“Unlimited” savings with Amazon FBA: How sellers can maximize their profits through optimized inventory utilization
The Fulfillment by Amazon program (“Amazon FBA”) offers online retailers a convenient way to store and ship their products without having to build their own infrastructure. Products can be sold internationally on Amazon with just a few clicks.
By strategically relocating items to international Amazon Fulfillment Centers, the seller can achieve fast and cost-effective shipping. But when does such a “relocation” using the Amazon CE or PAN EU program make sense? To clarify this question, let’s take a closer look at Amazon FBA.
Shipping through Amazon enables significant savings potential
Merchants who want to offer their products internationally through Amazon can choose between two options. Either they ship from Germany directly to buyers abroad, or they send their products to an Amazon warehouse in the domestic or foreign market. The items are then stored by Amazon either in Germany or in the desired third country and delivered to the buyers from there.
The public price list for shipping through Amazon allows for a very good comparison of the different costs incurred when shipping to foreign buyers from a German or a foreign Amazon warehouse.
An example: Shipping a product in a small package up to 900 g from an Amazon warehouse in Germany to Italy currently costs €8.45. Shipping from Italy via an Italian Amazon warehouse costs only €4.97 in comparison. This results in a savings of €3.48 per product unit and, with a sale of 1,000 items in Italy, a total savings of approximately €3,480.
Across all shipping sizes and countries, shipping through a local FBA warehouse compared to cross-border shipping with Amazon results in an average savings potential of 40% of shipping costs.
Local VAT reporting as soon as stored abroad
To realize the savings in shipping, it is necessary to activate storage abroad through the Amazon CE or PAN EU program. By actually storing the products abroad, there is then an ongoing obligation to submit local VAT reports in the respective “warehouse” country.
VAT services like countX offer this service starting at a price of €89 per month per country, which should be considered as ongoing costs against the savings. Taking the simplified example above with the product in a small package up to 900g, the switch in Italy is already worthwhile from 26 ordered products per month.
Different savings through different shipping sizes
Since most merchants do not sell only one product in one shipping size, there is no general answer to how many sales are needed to reach break-even per country. The reason for this is the differences in the respective savings across various shipping sizes.
Sticking with our example from Italy: The savings range per sale from €1.80 for products in small envelopes to €23.70 for products in oversized packages. To accurately calculate the individual savings potential of a merchant, countX has developed a free Amazon FBA shipping calculator that comprehensively considers all savings opportunities.
Potential for savings of over €13,200 per year
The FBA calculator from countX uses the monthly Amazon VAT transaction report as the basis for calculations. This report indicates which products (ASINs) were sold in a month to which countries and from where they were actually shipped.
countX uses this data basis to compare the actual shipping fees incurred for each sold product with the fees that would have been calculated if an alternative storage option had been activated in the respective sales country. The FBA calculator takes into account both the current storage usage of the online merchant and the conversion of shipping prices into EUR, which may be stated in other currencies. For example, a merchant in May 2023 could achieve a potential savings of
€13,200 per year, when the use of the FBA warehouses is optimized.
Individual calculation and direct recommendations
Merchants who want to calculate their individual savings potential can create a free account with countX and then link their Amazon Seller account with countX. Once this is done, countX can determine the possible savings potentials based on the merchant’s VAT transaction report. The result of the individual calculation and possible recommendations for action will be provided to the merchant via email within a few hours.
Conclusion for online merchants
Especially in times of rising prices and declining margins in online retail, it is extremely important for every merchant to continuously optimize their FBA costs. This is particularly true for merchants who are already trading internationally through the various Amazon marketplaces but have not yet closely examined the potential savings from using Amazon’s international warehouses.
With the FBA shipping calculator from countX, every merchant now has an easy and free way to uncover clear optimization potentials in shipping based on actual sales and to utilize them in the future.
Frequently Asked Questions (FAQs)
You can either ship directly from Germany to international buyers or send your products to an Amazon warehouse in the domestic or foreign market, from where Amazon handles the delivery.
Shipping a product in a small package up to 900 g from an Amazon warehouse in Germany to Italy costs €8.45, while shipping within Italy costs only €4.97. This results in a savings of €3.48 per product unit.
The calculator uses the monthly Amazon VAT transaction report and compares the actual shipping fees incurred with the potential fees for alternative storage. It also takes into account the conversion of shipping prices into EUR.
Image credit: stock.adobe.com – Yellow Boat
