The Importance of Following the Fees
With Amazon’s FBA services, fees are part of doing business. Many of us are so focused on increasing revenue, we often forget to look at the money we have already spent. If the largest aggregate expense you will have selling through FBA are fees, then why are we not more focused on ensuring that we are being charged correctly?
Nobody is more careful with how you spend your money than you. If you aren’t already tracking your reimbursement reports, returns, and reconciling your inventory for lost, damaged, or destroyed goods, then you are potentially missing out on hundreds, if not thousands, of dollars.
Here are three reasons you should be following the money spent on fees:
Amazon’s Fulfillment Centers Make Mistakes Sometimes
As a basic cost-benefit analysis, we can see that selling through FBA is beneficial for a number of reasons. While you’re able to move more product, you are also going to be spending more in fees.
Discrepancies can and do happen with your inventory. Often these discrepancies present as transactional discrepancies and inventory discrepancies, meaning you can get overcharged (or undercharged) and your inventory can get mishandled.
Amazon reportedly fulfills 35 orders every second. If you click on the previous link, you’ll see a video from the BBC from a few years ago, but one that emphasizes the multiple touch points of an Amazon fulfillment center. The supply chain involved in fulfilling what can accumulate to 1.6 million orders a day is intense and despite the constant improvements Amazon tries to implement, the process leaves room for mishaps.
Amazon identifies and reimburses for these discrepancies all the time. However, Amazon’s reimbursement rate is usually about 33%. They even created a system of detailed reports, a claims department, and an 18-month retroactive window to identify the other ~66% of discrepancies that they do not reimburse.
In order to catch these mistakes, you really need to be keeping an eye on what’s going on after the sale.
It Can Increase Your Bottom Line
The natural question after learning the above information is how often and how much may I be losing? I’ll start out with the scary number – you are likely to be losing 3% of your annual revenue to unclaimed reimbursements.
Amazon has an insurance policy. If something happens to your inventory under their care, or they overcharge you, and you can prove it, they will pay you back. And to their credit, they are always looking to make sure these issues do not happen. Unfortunately, because of the aforementioned massive supply chain system, these mistakes happen.
Watching out for their mistakes and then claiming them will mean you will increase your margins. In some cases, in the thousands of dollars. Because access to capital is always necessary, getting some back can really help your business continue and grow.
It Can Help You Find Out if There is a Problem With Your Inventory
The most obvious benefit of following the money is that you can get money back. But another benefit is that you can also start to track why those mistakes are happening and then also notice other trends in your returns. For example, if you’re getting a high level of returns on a specific SKU, there may be a manufacturing problem.
There is no such thing as too much information, at least, that’s what we think. We know it sounds overwhelming to add yet another thing onto the list of things you need to do as an Amazon seller. That’s why services like AMZAlert and GETIDA exist. Your focus is on your business, let us take some of that load off for you.