Many sellers sell low MRP products on Amazon India marketplace with MRP less than INR 100. Other seller wonders how low MRP products can be sold using FBA programme of FBA when there are so many costs involved. Pricing in Amazon FBA can be check here.
Some ways by which this can be achieved are mentioned below.
Listing as Bundle/Pack of products
As shipping cost is high and takes most of the amount from selling price in low cost products, selling as a pack or bundle of items is a good idea. It could be simple or complex pack. Simple pack means multiple units of Same item. It could be 2 or more units. In a complex pack, it could be combination of different items, different SKUs (i.e. combination of different size, colour variations etc.).
A seller can calculate shipping cost based on weight of combination of items and visualise how much cost it is coming up for a buyer. Lower the effective cost of Shipping, lower the final price of an Items(s) a seller can put. Explaining by an example:
- Let’s say the single item cost to seller is Rs. 30
- Seller wants a margin of Rs. 20
- S/he has to include cost of sending to warehouse, let say Re. 1
- Cost of storing item as warehouse, let say Re. 1
- Shipping cost to far region, say Rs. 55
- Fixed fee would be say Rs. 15
- Pick & Pack Fee say Rs. 10
- After a successful sale there would be commission of say 9.5%
- GST to be paid, say 12%
- It comes out to be 30+20+1+1+55+15+10+Commission+GST
- = 132 + ~16 + ~17
- ~165
This is the approx. cost of single item. If seller bundle it up as Simple pack of 3, then the cost calculation would be like:
- Let’s say the single item cost to seller is Rs. 90
- Seller wants a margin of Rs. 60
- S/he has to include cost of sending to warehouse, let say Re. 3
- Cost of storing item as warehouse, let say Re. 3
- Shipping cost to far region, say Rs. 55
- Fixed fee would be say Rs. 15
- Pick & Pack Fee say Rs. 10
- After a successful sale there would be commission of say 9.5%
- GST to be paid, say 12%
- It comes out to be 90+60+3+3+55+15+10+Commission+GST
- = 236 + ~28 + ~35
- ~299
- 299/3 = ~100
Effective price for Buyer for a unit is nearly Rs. 100 as compared to Rs. 165 (when a single unit is being sold).
Listing as Single Product SKU
In case seller wants to sell a single unit only with a low price MRP then s/he needs to follow a different path of selling. This could be applicable when seller sells a single unit or as a pack. Taking a low MRP of Rs. 150 only in case of FBA would mean that everything like cost, margin, tax, commission, shipping has to come under Rs. 150 only as in Amazon FBA programme seller cannot define Shipping separately.
The dilemma here is how to do that? or How other sellers could be doing this?
The key would be to reduce shipping cost. This can be done by storing the item inventory at multiple locations/warehouses (though there would be more burden of GST compliance). The shipping cost would reduce to Rs. 28 or Rs. 36 i.e. around Rs. 19 less (in case of Rs. 36 from Rs. 55).
- Let’s say the single item cost to seller is Rs. 30
- Seller wants a margin of Rs. 20
- S/he has to include cost of sending to warehouse, let say Re. 1
- Cost of storing item as warehouse, let say Re. 1
- Shipping cost to far region, say Rs. 36
- Fixed fee would be say Rs. 15
- Pick & Pack Fee say Rs. 10
- After a successful sale there would be commission of say 9.5%
- GST to be paid, say 12%
- It comes out to be 30+20+1+1+36+15+10+Commission+GST
- = 113 + ~14 + ~18
- ~145
Seller Flex
Selling using seller flex may reduce the per item cost. In seller flex there would be some additional compliance costs as compared to normal warehouse being manager by seller.