Proven strategies to reduce shipping costs on Amazon

Amazon. It’s hard to avoid the pull of the world’s largest eCommerce platforms, which regularly sees daily sales revenue over USD$1.6 billion (yes, billion). But! A word of caution for sellers. Competing in this massive marketplace brings both the prospect of Amazon seller fees and potentially giving up a lot of freedoms when it comes to order fulfilment, depending on how you go about it.

What’s more, if you do opt to use Amazon’s myriad of shipping and fulfilment services, there can be a lot of confusion around which service is going to be right for you, how much it costs and whether it’s even available in your region.

If it all sounds like a bit much, don’t worry - that’s why we’ve written this guide. We’re going to cover how to reduce shipping costs on Amazon and what Amazon is likely to charge you, whether you use Amazon’s fulfilment services or if you choose to go your own way. Let’s dive in.

Table of contents

• How much does Amazon charge me for selling?
• How to reduce shipping costs on Amazon
  • Consider using Fulfilled by Amazon (FBA)
  • How to manage your Fulfilled by Amazon (FBA) costs
  • Amazon Fulfilment by Merchant (FBM)
  • Consider using a 3PL service
  • Use a shipping automation solution
  • Offer free shipping with minimum purchase
  • Review packaging dimensions and weight
  • Regularly audit your shipping invoices
  • Seller Fulfilled Prime (SFP) program
  • Take advantage of seasonal shipping discounts
  • Invest in shipping insurance (wisely!)
  • Add margins to your shipping rates
  • Consider Amazon Multi-Channel Fulfillment
  • Research different carriers
  • Leverage customer pickup options
  • Tips for managing your Amazon advertising costs
  • Negotiate with your carriers
  • Implement an inventory management system – but when?
  • Assign the cheapest carrier options
  • How to reduce shipping costs on Amazon with Starshipit

How much does Amazon charge me for selling?

First, let’s clear up how Amazon’s seller fees work. It’s free to list a product on Amazon Marketplace, but as soon as you make a sale, Amazon will take a percentage of that sale.

Selling on Amazon involves three main costs: shipping fees, referral fees, and variable closing fees (VCF).

• Individual sellers pay USD$0.99 per item sold, plus variable closing fees of $0.45 to $1.35, including shipping. This plan suits small businesses selling fewer than 40 items monthly.
• Pro Merchant plan users pay a USD$39.99 monthly subscription fee and 6-25% in referral and variable closing fees, but avoid the $0.99 per-item fee. This plan is ideal for businesses selling over 40 products per month.

Referral and variable closing fees are deducted from the total sale price, which includes the product price, shipping, and other charges. The percentage varies based on the product category.

Note: All prices are listed in USD. However, Amazon fees vary by country, so we recommend verifying the exact fees for your specific location.

How to reduce shipping costs on Amazon

All these Amazon fees can start to add up, but thankfully there are more than a few ways to lower your Amazon shipping costs.

On first look, this can seem like an easy way to lower your Amazon shipping costs, but it’s a trade-off. While it does simplify your fulfilment, you do lose some control over the delivery journey (including the carriers you use). There are also additional charges based on the size and weight of your products and how long they’re stored in Amazon’s warehouses.

In summary, you’ll need to investigate whether it's cheaper to use FBA or run your own fulfilment using a mix of different tools and carriers.

#2 How to manage your Fulfilled by Amazon (FBA) costs

Decided to go with FBA or already using this service? If so, the best way to lower your Fulfilled by Amazon costs is through managing your storage fees.

Our advice? Move your products in and out of Amazon as fast as you can. Why? Because each day a single unit goes unsold, your per-unit storage cost goes up.

Keep a close eye on your inventory and avoid overstocking – keep just enough inventory for 60-90 days. When it comes time to send your next shipment to FBA, ensure you only send only as much as you expect to sell within 60-90 days.

#3 Amazon Fulfilment by Merchant (FBM)

Amazon Fulfilled by Merchant (FBM) is a little confusing in that it’s not actually an Amazon service – it’s just a term they use to refer scenarios where you, the seller, handle the fulfilment.

While the prospect of running your own fulfilment can seem a bit daunting, especially when you’re starting out, it’s often the best pathway to reduce shipping costs on Amazon over the long term for a couple of key reasons, including:

• Full control over your shipping costs, including which carriers you use and margins you add.
• Ability to use your own shipping automation tools to keep headcounts low.

More on this below!

#5 Use a shipping automation solution

If you opt to handle shipping yourself, then using a shipping automation solution is a sure-fire way to reduce shipping costs on Amazon.

These tools basically act as the shipping brain for your fulfilment – you simply plug in your Amazon Marketplace and Amazon Easy Ship details (along with any other sales channels and carriers) and then let automation save you money and time every week!

Here’s how:

• One-click label printing – Generate and print shipping labels directly from your dashboard, in bulk or individually, from all your carrier accounts.
• Control your brand experience – One downside of selling on Amazon is losing the ability to personalise and brand the shopping experience for your customers. For example, if you're a sustainable brand, you miss out on opportunities to share your mission with shoppers. When you use shipping automation, you’re able to fully control your shipping notifications, including branding, timing and messaging.
• Consolidate shipments - Automatically merge orders going to the same address to save on packaging and delivery costs.
• Always use the cheapest carrier – Create automation rules to assign orders based on the cheapest shipping option available.

Starshipit tip: Starshipit is a shipping automation solution used by over 30,000 retailers (including Amazon users). As we continue with the tips in this article, we’ll point out ones you can put in place with Starshipit.

#6 Offer free shipping with minimum purchase

Encourage customers to place larger orders by offering free shipping on purchases over a certain amount. This can help you offset your Amazon shipping costs by increasing your average order value. Simple

#7 Review packaging dimensions and weight

Whether you use Fulfilled by Amazon, Amazon Easy Ship, or another Amazon service entirely, it’s important to keep on top of your packaging. Here’s why:

• Dimensional weight pricing: Amazon, like many carriers, uses dimensional weight pricing. This means they charge based on either the actual weight or the package's volume, whichever is greater. Optimising packaging dimensions can directly lower costs.
• Storage costs: Smaller packages take up less space in warehouses, potentially reducing storage fees for sellers using Fulfillment by Amazon (FBA).
• Compliance with Amazon's guidelines: Amazon has specific packaging requirements, and adhering to these can prevent additional fees or shipping delays.

Starshipit tip: Starshipit has a handy feature which lets you auto-assign packages to your orders. With Recommended Packaging, you can let Starshipit’s advanced algorithm automatically select the most efficient packaging for your orders by matching item dimensions with your configured packages.

#9 Seller Fulfilled Prime (SFP) program

Amazon’s Seller Fulfilled Prime program lets you deliver straight to Prime customers in the US directly from your warehouse, with one-day and two-day delivery at no additional charge for Prime customers.

The benefit? Amazon explains that Prime customers are more likely to pick your products given the delivery speed improvements. It’s a somewhat rigorous process to get enrolled, however, and you’ll need to keep up with their requirements to stay in the program.

#10 Take advantage of seasonal shipping discounts

Many shipping carriers offer temporary rate reductions during specific times of the year, particularly around major holidays and peak shopping seasons. To maximise these opportunities, make sure to:

• Research and track discount periods: Stay informed about when different carriers typically offer their seasonal promotions. You may need to speak to them!
• Time your promotions: Coordinate your marketing campaigns and sales events to coincide with carrier discounts, allowing you to offer more competitive pricing or absorb shipping costs more easily.
• Diversify your carrier partnerships: Work with multiple carriers to take advantage of various seasonal offers and compare rates.

#11 Invest in shipping insurance (wisely!)

Evaluate whether you need shipping insurance on a case-by-case basis. For lower-value items, it may be more cost-effective to self-insure rather than purchasing insurance for every order that goes out the door. This means periodically setting aside your own money to cover any potential loss instead of investing in a 3rd party service.

Starshipit tip: Use Starshipit's rules to automatically add a percentage or fixed amount to your base shipping rates. You can set different margins for various product categories, shipping destinations, or order values, allowing you to fine-tune your pricing strategy and maximise profitability across all your Amazon sales.

#13 Consider Amazon Multi-Channel Fulfillment

Amazon Multi-Channel Fulfilment (MCF) is a complete fulfillment service provided by Amazon. Using MCF, you store your products in Amazon’s warehouse network, and have orders fulfilled from those warehouses, by Amazon.

If you’re thinking this sounds like Fulfilled by Amazon, you’re not wrong. The difference is that with MCF, you’re not limited to selling solely on Amazon.com - you can use all your other sales channels (Shopify, WooCommerce, Etsy, etc.).

This option is particularly good for two user groups:

• Sellers who already use Amazon FBA and want to expand to other platforms with similar ease.
• eCommerce businesses looking to leverage Amazon's established logistics network.

#14 Research different carriers

We’ve touched on a few fulfilment options in this guide, but one of the best tips we can offer if you want to reduce shipping costs on Amazon is researching your own carriers.

Here’s why:

• Ability to negotiate rates directly with carriers, instead of being susceptible to what Amazon offers you.
• Flexibility to choose the most cost-effective option for each shipment.
• Options for specialised handling or packaging requirements.
• Ability to use multiple carriers to optimise for different shipping scenarios (including delays and peak periods).
• Ability to offer more diverse shipping options to customers and easier to adjust shipping strategies as your business grows.

Starshipit tip: The easiest way to manage multiple carriers is with a shipping automation solution. With Starshipit, you can simply plug your carriers into the platform, and then automatically assign your orders to your carriers, based on conditions you set up. Easy!

#15 Leverage customer pickup options

If you have a physical store, offering your customers ‘pick-up in store’ options for their orders can eliminate shipping costs. There’s also the added benefit of increased foot traffic in your physical store and the ability for customers to inspect items before taking possession.

Starshipit tip: You’ll want to ensure that these pickup options are available in your checkout (this is where a shipping automation solution comes into play) and that your staff are up to speed with pickup procedures. Oh, and it doesn’t hurt to set aside a dedicated pick-up area too.

#16 Tips for managing your Amazon advertising costs

This isn’t technically a tip for reducing your Amazon shipping costs, but it's worth pointing out! Amazon has several advertising solutions available for sellers, and if you use them, it’s in your best interest to optimise to keep a handle on costs.

Here are our top tips:

• Budget: set a budget for advertising and track your ROI to ensure you're getting a return on your ad spend.
• Monitor your keywords: Remove keywords that aren’t performing well.
• Try external marketing: Try organic marketing strategies such as social media marketing on Instagram or Facebook.

#17 Negotiate with your carriers

This is building off our earlier tip about using your own carriers – so if you missed that one, scroll back up!

When you use your own carriers, you also gain the ability to negotiate with them directly. This isn’t as scary as it sounds – it just means that as your business grows, you can regularly check in with your carrier account manager and negotiate preferential rates as your order volume grows.

This strategy helps prevent overpayment and can result in considerable long-term savings for you, particularly in peak seasons.

#18 Implement an inventory management system

As your business grows and order volume increases, an inventory management system can often seem like a good option. But when? The right time to implement one is typically when manual tracking becomes error-prone or time-consuming, usually around 20-50 orders per day. A good system can help reduce shipping costs on Amazon by:

• Preventing stockouts and overselling
• Optimising stock levels to avoid long-term storage fees
• Improving forecasting for more efficient restocking
• Enabling better use of Amazon's fulfillment options
• Streamlining multi-channel sales

By providing real-time visibility into your inventory, these systems help you make informed decisions that can significantly cut shipping and storage costs on Amazon.

If you’re looking for an inventory management solution, you may want to check out Unleashed, Cin7 or CartonCloud.

Starshipit tip: Utilise Starshipit's rule-based shipping automation feature to set up conditional logic that assigns the cheapest carrier option for each order, based on factors you set yourself, such as destination post code.

#20 How to reduce shipping costs on Amazon with Starshipit

Thinking of branching out and selling on Amazon? Already on Amazon and looking to reduce your overheads? Managing Amazon shipping costs doesn't have to be a headache.

With Starshipit, you can automate your fulfillment process and watch your savings (and your business) grow. Starshipit’s features can do things like automatically choosing the most cost-effective carrier for each order, consolidating shipments, and even recommending the best packaging to minimise dimensional weight charges. Plus, you can easily add custom shipping margins and streamline returns with a self-service portal.

Starshipit makes it easy to operate your shipping process in a way that works for your business. Use the sales channels and carriers you want alongside Amazon services like Amazon Marketplace and Amazon Easy Ship.

• Manage your shipping in one place: Seamlessly fulfil orders from all your sales channels alongside your Amazon orders, from one dashboard.
• Pick the right carrier for each order: Use the carriers you want alongside Amazon Easy Ship, including Australia Post, DHL Express, FedEx, Sendle and more.

Ready to take control of your Amazon shipping costs? Give Starshipit a try - it's free for 30 days. See for yourself how much you can save on fulfillment and simplify your shipping operations. Try Starshipit today!