toward promoting the most profitable and fast-moving products. For products with long sales cycles or seasonal items, advertise them selectively during the most favorable periods.
- Optimize listings before launching ads. Even the most expensive ads will be ineffective if the product page doesn’t convince the buyer to make a purchase. Improve the quality of the photos, enhance the product description, and work on reviews before increasing advertising budgets. Every percentage increase in conversion lowers customer acquisition costs.
Relying solely on one platform, even one as powerful as Amazon, is a risky long-term strategy. One way to reduce operational risks and increase profitability is to expand sales channels beyond Amazon while simultaneously leveraging FBA capabilities through Amazon Multi-Channel Fulfillment.
The program allows you to sell the same product both through Amazon, your own online store, and other marketplaces, without increasing the overall inventory volume. In other words, all your sales across all channels use the same inventory. This helps speed up product turnover, avoid overstocking, and reduce Amazon FBA costs.
Many sellers on Amazon focus on optimizing within FBA, but true cost savings begin even before the product reaches Amazon’s warehouse. Purchase prices, packaging costs, logistics, and product preparation all impact your final margin. And most of these expenses can be reduced by regularly negotiating with key players in the supply chain.
Start with your supplier. The larger your purchase volume, the higher the chance of negotiating a discount. Even if you’re not ready to buy a large batch immediately, you can offer a schedule for regular orders. This reduces their risks and could serve as an argument for a price reduction. Also, try negotiating payment terms. While this isn’t a direct reduction in cost, it improves your cash flow, which is especially important when scaling your business.
FBA prep centers can also be an important part of a cost-reduction strategy. Here’s how a good prep center can help:
- Timely and correct product preparation. The prep center ensures that all products are packed, labeled, and declared according to Amazon’s standards. This helps prevent fines, rejections, and delays at the warehouses.
- Packaging optimization. A prep center can help select the optimal box size and arrange the products efficiently to reduce dimensional weight. This directly lowers the cost of shipping to FBA.
- Inventory management and partial shipments. A prep center can store part of your inventory and send it to Amazon only as needed. This helps avoid long-term storage fees at Amazon warehouses and maintain a high IPI (Inventory Performance Index).
- Reducing the risk of errors and returns. Thorough quality checks during intake or before shipping can reduce the number of defective or non-compliant items, saving you money on returns and helping avoid negative reviews.
Don’t treat existing terms as something set in stone. Every 6–12 months, review the following:
- 3PL rates
- Packaging format and pricing
- “Door-to-FBA” logistics
Also, don’t be afraid to compare offers from different partners. The logistics services market is highly competitive, and healthy competition can work to your advantage.
Amazon regularly updates its fees for storage, fulfillment, returns, and other FBA services. These changes can be seasonal or part of the platform’s annual fee adjustments. Even if the individual increases seem minor, collectively they can significantly impact your profit margins — especially if you operate with high sales volume.
To avoid slipping into the red, regularly check for updates in Seller Central and stay informed about Amazon’s announcements. Compare your current expenses with previous periods to identify rising costs and respond promptly. Sometimes, small adjustments — like changing your packaging, revising shipment frequency, or discontinuing unprofitable products — can help restore your profitability. Setting up notifications and conducting regular expense audits is a simple yet effective way to keep your costs under control.
Optimize, test, and adjust — and your business will consistently generate profits under any conditions.
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