055: Tactic Tuesdays: Slashing Amazon Fees & Boosting Profit Margins in 2024

Transcript

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Welcome everybody to the Brand Fortress HQ podcast for another Tactics Tuesday.

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We're also live on LinkedIn, so if you have any questions, you can always leave them either in the comments or in the chat over there.

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We'd love to answer questions live.

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Today.

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What we're talking about is unlocking profit potential and really a deep dive into lowering fees on Amazon.

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It's no big secret that fees continue to go up on Amazon.

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This is one of the things, especially as brands in 2024 on Amazon are really struggling with maintaining profitability, continuing to grow all those different things as Amazon fees go up.

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Today, what we're going to do is look at some of those different strategies, or at least where to look for that information and things to think about for your business in order to lower Amazon fees.

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Gentlemen, I know that we were having a discussion before we hit record on this on a couple of different things.

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I guess let's start off with where you know.

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What do you guys think is maybe the first best place to look when we talk about lowering Amazon fees for your brand?

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Well, amazon fees are so high everywhere, it's to be honest, it's a little bit hard to choose and I actually think, realistically speaking, I think it probably depends a lot on the brand which area becomes the area that you have yet to really pay close attention to, because whatever area that is, that's probably the one that you should pay attention to that you haven't been so, you know.

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For instance, you know we discussed the idea of you know checking your product dimensions and things like that to see how you can reduce your fulfillment fees because, quite frankly, they're extremely high right now.

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You, if you've never paid attention to your product dimensions, then maybe that's an area that you should be paying more attention to, because there are potential really significant reductions that you could see there.

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I'd also point out on that front that MCF has become extremely expensive compared to what it used to be.

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Right now, if we're using MCF through FBA, the MCF cost is probably 60% higher than the FBA cost to fulfill that very same item.

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So although it used to be that going through a 3PL would be more expensive, it's now proving that if we store a product at another warehouse and use 3PL through somebody else, that for those MCF shipments we can ship cheaper from a different 3PL than we can through Amazon, fba via MCF.

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Just to break down the acronyms there for anybody who might not be familiar.

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So when you're talking MCF, you're talking about multi-channel fulfillment.

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So basically using your Amazon FBA products If you run a Shopify store or somewhere else to ship those orders using Amazon's network is what you're talking about Multi-channel fulfillment.

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Yeah, yeah it used to be.

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That price has always been a little bit more than than a standard FBA fulfillment to a customer, and but it was close enough it wasn't a big deal, but now it's.

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It's much, much, much higher, at least for us anyways.

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But now it's much, much, much higher, at least for us, anyways.

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Okay, matt, things that you're seeing or things that you think are important for listeners to know when we think about deep diving into lowering Amazon fees.

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Yeah, I mean, one of the things that I've been digging a lot into which is a newer report from Amazon is that SKU economics report.

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And for me, two of my products are pretty different in terms of how much it weighs and we've been doing a bit of a cost analysis to figure out if it makes more sense to have the product at Amazon's warehouse or continue to fulfill it from our warehouse.

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And that SKU economics report has done a lot for us to be able to really understand at a SKU level what our profitability is both ways.

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We've sold a couple FBA, we sold mostly FBM, but now I can kind of look at that SKU Economics Report and look to see and then compare it with the shipping rates that we're getting from our 3PL.

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So it's a lot more complete data now, I feel like.

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And that SKU Economics Report, it really gives you a bird's eye view at the SKU level what used to have to get from a lot of different various reports and kind of piece it together.

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So, yeah, that SKU economics report helped us really understand at a SKU level what we were paying and what it would have costed if we were FBA as opposed to FDM.

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Yeah, and I just want to kind of double click on that because I think it's first of all, I think that report is fairly new and secondly, I mean this is something that you know we've kind of helped do for clients for a long time of really getting to.

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You know what is that net profit contribution, both from a dollar perspective and a margin perspective at the SKU level, and what it really does is it helps identify, you know, what is the goal of that product and how well are you achieving that goal?

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And we've talked about it, you know, in different episodes on this podcast of you know different products have different roles and so, depending on those roles, let's say you know it could be a tripwire product where your goal is to break even while having that SKU economics tells you like, hey, are we breaking even once we add in our ad costs and everything else goes along with the product of not only producing the product but getting into Amazon and then getting into the hands of the customer and then also looking at your hero products to say how profitable are we on those?

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And then you're going to have certain products that are really great as complementary products that you may not sell a lot of and so what we've seen a lot in the past for accounts that we've taken over adjustments that we've seen is where, essentially, brand owners were way overspending on ads for complimentary products because they didn't understand the role of that product.

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And using the SKU economics report, really laser focuses on where you're getting the best bang for your buck and how that product fits into your mix for your brand overall.

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Yeah, I think, I think it's really common, especially, I mean, let's face it A lot of, a lot of Amazon sellers.

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They don't necessarily have a whole lot of previous business experience Obviously some do, but many don't and so you're coming in flying blind and kind of building the plane as you go.

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And so it's important to recognize and be willing to admit, like there's certain aspects of business that maybe I don't yet understand and I need to figure out those things, and one of those is a lot of sellers don't even know their profitability overall, which obviously is super problematic.

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But once you've gotten over that hurdle and you really understand, you know what your say overall contribution margins are and whatnot for your business as a whole, then it is time to break down to that skew level and determine, ok, which of these products are profitable, which of them aren't, how profitable.

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It may be that that you know, say, skew economics report or whatever other kind of report that you want to pull to get that data.

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It may be that you find that products that you thought had role XYZ really shouldn't have that role.

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Like they don't.

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That's not the role they should be.

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They should be here Like maybe I didn't think it was going to be a very profitable product, and so I thought it was.

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This Turns out it's been more profitable than I thought, for whatever reason.

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But if you don't dig into the data and you don't look at that on a per skew basis, then you don't know those sorts of things.

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And what you don't know is what's going to hurt you.

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And so you know, evaluating that at that level, you know what are our ad costs on that product, what are our fulfillment costs on that product, what are our cogs on that product.

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You know all of those different levels.

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That gives you that.

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You know insight that you need to figure out.

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Where should I place my emphasis?

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You know where can I save the most money?

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You know, or maybe it's already you know, maybe we're already efficient on that product and I need to focus on a different product.

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Yeah, and I mean I would say that most businesses at least that would be.

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You know that we see on Amazon there's always, there's always products that people are over spending on and and and and again.

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That's not always bad in the sense of it may be, like you said, that you're testing out, like hey, could this complimentary product be a hero product if we gave it the visibility that it needs?

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Or, you know, and see how much market demand there really is for that product?

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So you know you can definitely have an investment there and as long as you're making those decisions consciously, like you said, and with your eyes open, I think that that's really what matters.

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You know, not necessarily because strategy is going to change a lot depending on your situation.

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It's just being intentional about it.

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Yeah, I think too.

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You know, I mentioned at the beginning and I think it's it's probably important to to reiterate it because, I don't know, I feel like it's the one area that a lot of times sellers don't pay any attention to and that is your product dimensions.

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Because I think it's easy to make the assumption like okay, we decided to move into this niche and sell this product.

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We found a manufacturer that's giving us a decent price and it has a decent product.

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We already know what the packaging is.

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This is it, this is the product right.

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So we're selling it.

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It's selling well, maybe, maybe it's a very profitable product.

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But at the end of the day, there still is a factor of Amazon's fulfillment fees, or any 3PL for that matter, are based on dimensions and weight, and so if you can reduce a certain characteristic of that, you may be able to significantly reduce the fulfillment fee on that product.

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And let's say, let's say, you're selling a 25, well, let's say it's a $30 product, right, and let's say that your fulfillment on it is is 10, you know.

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Let's say it's eight or $9, you know that that's a pretty significant amount, you know, on that $30 product.

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Now, maybe your ad costs are low.

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Maybe you're able to get really good placement so you don't have a whole lot of ad costs.

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Maybe your cogs are pretty low on that.

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It's a small product, it doesn't cost much from the manufacturer, so maybe your fulfillment fees are the major expense for that product.

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Well, if you can get under it, it's very possible that you're being classified.

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I'll give you a perfect example.

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So on our pool nets we in one dimension were outside of the dimensional requirements for large standard, the sizing tier.

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So we ended up in oversize.

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But it was only one dimension of the product.

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So we eventually realized like well, this is kind of ridiculous, like why would we do that?

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So I went to the manufacturer and I said, okay, what is a different way that we can manufacture this product and so that we can get under that dimension?

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Cause we were only over like I don't know an inch a year or something like that.

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And so I said how can we remanufacture this so that we can get under that?

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And it took a little bit of you know, back and forth but we finally came up with a way.

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And sometimes it's not even changing the manufacturing, sometimes it's changing is the product assembled when it's shipped to the customer.

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Maybe it's an easy product to assemble, maybe it's a couple of minutes for the customer, and if you ship it disassembled you can get under that dimension.

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But if you ship it assembled you're not over that dimension.

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Like our pool brush with the end pieces on, we're over that 18 inch, you know, target dimension, but we designed it so the end pieces can be removed and so the customer just assembles it on site.

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Well, now we're under that 18 inches and so instead of spending $10 to ship it, we spend $6 to ship it.

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Well, $4 is a lot.

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I mean, if your profit margin is only 10 or $15, or even $20, like an extra $4 in your pocket is pretty significant, and sometimes that remanufacturing doesn't necessarily cost you a whole lot more.

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An even more easier.

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Example of that was a pair of gloves that I sold that had a long sleeve and instead of the sleeve being in the box full length, we just folded the sleeve and it didn't affect the gloves at all and by the time it got it was a neoprene coated rubber glove.

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I mean, it took a shape once you unfolded it, but folding the gloves and putting them in a box saved us about a buck 80 per unit, which is significant when you're talking about a thousand units.

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You know, 1500 units in a month, yeah for sure.

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Yeah, that's an extra $3,000 to your bottom line, you know, just for making a small change.

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And you know, just process wise, what I'd really encourage sellers out there to do is, at least every six to 12 months, look at your different products.

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Because here's the other thing.

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I mean we were just talking about this before we hit record on it.

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You know Amazon has changed their tier categories.

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I feel like they changed them at least twice a year.

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Change their tier categories.

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I feel like they changed them at least twice a year.

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So even if you maybe optimized it for one tier category, they're changing how those tier categories are calculated and that type of stuff.

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You really have to reevaluate every six to 12 months to make sure that you're getting the best rate possible for your products.

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And this is one of the biggest things from a cost perspective.

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When you're talking about FBA, that you know they we control as sellers is kind of that dimensions of the product, and so, like you said, I mean you can find an extra, you know, five, 10% margin sometimes just by making those changes.

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Well, the other thing that's interesting too is that, depending on the category that you're selling in, a lot of times you're selling against brands that are like maybe that maybe the top of category brands are actually retail brands that you normally find on the shelf.

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They just happen to also be selling on Amazon now, because of course you have to sell on Amazon.

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So.

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But what happens with that is that a lot of times those bigger brands, where maybe selling at retail has been their business model, forever off the shelf, they just take that exact same product and the exact same packaging and they funnel it through Amazon for a sale.

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Well, you might be able to take that and have that product.

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You have the option of going and changing anything about that product that you like.

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They may not really have quite that flexibility.

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So I know there's some products within our category where the products that are being sold they're just simply the exact same product that they've sold down at Leslie's Pool Store for years off the shelf and they're just selling the exact same product on Amazon and the sizing category that it's placed in is really expensive and there would be really easy ways to modify that product and move it into a smaller sizing tier and save a whole lot.

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So this is not just an area where you can save on current products that you're selling.

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It's also an area where you can investigate categories and say is that a category where maybe I could redesign that product just a little bit and even if I don't make the product better, I just make it cheaper to ship it, so that I've got much more profit than my competitors do, which gives me more room for advertising or whatever.

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Wherever I want to put that money.

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Yeah, well, I mean back to Matt's example.

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I mean I imagine that his competitors probably have that glove full length, because if they're selling in a retail location, that makes a lot of sense and that's what customers are going to want to see.

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But if you're selling on Amazon, you know you don't necessarily need that if you're using your main images and you know your listing in order to sell the product.

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So, yeah, there's, there's probably a lot of opportunity there.

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One of the other areas that I want to talk about because, mike, I know you, I, based on our previous conversations, have some kind of strong opinions and experiences with this as well is is that, as Amazon has, you know, essentially forced sellers to have more inventory, of looking at that mix of FBA, amazon warehouse and distribution that I feel like is becoming, you know, from a nice to have to almost a have to have, if you.

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What are the things?

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So what I think about that, what I see, is, is that that balance whether it's a 3PL in FBA or AWD in FBA to make sure that you have essentially the inventory that Amazon wants so you're not getting dinged.

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I mean, before I jump in, I don't know, Matt, is there anything that you really want to say on that?

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I've got plenty I could say, but Well, let's hear what you have to say then.

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Well, I think, first of all, awd is interesting in that, first of all, not everybody can use it.

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To the best of my knowledge at this point, they still don't accept oversized products, which actually technically oversized isn't even a category anymore.

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We were just talking about that.

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But Amazon changed their sizing tier so oversized it doesn't even exist.

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It looks like it's just small standard, large standard and then it goes straight to bulk.

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But my guess is AWD is still anything over that large standard size.

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I don't think they're accepting.

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So if you have products that are in that higher size tier, awd right now at least I don't think is even an option.

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But for anybody who it is an option, I think it's definitely worth considering at a minimum, because I do believe absolutely that basically any Amazon seller should have some form of backup you know, beyond what you have at Amazon's warehouses Because, let's face it, their storage fees are high.

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But then also now you've got low inventory fees.

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So you've got to strike this really crucial balance right.

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And if you don't have some sort of staging warehouse or something else in the US where you're bringing product into first or at least backup inventory that you have there, you can ship straight to Amazon's warehouses.

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That's probably a good idea.

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We do that from Skewdrop in China and I think it's absolutely going to help us and actually already is helping us.

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But if you don't have someplace in the States where you're also storing inventory at some staging warehouse and I would recommend, on both coasts, if you can then that's going to be problematic Because, again, if you run out at Amazon, it's not just that now you have the low inventory fees, which is bad enough, but of course we all know if you run out of stock at Amazon, then your BSR is going to suffer, which means your rank is going to suffer and it's going to take a while to get back up to speed.

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So if we're talking profitability, it's not always about reducing fees.

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Sometimes it's about well, profitability means I stay in stock and I don't lose rank and I don't deal with those issues.

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So we right now have a staging warehouse on both coasts.

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We've got one in California, we've got one in Pennsylvania.

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We do not use AWD because our products won't be accepted.

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But also I have heard from other sellers that even though there are some benefits to AWD like, first of all, as long as you have inventory at AWD, then Amazon essentially kind of doesn't consider you out of stock.

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So like if you run out of stock at Amazon FBA, what will happen is your listing will still stay up.

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The delivery times will increase because then Amazon knows well, ok, we've got it at AWD, but we're not going to be able to get it to the customer as quickly as we would have from an FBA warehouse, so delivery times increase.

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So you might still lose some CTR and a little bit of conversion rate on that listing, but at least you're still up.

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So that is a huge benefit of AWD.

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It doesn't sound like they're really good yet at inventory forecasting, especially if you're a very seasonal product or something like that where there's fluctuations.

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So it might still be a fairly common situation where your FBA inventory would be sold out, but at least you still have some at AWD.

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Our strategy as opposed to that is we have two warehouses that not only are staging warehouses for us that we can ship to Amazon FCs from, but also we can fulfill via FBM from those warehouses.

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So we always have an FBM listing as a backup to our FBA listing and we have two different warehouses that we could potentially ship from to do that and again we also then use those for our MCF shipments Well, in replacement of what would be an MCF shipment for sales from other platforms, because now it's less expensive than MCF is.

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Matt thoughts you want to add to that conversation?

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Talk about.

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AWD and 3PLs.

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So I mean I don't know that I've ever experienced a need and I haven't really looked into AWD as much as probably I would have if I didn't have a 3PL.

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But I mean, for me I've always considered a 3PL.

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Just the fact that just the cost of doing business, I mean it's a lot easier for me.

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I mean I typically end up ordering in larger quantities to get the bulk discount.

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And this is before skew drop.

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And that's one of the things I want to start looking into is does it make more sense to store it in China?

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I mean, obviously I think it goes without saying that 3PL storage is a lot cheaper in China.

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So now that Mike's had a lot of experience with skew drop, I want to start looking to see and do a cost comparison.

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But I've always had a 3PL and I've always had a backup FBM listing for that reason.

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So yeah, I don't know as much about AWD as I probably should or if it's more cost effective than the way that I've just always been doing.

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Yeah, I would say so.

00:21:06.809 --> 00:21:08.374
We've had some clients that use AWD.

00:21:08.374 --> 00:21:25.257
And just to echo some of the things that Mike said, the first is that I, you know, I think it'll get better, but right now, especially if you have a seasonal business, it is not great at inventory management, forecasting inventory, so you could very easily be out at FBA and still have AWD inventory.

00:21:25.257 --> 00:21:29.526
Now again, the nice thing about that is is that your listing doesn't go down, However.

00:21:29.526 --> 00:21:37.000
You know I would say you know, just be aware that if that happens, your delivery time is going to be significantly longer.

00:21:37.000 --> 00:21:45.960
And one of the things we've talked about in previous episodes is, even if you have your products in FBA like, say, you're shipping it in and Amazon's still waiting to check it in, they'll still sell your product.

00:21:45.960 --> 00:21:50.036
But people who are shopping on Amazon, they want a product in a day or two.

00:21:50.036 --> 00:21:57.640
So if they see that your product has a 5, 7, 10 days in order to fulfill, your conversion rate is going to drop pretty significantly.

00:21:57.640 --> 00:22:04.627
Typically, what we see is again depends on how long that delay is but 20 to 50% of what your regular conversion rate is.

00:22:04.627 --> 00:22:11.673
So if that's an ongoing thing, I wouldn't rely on AWD in order to pick up the slack in that process.

00:22:11.673 --> 00:22:24.354
The other thing that I would say from an Amazon fees perspective is it does, at least right now, essentially Amazon's incentivizing people to use AWD by, in most cases, waiving the low inventory fees.

00:22:24.354 --> 00:22:37.686
So I would say that's the other piece why you might want to consider it as a part of your strategy, and I think you know there's typically not a like one.

00:22:38.208 --> 00:22:41.315
One solution solves all situations approach.

00:22:41.315 --> 00:22:50.707
You know you probably need a combination of things, and that might be, you know, skew drop with AWD, with even a 3PL, in order to solve those problems.

00:22:50.707 --> 00:22:52.009
So be aware of that.

00:22:52.009 --> 00:22:59.288
And then the other thing that I would put out there is that I'm seeing a lot more of it, and some of this has to do with just political climate and that type of stuff.

00:22:59.790 --> 00:23:06.413
Long story short, seller fulfilled prime has really made a comeback to where Amazon is opening that back up quite a bit.

00:23:06.413 --> 00:23:11.089
So, as we're talking about, if you already have a three PL, that does a really good job for you.

00:23:11.089 --> 00:23:30.185
If you've taken the time and effort to have one on the East Coast and West Coast, it may be worth looking into getting your product certified for seller fulfilled prime, and so you can kind of have some of the best world, or best of both worlds, depending on you know, again, dimensions of your product, your kind of situation and that type of stuff.

00:23:30.185 --> 00:23:45.075
So definitely don't discount seller fulfilled prime as an option because that could be a way for you to get FBA with a lot more control over how much inventory and how much and paying a lot less for storage fees and other things, but getting all the benefits of FBA, yeah for sure.

00:23:45.095 --> 00:23:46.140
I'm actually going through that.

00:23:46.140 --> 00:23:48.808
I'm going through that right now with one of the brands that I work with.

00:23:48.808 --> 00:23:53.577
We just got accepted to the seller fulfilled prime test trial program.

00:23:53.577 --> 00:24:11.153
So what I've learned already in the first couple of orders that we've gotten is that shipping buying the shipping from Amazon as opposed to through my 3PL is cheaper than shipping through my 3PL, and I didn't actually think that was going to be the case.

00:24:11.153 --> 00:24:26.173
I thought that we were going to get better rates through our 3PL how we've been sending, but the first couple of orders I think it was about $4 cheaper buying the shipping through Amazon as opposed to how we were doing it before, before we were Seller Fulfilled Prime.

00:24:26.173 --> 00:24:28.574
So we're going to save pretty significantly on shipping.

00:24:28.574 --> 00:24:31.547
And now we have the Prime bags too, and now we have the PrimeBads too.

00:24:31.567 --> 00:24:45.479
So to clarify that for people, what you're suggesting is you're still shipping the product from your 3PL, but you're utilizing Amazon shipping rates and using their carrier, whatever that is.

00:24:45.479 --> 00:24:49.442
They come in to pick up and take out, but you get to pay Amazon the rate.

00:24:49.481 --> 00:24:50.123
That's exactly right.

00:25:00.969 --> 00:25:10.477
So now we have the PrimeBadge and now we're paying less for shipping than we were before because we're able to leverage Amazon shipping rates.

00:25:10.477 --> 00:25:25.164
There is a tendency with Amazon sellers and again I think a lot of this comes down to a lot of us are coming into this business not having a whole lot of previous experience and so managing some of these things looks really scary and we don't necessarily know what we're doing.

00:25:25.164 --> 00:25:40.561
But I think that because of that, we tend to latch onto the idea that I'm just going to find the solution and I'm just going to do that because it's easy, Because once I figure it out and I know what that solution is and I know how to operate it, I'm good.

00:25:40.561 --> 00:25:46.307
And the problem with that is is that, as you alluded, do AWD and you have FBA.

00:25:46.307 --> 00:26:24.070
You know like it's multiple things to manage, but at the same time, having AWD if it's open to you, if you're, if you've got standard size inventory would potentially eliminate that low storage or low inventory storage fee, right, or low inventory fees.

00:26:24.070 --> 00:26:32.372
So you don't have to put everything through AWD, but having it and utilizing it to some extent would eliminate that fee for you.

00:26:32.904 --> 00:26:45.614
Having 3PL backup means that, even if AWD doesn't really well forecast your inventory, you can be paying attention to forecasting your inventory and bring it in from that 3PL, from that staging warehouse.

00:26:45.614 --> 00:26:47.449
You still have FBM backup.

00:26:47.449 --> 00:26:51.067
You still have maybe seller fulfilled prime if it's a good option.

00:26:51.067 --> 00:27:16.878
So I guess I would just encourage anybody listening that if you're taking the simple approach simply because it's the simple approach, consider the possibility that maybe a more complex approach may take a little bit more effort and a few more man hours on your side and a little bit more of a learning curve, but you could be saving yourself tens of thousands of dollars by going that route, or at least increasing your profit, of course, by that much.

00:27:16.878 --> 00:27:21.717
So don't discount the possibility that the more complex approach really is the way you should be going.

00:27:23.006 --> 00:27:28.229
Well, I agree with that should be going Well, I agree with that.

00:27:28.229 --> 00:27:38.397
I'll throw even another one on there that we've been working recently with a client, which is so they sell everything merchant fulfilled but, as Matt was talking about, they buy their shipping through Amazon because Amazon does do a good job of that.

00:27:38.397 --> 00:27:46.974
Of course, they're leveraging how much they order with UPS, fedex and the large shipping companies and you get a good rate out of that.

00:27:46.974 --> 00:28:19.000
Well, one of the things that we adjusted for them because Amazon really is pushing a lot of brands towards the self-fulfilled prime, or at least those timelines, even if you're merchant fulfilled and what we did was we went into the backend and actually adjusted some of their shipping times so that way they didn't have to pay for, for example, like next day air and some of those really expensive shipping options as a part of their merchant fulfilled, because what would happen is every once in a while, based on their settings, you know they say, hey, yep, we're going to get it to the client or the customer in two days.

00:28:19.125 --> 00:28:22.271
Well, the only option to do that was like next day air.

00:28:22.291 --> 00:28:27.510
That was, you know, 40 or 50 bucks for that product, whereas if we sent it ground, it was like 10 bucks.

00:28:27.510 --> 00:28:36.727
And so there are actually options to go in there, and I think it's worth doing, if you sell quite a bit merchant fulfilled, to say, hey, I want to eliminate those options.

00:28:36.727 --> 00:28:44.151
They're going to be super expensive for me Because, again, if you're FBA, that's one thing, but it's a whole nother thing If you're a merchant fulfilled.

00:28:44.151 --> 00:28:57.976
If a customer has got to wait an extra day in order to get the product, it's probably not going to make that big a difference on your conversion rates, but it may save you $30 in shipping by taking that extra day to send it by ground versus by air.

00:28:57.976 --> 00:29:10.386
So that's another thing that I would really encourage people to do is, if you're selling quite a bit merchant fulfilled, look at what those shipping options are, because you may be able to save quite a bit on your shipping just by eliminating some of the more expensive options that are in that menu.

00:29:11.067 --> 00:29:12.112
Yeah, no for sure.

00:29:12.112 --> 00:29:13.454
Well, I didn't even think.

00:29:13.454 --> 00:29:29.640
I assumed by before we even applied for the seller fulfilled program, I was reading in, reading into the requirements and I assumed that you had to have it to the consumer two days after they ordered it, just based on the documentation that I was reading online.

00:29:29.640 --> 00:29:31.230
And that's actually not the case.

00:29:31.230 --> 00:29:38.397
With Seller Fulfilled Prime, it can get there up to five days after, depending on where they are, where your warehouse is.

00:29:38.464 --> 00:30:00.877
There's a bit of an algorithm that Amazon applies to Seller Fulfilled Prime orders applies to seller fulfilled prime orders, and it turned out because of that calculation that we didn't really have to change anything in terms of the speed that we were already shipping outside of the seller fulfilled prime program, where now we're sending it the same service as we were before.

00:30:01.346 --> 00:30:13.637
But now we're able to get the prime batch because we were already getting it there under that certain threshold and it was for I think it was for like zone four or five, which was East Coast, based on where our warehouse was.

00:30:13.637 --> 00:30:29.174
We still qualified for the Seller Fulfilled Prime program, even though it was getting there in four days, and it was actually our Amazon rep that kind of allowed us to understand that about the Seller Fulfilled Prime program, but I didn't even think we were eligible because I didn't think that we could get it everywhere in two days.

00:30:29.174 --> 00:30:30.588
But that just wasn't the case.

00:30:30.588 --> 00:30:40.147
So it just took a little bit more digging and some working on it with our Amazon rep to understand that we still can qualify for it and we don't have to change anything internally about how we were shipping anyways.

00:30:40.669 --> 00:30:47.799
Yeah, the other thing I want to bring up here just before you know, before we wrap, because I think that this was a really powerful example for me.

00:30:47.904 --> 00:31:00.599
So one of the other fees that Amazon has added is the placement fees, and so we were working with a client and they had probably something that was a three-quarter full pallet that they were going to ship into Amazon for FBA.

00:31:01.204 --> 00:31:09.119
And normally what was the most cost-effective way was, hey, go pick up one three quarter pallet and ship it into Amazon.

00:31:09.987 --> 00:31:34.285
And you know we were working with them and what we found out was is that it was significantly cheaper like half the price to do small parcel delivery with five boxes, because then we didn't have to, because there was enough boxes to where now we didn't have to pay the placement fee, because now Amazon can ship it to whatever fulfillment centers they want, compared to shipping in that one pallet.

00:31:34.444 --> 00:31:57.686
So I would say the takeaway from that is is that you know you may have a way that you've always shipped in your product to FBA, especially if it's one of those products where you know again back to the beginning of our conversation that's a complimentary product, where maybe you don't sell a ton of units to that product, and so you don't have to ship a ton of inventory in.

00:31:57.686 --> 00:31:58.368
But you've always done it one way.

00:31:58.368 --> 00:32:14.207
I would encourage you to look at the different methods of getting into Amazon FBA, because there may be one way of shipping in that's significantly cheaper with especially now the placement fees have taken effect on Amazon versus how you may have used to ship something.

00:32:14.989 --> 00:32:36.830
I was actually just reading and I don't know if it was a LinkedIn post or it was a newsletter, and I think it was a change that they've just recently made that you can get the inbound placement fees waived if you're sending in at least five cartons that have the same configuration inside of them, so the same SKU and the same number of SKUs across five different cartons.

00:32:36.830 --> 00:32:41.247
Then it negates the inbound placement fee altogether.

00:32:41.247 --> 00:32:45.738
Is that what you were talking about, John, or is that, yeah, that's very so.

00:32:45.878 --> 00:32:47.651
I'm using small parcel delivery, I think.

00:32:47.691 --> 00:32:53.092
I think that's what the case was here, and so basically, instead of sending in that three quarters I mean so we were sending in.

00:32:53.092 --> 00:32:57.276
They were sending in a full pallet, but there was about the pallet was only about three quarters full.

00:32:57.276 --> 00:33:12.880
So we broke that down into small parcel delivery and ended up being like you're talking about like five boxes that were identical in how they were laid out and because of that they were able to ship in without paying that placement fee, and it made a huge difference.

00:33:12.880 --> 00:33:14.101
I mean Huge difference.

00:33:14.101 --> 00:33:20.627
Yeah, like I said for them, it cut how much that cost them to ship in by 50%, which saved them a few hundred bucks.

00:33:20.627 --> 00:33:24.853
But then the other piece of it is is just from a processing perspective.

00:33:24.853 --> 00:33:30.179
Usually your small parcel deliveries get processed much quicker than if you're shipping in a pallet.

00:33:30.179 --> 00:33:43.848
Now, obviously you can't ship in everything small parcel delivery and it doesn't make sense in every case, but in this case, not only did they save significantly on their ship in, but also their product was now available via FBA a lot faster.

00:33:44.309 --> 00:33:51.173
It's probably also worth mentioning and, just depending on your situation, every business is a little different.

00:33:51.173 --> 00:34:31.791
You know and obviously some people listen to this are, you know, a one person operation and some people listen to this, you know, maybe have 10 or 15 employees, but for those of you that are a much smaller operation, maybe a single operator or maybe you've got, you know, a couple of people on your team, depending on the value to your business of moving to a more complex logistics system, it may behoove you to find somebody to hire on as your logistics you know manager, because it really does get pretty complex when it gets down to your inventory forecasting.

00:34:31.791 --> 00:34:34.623
And then where are we going to store the inventory?

00:34:34.623 --> 00:34:36.168
What warehouses are we going to bring it into?

00:34:36.168 --> 00:34:37.451
Do we send it to the 3PL?

00:34:37.451 --> 00:34:38.594
Do we send it to AWD?

00:34:38.594 --> 00:34:40.668
Do we send it to FBA?

00:34:40.668 --> 00:34:43.494
How much are we going to send here, there and the other place?

00:34:44.496 --> 00:34:47.728
It's a lot to manage for one person.

00:34:47.728 --> 00:35:03.932
If they have a whole lot of other things that they're also managing, if that's all they're doing, then they can do a much better job at that, and especially if you hire somebody who already has that experience in logistics and understands all of the various different ways that this could be put together.

00:35:03.932 --> 00:35:23.838
I would imagine that there's actually quite a few businesses out there that could save a lot of money on the logistics side of things when it comes to fees and the shipping costs and storage fees and all of that If you had somebody who that was their job and you stopped doing it as one of the many jobs that you're doing to manage your business.

00:35:23.838 --> 00:35:29.967
Get somebody who knows what they're doing and really figure out what the best setup is and make sure that you've got somebody to manage that.

00:35:30.768 --> 00:35:58.367
I had a very good seller friend of mine who made what he thought was a very difficult decision of hiring a logistics manager and within the first two months of hiring someone that he thought he couldn't afford, the guy paid for himself and then some in the increased profitability that he was able to eke out of just their existing supply chain and that one person paid for himself for a whole year in the span of a month and a half two months of him being on staff.

00:36:00.311 --> 00:36:07.494
And even if it's just reducing out of stocks, I mean the amount of money that you can lose on out of stocks, especially if it's on a hero product or something.

00:36:07.494 --> 00:36:13.396
You've got somebody managing that who's who's going to be better at that than you, even if it doesn't mean they are better at it.

00:36:13.396 --> 00:36:16.594
It just means that's the only thing they're doing, you know, so they can be better at it.

00:36:16.594 --> 00:36:19.653
You know, reducing those out of stocks could easily pay for that person.

00:36:21.175 --> 00:36:23.295
Yeah, well, I think that's so as we wrap.

00:36:23.295 --> 00:36:41.048
I think that's probably a great action item for listeners to put on their list of you know, especially if you're spending a lot of time with these types of things, looking at somebody and it doesn't have to be full time, you know, especially if you're growing, it could be something as little as five to 10 hours a week where you can find somebody you know on Upwork or something like that.

00:36:41.048 --> 00:36:53.161
There are a lot of people out there that really know this stuff inside and out and, like you said, matt could easily 10x the investment that you put in them in a month or two to really add to your bottom line.

00:36:53.161 --> 00:36:55.291
So I think that's a great action item.

00:36:55.724 --> 00:37:10.655
Other action items based on our discussion today that you guys would have for listeners I think a really easy one, and the one that ended up saving us almost $2 per unit, was just look at your current existing product and is there a way that you can make it smaller?

00:37:10.655 --> 00:37:24.889
Is there a way that you know, look to see what the different dimension tiers are and see how close you are, because I mean, if it's as easy as folding a pair of gloves, that doesn't affect the integrity of the glove at all and you can save almost two bucks, I mean that's a huge win.

00:37:24.889 --> 00:37:32.208
So you know, I'd say, looking and being aware of what the different dimension tiers are and how close you are is a good first action step.

00:37:33.132 --> 00:37:40.014
And I would say, even though we haven't made a lot of use of it yet, the fact that that SKU economics report is now available.

00:37:40.014 --> 00:37:52.728
I would say that would be another, you know, really good action step, even if it's just to take a glance at it, just to see, you know where are you on each of these SKUs and, you know, pick out some individual SKUs in your list that maybe could use some attention.

00:37:52.728 --> 00:37:55.956
You know, maybe the fees are, you know, really high.

00:37:55.956 --> 00:37:59.561
You know one or two products in one or two categories at least.

00:37:59.561 --> 00:38:06.458
Then you can pinpoint what they are and it gives you, you know, a roadmap to you know where might we be able to make the biggest effect.

00:38:06.458 --> 00:38:16.677
And obviously you want to pay attention to those products that are moving the most volume and that have the highest level of fees overall and total expense.

00:38:16.677 --> 00:38:23.311
You probably want to pay attention to those first, make sure that you're addressing those, but then just kind of keep working your way down that list.

00:38:23.733 --> 00:38:30.967
Yeah, and I would leave with this tip and kind of double clicking on that SKU economics is look at your products and think about so.

00:38:30.967 --> 00:38:42.592
One of the tests that we've done on a regular basis is look at what happens if we either add 20% to the ad spend or we cut the ad spend by 20% for that product, and how does that change the SKU economics.

00:38:42.592 --> 00:38:58.282
When you have that data, that can be really powerful to know, am I spending the right amount of ad spend on the SKU to get where I want to go, Especially if you kind of have everything in a happy place but you're looking at how can we improve?

00:38:58.282 --> 00:39:14.307
I would leave that action tip for people that are looking for a way to maybe squeeze a little bit more margin out of their product, Because ad spend is a big piece where that's a lever that you have control over, yeah for sure.

00:39:14.307 --> 00:39:14.708
So all right.

00:39:14.728 --> 00:39:17.771
Well, great place to wrap for today, and I just encourage listeners again.

00:39:17.771 --> 00:39:21.297
You don't have to do, obviously, a lot of things that we talked about today.

00:39:21.297 --> 00:39:32.012
What I would encourage listeners to do pick out one of those action items, test it on your business, and then we'd love to hear, whether it's on LinkedIn or reach out to us via email or somewhere else and let us know how it worked out for you.

00:39:32.012 --> 00:39:34.733
So thanks everybody for listening and we'll see you next time.

055: Tactic Tuesdays: Slashing Amazon Fees & Boosting Profit Margins in 2024

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