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Amazon FBA Fees Update

There was a recent addition to FBA Fees that I want to mention.  For those of you not familiar with Amazon’s ‘Fulfillment By Amazon’ service, it’s a product fulfillment service where you ship your inventory to Amazon, and when an order comes in on Amazon for one of your FBA-fulfilled items Amazon does the pick, pack, and ship for you.  They also handle any customer problems with the order, such as returns.  It’s a great deal, and if you sell any reasonable amount of volume on Amazon I recommend you consider using their FBA service.

To date Amazon did not charge a fee to process customer returns.  Obviously it does cost them money to process a return, so doing this for free was a real gift to FBA sellers.  Unfortunately, they’ve decided to start charging a fee to process returns, with the fee being equivalent to the fee they charge to fulfill the order.  If you look at a transaction report from March or onwards (assuming you had any FBA returns), you’ll see these fees in your report now.

While it’s unfortunate that processing returns is no longer free, I still feel FBA is a good deal.  It frees you from having to touch every individual order you receive.  It also frees you from having to process returns and from most order-related customer interactions.

If you do use FBA, you need to account for the return fees when setting your price.  Of course, you need to know what percentage of each sku you stock gets returned on average to effectively do this.

Having no returns is the best way to minimize the cost to you of return fees.  Avoiding low-quality manufacturers is your best bet here, over the years I’ve dropped a number of manufacturers whose products sold well, but the merchandise was often defective.  It’s bad for both your customers and you if the merchandise is often defective.

Some types of products, though, just naturally have a higher return rate even if the merchandise isn’t defective.  Anything that must ‘fit’ correctly, and there’s no way to guarantee a fit without the customer physically having the product in hand, is an example of this.  For these products it will be especially important to factor the cost of returns into your price, or you will end up making little or no money on these items.

I should mention that the FBA service can also be used to fill non-Amazon orders.  When you get an order on another channel (Sears Marketplace, eBay, etc.), you enter the order into your Amazon seller account and they take care of the pick, pack and ship for you.  This isn’t quite as automated as your orders from Amazon, since the order information must be entered into the Amazon system.  If you don’t have high volumes from outside of Amazon this isn’t a problem, and if you do have high volumes outside of Amazon there are services available to automatically transfer this order information to Amazon for you, for a fee.

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My monthly list of potentially good products to sell online has been updated for March 2013, if you haven’t checked it out yet this would be a good time to do so.

 

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