Chelsea Cohen is an Amazon inventory & FBA fees expert and the co-founder & CEO of SoStocked.com, an Amazon inventory management software now part of the Carbon6 ecosystem. She has helped hundreds of 7 & 8-figure sellers increase profitability through stockout avoidance and fee prevention. Chelsea has been featured on Billion Dollar Sellers Summit, 7-Figure Sellers Summit & Prosper Show, among others.

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In this episode of the Ecomm Breakthrough Podcast, host Josh Hadley interviews Chelsea Cohen, CEO of SoStocked, an Amazon inventory management software. They discuss the hidden costs and fees Amazon sellers face, especially in the current economic climate. Chelsea shares insights on understanding unit economics, managing shipping and storage fees, and the importance of inventory forecasting. She highlights strategies to mitigate these costs, including negotiating supplier terms and optimizing product packaging. The episode provides actionable advice for Amazon sellers aiming to improve profitability and navigate the complexities of e-commerce.

Here are the 3 action items that Josh identified from this episode:

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This episode is brought to you by eComm Breakthrough Consulting where I help seven-figure e-commerce owners grow to eight figures. 

I started Hadley Designs in 2015 and grew it to an eight-figure brand in seven years.

I made mistakes along the way that made the path to eight figures longer. At times I doubted whether our business could even survive and become a real brand. I wish I would have had a guide to help me grow faster and avoid the stumbling blocks.

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Josh Hadley 00:00:00  Welcome to the Ecomm Breakthrough podcast. I'm your host, Josh Hadley, where I interview the top business leaders in e-commerce. Past guests include Kevin King, Michael Gerber, author of The E-myth, and Matt Clark from ASM. Today I am speaking with Chelsea Cohen, the CEO of So Stock. Com in Amazon inventory management software. And we're going to be talking about all the hidden costs and fees that Amazon is charging you, how to identify them, and how to reduce them so that you are more profitable. This episode is brought to you by Ecomm Breakthrough, where I specialize in investing in and scaling seven figure e-commerce companies to eight figures and beyond. If you're an ambitious e-commerce entrepreneur looking for a partner who can help take your brand to the next level, my team and I bring on that hands-on experience, strategic insights, and the resources needed to help fuel your growth. If you or someone you know is ready to scale or looking for an investment partner, reach out to me directly at Josh at Ecomm Breakthrough.

Josh Hadley 00:00:44  Com that's E-comm with two M's and let's turn your dreams into reality. But today I am super excited to introduce you all to Chelsea Cohen. Chelsea is an Amazon inventory and FBA fees expert and the co-founder and CEO of Sostocked.Com, an Amazon inventory management software that is now part of the carbon six ecosystem. She has helped hundreds of seven and eight figure sellers increase profitability through stock out avoidance and fee prevention. Chelsea has also been featured on the Billion Dollar Seller Summit, seven Figure Seller Summit and Prosper Show, among others. With that introduction, welcome to the show, Chelsea.

Chelsea Cohen 00:01:15  Awesome. Thanks for having me.

Josh Hadley 00:01:16  Chelsea. Super excited to have you on the show. I myself was one of the first people that signed up for So Stoked when you first came out with it, because I knew the pains that we were experiencing personally with our inventory management, I think at the back in the day. So we used forecasts. That's not even around anymore. That was our first like inventory management software and then we even so I brought on like an operations manager at one point.

Josh Hadley 00:01:40  He had a lot of CPG experience and we went in with another man. I can't even remember what it's called now, but it was much bigger. It was by his. It was a sage product. it was one of their inventory management platforms. But anyways, it was like $20,000 a year. And I was like, and it didn't even it couldn't even do everything we wanted it to. And I was like, why are we paying all of this money? And so lo and behold, so stock comes around and here we are. So. Yeah. Chelsea. With that being said, people I think people have heard about so stocked and how powerful it is. But I'm curious, in the world we're living in right now, in the economic environment, we've seen Amazon just continuing to raise fees for everybody. We see shipping becoming more expensive. They're adjusting their structure, it seems like on Amazon so that they're profitable but they don't necessarily care about your profit. So I'm curious to hear from your perspective, Chelsea, what's on the top of your mind? What should seven and eight figure Amazon sellers be focused on right now to make sure that that margin squeeze the Amazon's putting on everybody? it doesn't really just like completely tear apart your bottom line.

Chelsea Cohen 00:02:41  Yeah. For sellers I think the big focus needs to be on understanding unit economics. So understanding what goes into the profitability of your product. there's the idea of landed costs. And landed cost is a variable. It's if you're looking at your landing cost based on data from last year, the shipping costs have changed significantly. They are all over the map right now. There's a lot of problems in shipping, in the shipping industry. So getting an understanding of what your landing cost is, but then breaking that down further to storage and all of these fees that can stack up, full picture of your business, not just from when it hits Amazon shelves or, you know, after their regular fees, but looking at the long term effects of of that inventory and how that affects your profit margin, I think is huge.

Josh Hadley 00:03:28  Yeah, I think that that is super important. It can easily be overlooked. I remember for our business, you know, I can make a bunch of mistakes with inventory and oh, we sent in too much inventory into FBA back in 2016, 2017, and it might sit there for a year or two and I might get charged some nominal, you know, long term storage fees.

Josh Hadley 00:03:47  Well, now that that game is completely flipped on its head and Amazon is severely punishing you to say the least, if that's if that stock sits in their warehouse for anything longer than 180 days. So I'm curious, from your perspective, Chelsea, what are some of the hidden costs and maybe fees? Not necessarily that Amazon specifically charges, but all throughout the supply chain that you see a lot of e-commerce sellers overlooking.

Chelsea Cohen 00:04:09  Yeah. So first and foremost shipping costs. we kind of touched on it a second ago. Understanding having a broader view of what's happening with shipping, I think is important to understanding why the costs are fluctuating and also to prepare for that, prepare for the cost changes as well as the changes in terms of the lead times. Because when you have a longer lead time, obviously the dynamics of your cash flow are going to change. So that needs to be adjusted. if it's possible, you know, consider going to your supplier and saying, hey, the lead times are longer. Can we, you know, make some adjustments to the payment terms, but just continuing business as usual and not paying attention to the fact that, you know, for instance, the Red sea is a direct path from China to Europe and that has had, you know, piracy.

Chelsea Cohen 00:04:53  There's a lot of unrest happening in that region. And so ships are going around the bottom of Africa and it's adding so much time. So the supply and demand is being thrown off because these ships are taking so much longer to deliver products. And then the Panama Canal has had huge droughts. So the Panama Canal is the width of the Panama Canal is shrinking, less ability to pass through. So all of these things add to the, you know, the global freight shortage. And then on top of that you add what recently was announced in domestic shipping, which is that rates are going to be coming up in Q3 because there's more demand in that. Last year there was a huge overstock and people were not they were not sending in more inventory. So now that the economy is starting to pick up again, there's a lot more, you know, the freight industry is coming out of a recession and they're going to start charging a lot more, more money, and there's going to be less demand. So being prepared for all of those things, I think it's important to have that view, that perspective.

Chelsea Cohen 00:05:48  And, and we actually have a newsletter that goes out, weekly, which is how I, you know, have all this insight is that following these things, you can be making strategic decisions and strategic negotiations and planning, if you know these things in terms of the whole global e-commerce or global commerce, as opposed to just being focused on Amazon.

Josh Hadley 00:06:08  Okay. So I love that. So all right, Chelsea, I'll ask you the hard question. All right. So what's the solution to these problems? Right. As you talked about, if we understand these issues we can start making strategic decisions now. So what would be your recommendations?

Chelsea Cohen 00:06:20  Yeah. So like I mentioned the possibility of adjusting payment terms with your supplier. There's a couple of different ways. The first question is to understand the supplier's business. And because you don't want to go to them with basically like, hey, you know, you need to make some concessions or else. understanding that they have cash flow and they have things to pay for as well.

Chelsea Cohen 00:06:41  So being able to go to them and say, hey, maybe, maybe you have to pay upfront or pay extra for inventory for raw materials upfront and then they can be a little bit more lenient or flexible with the payment terms. on the other side, but figuring out a way that can be a win win situation, so that when you have these longer lead times, you can afford them, you can balance your cash flow. I think that is kind of one of the first things to look at is understanding what the lead times are and the impact on your cash flow, and then figuring out how you can balance that with your supplier.

Josh Hadley 00:07:12  Yeah, I think that that is so, so important. Chelsea, we talk about, you know, I've had previous guests that talk about, like, negotiating payment terms with your supplier for a better, improved, you know, you know, cash conversion cycle. And typically we'll talk about that in terms of, hey, you know, you're not going to be able to launch as many new products, right? If your cash is locked up.

Josh Hadley 00:07:32  As I see this, it's like if we continue to experience more issues with shipping and everybody starts shipping more, and, you know, Q4 is upon us and, you know, we know everything takes a lot longer the longer it takes you to return. That capital means it's not sitting in your bank account. B it means you aren't launching more products, but also like you're less nimble and able to, I guess, navigate around challenges that are certainly going to come up in your business. And so I think negotiating with your supplier on those, those, those upfront payment terms are so essential. Chelsea, I'm curious what payment terms have you seen some brands get.

Chelsea Cohen 00:08:07  Yeah. So I mean I've seen some, some crazy payment terms. I saw you know a friend of mine, they did it was like 0% down 100% like net 90. That was like years ago. But that was, that was the craziest I saw. I don't think that's a win-win scenario. But one of those that tends to be helpful is paying a percentage upfront and then, paying on whatever ships out.

Chelsea Cohen 00:08:28  So let's say, for example, you know, we pay 30% upfront or and then we produce, let's say three months of inventory. They might store those three months of inventory, and you would only pay the other 70% on whatever ships out, say 30, you know, 30, 60 days after it ships. So being able to have the stability of your inventory being produced and ready to go and then storing it for, you know, low cost or no cost at that warehouse and shipping it out in such a way that your cash flow is not strained.

Josh Hadley 00:08:59  Yeah, I like that. So I'm just using them like a warehouse, right? That's like, hey, we'll manufacture X amount of units, but let's only drip in half or whatever a third of it right now, and then bill me for this. But you're not going to build me for the full amount until later. I really like that strategy. Okay, Chelsea, lots of fun. Okay. What are some other fees that people need to be paying attention to? so we talked about shipping.

Josh Hadley 00:09:21  What else?

Chelsea Cohen 00:09:23  So storage is obviously, you know, I mean, you've got anything that you do with inventory is going to cost you. That's the majority of our costs, right? Fulfillment, transport, storage, inventory touches everything that has to do with your money. Really? So storage is a big one. I think what we're starting to see really is a lot of people moving into Amazon warehousing and distribution, and I haven't talked to many three PL owners, but I am interested to find out what the industry is like because it's been, you know, swinging in the direction of people moving from three place to Amazon warehousing and distribution. And there are other FBA storage fees that can be benefited from, you know, kind of having that strategy as well.

Josh Hadley 00:10:03  I'm curious, so what is your recommendation in terms of so I believe that you're saying a lot of like Amazon rolled out their new inventory placement fee this year. Right? But they said, if your products are in order, then you don't have to worry about paying this inventory placement fee.

Josh Hadley 00:10:19  Yeah. I'm curious, like, are you recommending people go to, give me the scenarios where Ord makes sense, give me the scenarios where it does not make sense. Sure.

Chelsea Cohen 00:10:29  So if you're using a three PL one of the you know, there's always a danger in moving from one three PL to another. And Amazon, you know, is basically a three PL. There's less of that personal touch that you can't just pick up the phone and talk to the warehouse manager about a problem. You're still dealing with Amazon. so having that in mind and it's always a good idea to have a backup, like I would never, you know, just as I never said, put all your, you know, put all your inventory into Amazon, always have a three pile backup. I feel the same way. Have a backup to your backup. You know, don't trust Amazon with all your inventory. It's still Amazon. That being said, if you're stuck with inventory there's a couple of different scenarios. So the costs are pretty low.

Chelsea Cohen 00:11:09  You can get around the inbound placement fee. The rates are steady throughout the year. So you don't have any peak storage, and then the rates are $0.48 per cubic foot year round versus, you know, the $0.78 per cubic foot, $2.40 in Q4. So there's significant savings there. And then if you're using supply chain by Amazon, meaning you're using Amazon partner carrier where you're using Amazon Global Logistics, they have an additional rate that's a reduction. It's called integrated. So that if you qualify for this by using their service, there are other services. Instead of $0.48 per cubic foot, you're paying $0.36 per cubic foot. And then the rest of the fees. Also, you know, the transportation fee goes from a dollar per cubic foot to like 80 $0.86 per cubic foot, something like that. So all of the fees are also reduced by using the supply chain. There's incentivizing you like crazy with, you know, the carrot and the stick. They're incentivizing you to go into using the entire supply chain by Amazon system.

Chelsea Cohen 00:12:06  Really?

Josh Hadley 00:12:07  So is that a good approach then? Because I mean Amazon. So I'm really curious to hear from your perspective, like why is Amazon so adamant about trying to get people into food? And then again like AGL, right. They have discounted rates like as we've shopped quotes like AGL continues to come out on top with the lowest rate. Yeah, right. But I see this as being like Amazon being Amazon where it's like, yeah, we'll give you a really low price to begin with. Then we know once you're in bed with us you can't leave. So like then we just jack up your rates and we'll screw you a couple years from now. It's all right that we're losing money right now. So I want to hear your thoughts on that.

Chelsea Cohen 00:12:40  I mean, I think that the numbers do look very attractive right now. it's important to do rate shopping as well, because we can just say, oh, well, this is the best rate. And it may not be. I mean, and to do it, you know, not just once but over time, you know, because the market has to change.

Chelsea Cohen 00:12:58  If you've got three people that are higher priced and Amazon's starting to take their business, they're going to start lowering their prices to be more competitive. So I think that, you know, on the one side, it could be that they're trying to lock us in. And then, you know, we get stuck. But on the other side, pay attention to what's happening outside of Amazon in terms of the rates. And if those start coming down because of Amazon and what they're doing. so I think that that's the never, like I said, never trusting Amazon fully. But also it could be a good thing for the rest of the rest of the market.

Josh Hadley 00:13:27  Makes sense. So here's a hypothetical for you, Chelsea. So let's say I'm getting a good rate through AGL into Ord, but I have some wholesale orders that I have to take care of now. Yes, you can ship from AUD to different locations, but you can't put it off like they're not going to do packing slips and different things like that for you.

Josh Hadley 00:13:43  So you're going to have to utilize the three PL. What would be your thoughts on the strategy of like, okay, I still need a three PL, but it doesn't need a ton of stock. Yeah, it needs a little bit. Would you recommend saying like, all right, let's take the AGL rate, ship everything into AWD because it's still going to be more cost effective. then ship the product. You know, maybe it's a pallet. You take one pallet of the ten and you ship it to a three PL that then can do your wholesale or retail, or maybe it's your Walmart other sales channel orders for you. What are your thoughts on that? Do you like that? Does that seem overly like, no, it's probably better just to split the shipment to begin with.

Chelsea Cohen 00:14:20  I mean, it always it always depends on the numbers. You know, I would say that that sounds like a great plan, because you're. Then you've got everything in that one container, but you have to kind of run the numbers on, well, you know, would an air shipment to, you know, the three PL make more sense at and then just to think through the projections back again, everything can be projected.

Chelsea Cohen 00:14:41  You know you want to project out how much is it going to how much am I going to need over let's say six months versus, you know, if I ship directly versus if I pull out from Ord. So it really just depends. I think it's a good strategy. But always, you know, always like to say run the numbers.

Josh Hadley 00:14:55  Yeah okay. Makes a lot of sense. All right Chelsea let's go into you talked about that you know modeling and projecting out, you know, your fees and also doing some inventory forecasting. So tell me why that's important. And also I'm curious to hear how you actually go about doing this.

Chelsea Cohen 00:15:11  Yeah. So projecting you know really in terms of sostocked kind of like say is an inventory forecasting system more so than an inventory management system. And I think that's an important differentiator that hasn't really been made in our industry enough. And when it comes to forecasting, if I can forecast, you know, obviously we've been forecasting inventory orders. That's tied to forecasting sales.

Chelsea Cohen 00:15:32  You can't forecast, you know, inventory without sales. But then if you take it a step beyond, you can forecast fees, you can forecast profit, you can forecast cash flow. And so those are the things that we're focused on first and foremost the fees. That's where the bleeding is. So being able to look at not just what is happening today is you've got all these profit tools and they show you what yesterday's profit was and what last months and last weeks, and they're showing you the profit as it is today, with the money that has hit your account right now and the money Amazon has charged you right now, but they're not looking at what is Amazon going to charge you next month and the month after that and the month after that. Yeah. I open up, you know, accounts, look at some client accounts, and they're sitting on hundreds of thousands of dollars in forecasted storage fees. So being able to forecast for those is huge. You know, you've got I looked at yesterday I was working with a client and they had tens of thousands of units in aged inventory that was in the 240 day range, 270.

Chelsea Cohen 00:16:31  Basically, you know, you go from one $1.50 per cubic foot in in age inventory fees, and then 30 days later, they're going to be paying $5.45 per cubic foot. But that gap into nine months is just a huge, huge gap. And it can mean tens of thousands of dollars in just, you know, not reacting in time to those things. Yeah.

Josh Hadley 00:16:50  It makes a lot of sense. so, Chelsea, I'm curious, like, do you have more case studies that you can share with us of, you know, here are some mistakes that other people have made. We don't need to share brand names. But here's what I see when I look into people. So stock accounts I see people making mistakes here. I see people winning here. Can you share some case studies?

Chelsea Cohen 00:17:04  Yeah. So yeah. So we have a nine figure seller come in to work with us. And his big focus was on fees, being able to see visibility into the age of the inventory right now.

Chelsea Cohen 00:17:18  But, you know, a big focus was you always want to start with the latest and the oldest inventory. And he came in and he had you know, he has tens of thousands of SKUs. He had hundreds of SKUs that were over a year old. So he's incurring age inventory fees at such a high rate. you know, we're talking projected out for a year. If he did nothing, if he didn't change his business at all, he'd have been paying a couple hundred thousand dollars in overstock storage fees. So we went through and we isolated, first and foremost, the oldest inventory. Looking at everything over a year, we said, here's all the items over a year go through. And being able to isolate those, that's first and foremost. And if you're not using software, Amazon does have a report that can help you with this, which is the FBA inventory report. I got teased by someone for saying it was my favorite Amazon report, but it is, it's kind of hidden.

Chelsea Cohen 00:18:06  So you have to go into the fulfillment reports, go to inventory, and then you have to click the more button. So I don't think a lot of people know that it's there, but it has your inventory page for every single Asin so you can find your what we did is we, we pulled up all of his products that were aged over a year and focused on those and went through and said, okay, you know, this one, you can price drop, this one, you can this, this one, you know, turn on marketing, this one, remove and sell on a different channel. And just going through that whole list and starting with the oldest and then working your way back with if you don't have aged inventory that's aged that dramatically, the focus would be on anything over 240 days, because 240 days you're about to hit that, you know, that time bomb is about to go off, and then anything over that is already incurring those, those crazy feeds. So that would be the strategy, I think, for, for anyone.

Chelsea Cohen 00:18:50  and with him, I think within three months, we were able to save him about $38,000 in fees.

Josh Hadley 00:18:56  Yeah. That's unreal. And I remember so this year we've been working closely with Chelsea and the sostocked team as well to get better visibility on our own inventory situation. So we have a lot of different seasons within our business. Right. We have products that are highly seasonal that will do well during, you know, graduation season. There's stuff that does really well during the back to school season. There's stuff that does really well during the holiday season. And then at the beginning of the year during the New Year season. Okay, now the challenge with that is like when you a10x your sales in one month, but then sales fall off a cliff. That inventory projection and forecasting becomes so, so important on Amazon because like I said back in the day, I could let it sit there and be like, over purchase this year. That's all right. We'll sell again next year.

Josh Hadley 00:19:37  But as you mentioned, like I can't afford to keep that inventory. Leave it in that full year. So my team and I, we went through and we did a whole analysis to say, all right, here's how much it costs to remove the product. I relish in the days when it was $0.30 to remove a unit, right?

Chelsea Cohen 00:19:51  No, I remember $0.20 just.

Josh Hadley 00:19:53  Like it was. Yes. Yeah. So that that is long gone. So these are big conversations that you have to have because removing inventory is still going to cost you at least a dollar a unit at a minimum. Okay. And then you have to be able to calculate. All right if I remove 10,000 units it's going to cost me $10,000. Now that sounds painful right. But what happens if you're incurring long term or storage fees. Right. The higher rate beginning in let's say you're going to hit it at 180 days, right. It's going to be at a lower rate. Let's say you're getting $1,000 a month in overage fees or long term storage fees.

Josh Hadley 00:20:25  But then once that 240 days kicks in and let's say you're still outside like another 90 days or 120 days from your next peak season. At that point, you you may be being charged 5000, $7,000 a month, at which point take the one time hit early on. Remove the inventory and then, you know, put it back to a 3 p.m., then ship it in later. Is that kind of the strategy that you're recommending.

Chelsea Cohen 00:20:47  With people running the numbers? I think that some people have they can do that if they're like with your case, removal fees are fairly low. Some people are sitting on removal fees that are like three, you know, three, 4 or $5 a unit, you know. So it depends. It depends on the situation. But sometimes, especially with products that, you know, are highly seasonal, that could be a good strategy. That's where the strategy also comes in. Yeah. with a seasonal business, since you don't have to worry as much about ranking my understanding, not having a seasonal business, my understanding is it's better to sometimes to run out of stock in your season than to sit on a bunch of stock.

Chelsea Cohen 00:21:24  Is that kind of the strategy?

Josh Hadley 00:21:26  Generally, that is not the strategy we employed last year, but it is the strategy we're employing this year. Yeah, I have a.

Chelsea Cohen 00:21:32  Client and talked to him about that. And my recommendation was if you've got this heavy season, you know, stock up and have kind of the three PL you can, you know, send a bunch of inventory in. but don't send everything in that you're going to sell. Send some of it to have a little bit of a backup in three PL where if is not doing its job quickly enough, you can send in, but then kind of, you know, kind of like musical chairs at the end, you know, you want it. You don't want to be sitting in the FBA chair when the music stops. You want your inventory to be sitting at, because the storage situation is a lot better, especially once you get into Q4 if you don't have a Q4 product.

Josh Hadley 00:22:08  Yeah, 100%. So I think makes a lot of sense.

Josh Hadley 00:22:11  And if he makes the mistake and ships in excess inventory supposedly now again, I'd have to wait and see the numbers because we're just barely testing this out. But supposedly they're not going to charge you the long term storage fees if you have it on auto replenish. On the challenge is with AWD, they're not forecasting your inventory and saying like, oh, next month you're going to sell 10,000 units, even though last month you only sold 1000 units. So you have to manually force that shipment in from AWD. And then again, any manually forced inventory orders like you're on the hook for. So I don't know, maybe you could see it on AWD or like okay, surely I'm going to sell at least 5000 units. So see that and then AWD will keep dripping stuff in along the way. I don't know, it's going to be interesting.

Chelsea Cohen 00:22:52  Yeah. On the, on the, you know the upswing and the downswing definitely kind of paying attention. You can't go on autopilot during that period with Amazon because we don't know what data they are using.

Chelsea Cohen 00:23:02  We'd hope they were using some sort of seasonality data. But their algorithms on restocking have not been proven to be the best. So I think that watching, you know, watching and monitoring that side of things and taking that more under your control, is important. I mean, because even if Amazon waves, you know, wave the low inventory level fee or the overstock fee, you're still getting charged those standard fees, which are pretty costly.

Josh Hadley 00:23:24  Yep. Agreed. All right, Chelsea, give me another case study.

Chelsea Cohen 00:23:28  Okay. well, one of the one of the things that I like to talk about is, you know, with everything in terms of, storage and fulfillment, size really matters. So we've done a lot in terms of resizing. We have resizing for products and then also resizing cartons. And so that's something that we built that about a year and a half ago and have seen really great results. But the story that I like to share is not my own story. It was with I think, you know, Travis Ziegler, he's, co-founder or founder of Profitable Pineapple.

Chelsea Cohen 00:24:02  He also had an eye care brand with his wife, Jenna. And they were, you know, they sold that business. But before they sold it, one of the great stories that I like to tell of his is with regards to resizing their products. They had these sunglasses, and the sunglasses came with a hard case and they didn't promote the hard case. They didn't, you know, showcase it in images. It wasn't something that was really a big selling point. So they decided, well, why are we doing this? Why do we have this hard case? And they put them in soft cases, and that changed the entire dynamic of of that product. They were able to significantly reduce their fulfillment fees, also reduce their storage fees. They could get more units per carton, more units per pallet. So their shipping fees and their handling fees went down. And then when I asked him, how much does he think that he saved annually from that decision, he said $70,000 was probably what they ended up regaining in in profit.

Josh Hadley 00:24:53  Yeah, that's massive savings. So you're saying not only resizing helps in terms of the FBA fees, which I think are probably the most significant. Right. Because if you can either decrease the weight of your product by removing maybe excess packaging. I think a really good example of this is like, let's say you're in this small standard size right now, but your product weighs 16.2oz, right? Which now forces it it's over a pound. So now you're automatically in large standard size. Yep. Okay. If you could remove two ounces of packaging. Right. And sit at 15.9oz, for the packaging, you now drop down into small standard size, which I think some of those you're saving almost like 75, $0.80. Yeah. per unit. Right. And you look at that. That could be a huge savings if you're selling, I don't know, 50,000 units a year.

Chelsea Cohen 00:25:38  Yeah, exactly. Yeah, tens of thousands. I mean, we do. We have a free tool. So stock. Com forward slash tools.

Chelsea Cohen 00:25:44  But we also have done bulk audits so we can run an entire catalog. And sometimes it's just that Amazon has pushed you into a higher size you know higher tier. We've seen times where you know we run it and it says if you adjust your weight by 0.01, you'll get into the next lower tier. Well that's a remeasurement. That's not, you know, completely changing the dimensions of your product. It's submitting and saying Amazon, you need to remeasure this. and so keeping your eyes on that, paying attention to that I think is huge. because that's just kind of, you know, it's not a glitch, but it's technically it's kind of a glitch in your business. So that would be the first approach where you could start gaining more money, putting more money back in your pocket before you even turn to your supplier to, to restructure.

Josh Hadley 00:26:27  Do you feel like that's kind of like news to a lot of sellers when you talk to them about remeasurement?

Chelsea Cohen 00:26:34  sometimes, yeah. I think that if it weren't news, we wouldn't be seeing as many as we have.

Chelsea Cohen 00:26:39  You know, we see it a lot. So I think that it's I don't believe that enough sellers have a standard system for identifying these things and also for requesting re measures. If you're not requesting measures monthly. then you probably need to address your system because, you know, when Amazon, I mean, especially if you have a large catalog, you have a large catalog, you know, thousands of SKUs, there's probably a good chance that you should be doing regular measurements, across your catalog. So actually, Seller Investigators has a free tool. So whether you sell or investigators or not, they have a it's called the weights and Dem's tool where you can just plug in your data. And this is what my weights and dimensions are. And then they will alert you if Amazon has changed something. They'll alert you and say, hey, this is you know, this has been bumped into a higher size tier.

Josh Hadley 00:27:26  Yeah, that's brilliant. And I think so again, this is another thing that we worked on with you guys as well this year because we were noticing that, you know, some of our products, we'd sell similar products, but one would have a higher FBA fee on it for no given reason.

Josh Hadley 00:27:38  And so being able to do that remeasurement makes all the difference. Now sometimes we actually found out this Chelsea. So the problem is we weren't getting like we ourselves weren't measuring the product when we would get the final product from the manufacturer. Right. So now we have a team member that like literally we get the samples and we measure it. We measure the thickness, we measure the weight, we measure everything. And we say, this is exactly where this product should be. We code that into our spreadsheet and obviously into software tools. And then that way we know without a doubt what the FBA feed fee should be. We've seen it go both ways. A when Amazon's made a mistake and we're actually sitting in a lower fee that we shouldn't be. Now that doesn't happen very often, but it does happen. But most of the time Amazon's overcharging you for some reason. I don't know something else was sitting on the scale or I don't know why. And I'm curious maybe do you know.

Chelsea Cohen 00:28:27  On the scale at that very second.

Chelsea Cohen 00:28:28  Right. Yeah.

Josh Hadley 00:28:28  Like, do you know how Amazon measures their stuff and why they're so much like variance with that.

Chelsea Cohen 00:28:32  Yeah, it's called a cubic scan. In terms of the variance generally because we had I was on a panel with Jungle Scout and one of the I think it's the CTO of Jungle Scout used to work in that area and worked with the Cuba scan, and I thought I was going to get some like, you know, secrets. But, you know, it's basically just, you know, the scanning and what we've all known is generally the product might be squashed. The one that they grabbed might have been kind of funky. So that's kind of, you know, that's the thing that you have to pay attention to if you've got a product that's so close to the line, oftentimes that can happen more likely than something where you give a little bit of wiggle room for something to swell. Maybe it's humid in the, you know, area, maybe something got squashed.

Chelsea Cohen 00:29:12  And make sure if you've got I talked to someone yesterday, they had a problem with their They loaded a high like a very heavy box onto something that was very light and their product got squashed and everything got pushed into a higher category because the items were warped. So pay attention to making sure that your boxes are structured in such a way that things are not getting crushed.

Josh Hadley 00:29:32  Yeah. And I think the other one, I think this happens a lot with anybody that like poly bag stuff, right? Yeah. Anything that is loose. Right. Like Amazon, it doesn't. It doesn't matter that that bag could actually be squished down a little bit more that the Amazon employee is not doing that. They're not like, let's shrink this down then put it in the scanner. They just take it from the box, they throw it on that thing, it gets cube scanned, anything accessed if you've got air in there and that pushes you over in terms of thickness or size or whatever it may be, it's not going to affect weight.

Josh Hadley 00:29:57  But yeah, it will affect your dimensions. And if that happens because now Amazon's doing like that. Cubic dimensions. Right. The dimensional weight too. So my goodness Chelsea, there's just so many ways how I guess this would be my question to you Chelsea. Like how in the world does an Amazon seller like have a handle on all of these little things that truly can add up? We talked about dimensional weight. We talked about, you know, being able to optimize your cartons when you're shipping them in. We talked about not sending in too much inventory, too little inventory. How do you manage this?

Chelsea Cohen 00:30:29  first and foremost, I think that you need to have data. I think that the biggest problem is that this is not exciting you know, it's exciting for me. I get you know I get excited about this stuff. But most people don't. So I mean it would be good to if you have the business, get someone who does get excited about this sort of thing. I think that, you know, for seven and eight figure businesses that someone to invest in, someone who really likes this and then to figure out where all of your potential is, you know, look first at your fees.

Chelsea Cohen 00:30:58  Do you have a lot of inventory fees? Are you, you know, getting into trouble with shipping, understanding all the fees and saying, what is the biggest impact that I could make if I only have so much time in the week or the month? What is the project for now? Usually it's for aged inventory. That's the thing that the clock is ticking on and it's going to just get worse and worse. So going after aged inventory, you know, really understanding what are your problems, how can you address them. And then moving on to the next thing. So maybe the next thing is looking at the impact of, you know, what are those top three products that we can change the dimensions on. It's not your whole catalog. It's what we do when we audit a catalog is we'll look at what is the potential, what's the lowest hanging fruit. So the lowest amount of weight reduction the lowest amount of size reduction. and then against the annual sales, the biggest impact because if I have, you know, if I have something that is going to save me $5,000 a year versus something is going to save me 80,000, I'm going to go after the 80.

Chelsea Cohen 00:31:50  So taking those, okay, I've got my top three. I'm not going to change everything, but focusing on those, you know, little projects. This month we're focused on inventory. This month we're going to resize. We've developed a program to to monitor and remeasure and do remeasure requests, just kind of these little projects that make it, easier to to systemize and to confront. Because I look at you, we look at all of this and I say, here's all these things you could do with your business that would fix it. and then, you know, people just get overwhelmed and they end up doing nothing. So it's the strategy. And then it's also having the data, is another big part.

Josh Hadley 00:32:25  I love that. Chelsea, are there any final case studies you want to share with us?

Chelsea Cohen 00:32:29  Let's see. I would say in terms of forecasting a story that I like to tell, you know, the Phipps, I believe, they, they started using so stopped a long time ago.

Chelsea Cohen 00:32:39  And, and this goes back to kind of the shipping being able to to get a handle on, on your shipping. They started using so stocked and they were shipping a lot of air shipping. and they weren't, you know, projecting out as far as they should. And so maybe I think that's an angle is if you're if you can project out far enough, you can make strategic plans. And so they ended up saving $0.75 per unit by avoiding the by switching from air shipping to sea shipping. And that had a huge impact. They ended up exiting you know so whatever multiple you know if you save $0.75 per unit on shipping or if you save $0.75 per unit anywhere, that can gain you tens of thousands of dollars. But at the same point, if you're going to exit that business like they did, they ended up exiting and that tens of thousands turned into, you know, exponentially. I think, you know, I don't know what their multiple was, but that's during the time when multiples were very high.

Chelsea Cohen 00:33:27  So I think that's a perspective of based on savings, not what is it gaining you today. But you know you're saving this amount. So you're also gaining that money back to be able to scale and you're gaining additional savings to improve your EBITDA for exit. So it really is doing. The sooner you do it, the faster you scale and the larger your exit. Yeah.

Josh Hadley 00:33:47  That makes a lot of sense. Yeah. If you're about to exit like everything that we just talked about, like removing that aged inventory, if that's costing you ten grand a month. Right. That can add up drastically. Right. Put A3X on top of losing $100,000 a year in just aged inventory fees, right? Right. Imagine, you know, you sell 10,000 units a year and you can reduce that by, you know, $0.75 by doing a lower FBA fee. Right. You start to stack these wins, and that could be another half a million, million dollars when it comes time to exit. So I think that's the power of everything that you talked about today.

Josh Hadley 00:34:17  Chelsea, is there anything that we haven't touched on that you think Amazon sellers need to know?

Chelsea Cohen 00:34:23  I would say I mean, we talked a little bit about cash flow. I think that, understanding cash flow, it's important to to draw the parallel between I kind of like to say, you know, sales is the is, you know, is the equivalent of your, your traffic and your conversion. Scaling is the combination of profit and cash flow. So understanding those pieces, you know, we talked a lot about getting to getting a handle on improving your profit, but not understanding your cash flow or not understanding like one of the big questions I get when I started talking about cash flow was I want to know how many products I can launch so there is a lost opportunity cost and not having an answer to that question. And then if the answer is none or the answer is one, and you want the answer to be two, well, maybe there's money hiding in your catalog that's draining that cash.

Chelsea Cohen 00:35:08  So understanding what the true profit margins are, you can identify some of those that are bleeding you, your profits and then are also just, you know, eating up your cash flow, tying right into, you know, moving that inventory out, regaining because there's cash just basically sitting there. So if you start selling through that inventory, you don't restock. All of a sudden your cash flow dynamics can change. And you can then launch the products that you want to launch for a much larger gain to scaling your business.

Josh Hadley 00:35:32  Yeah, I love that. Now, Chelsea, I know this isn't necessarily a sponsored podcast by carbon six, but I do want to have you tell me, like, give me the software tools that we should be using that allow us to, like, manage all of these fees. Because you mentioned, like seller investigators has a cool feature of, hey, all I need to do is key in my product dimensions, and it will alert me anytime Amazon changes the FBA fee. Like that's super helpful and very scalable.

Josh Hadley 00:35:56  what other tools have you seen or been built out to help manage everything that you talked about today?

Chelsea Cohen 00:36:00  Sure. Yeah. So for seller investigators on the topic of the resizing, one of the things that they will also do is if you've got a product that has been resized, I mean, this is beyond, you know, the other fees that are acquired. if there's a product that has been in the wrong size tier and you get them to reduce it, you can go back and get 90 days worth of that. Those fees, it's not as high of a success rate as the other ones. Amazon likes to, you know, kind of hold on to their money. But there is, you know, there is success in being able to do that. So they'll file those cases for you to, you know, get that money back. So that's what resizing. And then we've got tools now in sostocked to help to forecast or aged inventory forecast overstock and to be able to figure out what to do with that.

Chelsea Cohen 00:36:43  So things like, you know, if you remove it, what is the impact of removal, what is the impact of, you know, using liquidation? Amazon has a liquidation program. What do I have to do to sell through that inventory to make those right decisions? And then I would say the last piece in terms of, you know, improving your profit would be that PPC entourage has a, an audit where they'll do an ad spend audit to see what products are or what what, keywords are possibly, you know, damaging your ad spend not, you know, not performing to, to where they should be.

Josh Hadley 00:37:12  I love that very all of these 1% like efficiencies can truly add up, in a business. on the topic of, liquidations, do you have any recommendations? Let's say I've got way too much inventory. I've got five years worth of inventory. At this point. I just want to liquidate stuff or I want to exit it because, you know, I see it tying up my cash flow.

Josh Hadley 00:37:30  what? Do you have any recommendations there?

Chelsea Cohen 00:37:33  So, I mean, if you are an FBA, Amazon has an FBA program. They have liquidations. They also have a donations program which can sometimes benefit, you know, let's say in the US. I think that there are specific tax codes that you can talk to your tax accountant about. So those are a couple of programs I wouldn't. It wouldn't necessarily make sense to remove that inventory from FBA, paying those high removal fees and then try to sell it to a liquidator. The math probably doesn't make sense. Maybe there are instances where it would, but that would be one approach. If you've got inventory sitting at the 3PL, there are companies that will do the liquidation for you. So Janu, worldwide, is one of the companies that we work with. Norm Farrar is one of the co-founders of that. And they'll do liquidations. So really just, you know, asking your warehouses, a lot of warehouses do it now and then.

Chelsea Cohen 00:38:19  You don't have to do anything. They won't take the money. They won't take any payment until they receive payment. So it's really just a percentage of what they make.

Josh Hadley 00:38:25  Okay. Love. It makes a lot of sense. Yeah. All right Chelsea, this has been an awesome episode. I appreciate the insights that you shared. Here's my final question for you. Where do you see the puck going with Amazon, and what's your prediction of what Amazon selling on Amazon looks like five years from now? Yeah.

Chelsea Cohen 00:38:41  So Amazon, they have been doing everything that they can to get you into more and more of their programs. I think that is the big push from everything that we've seen coming out. Amazon taking FBA. You know, FBA used to be a loss to them. They would make up their money in ads and referral fees. Now FBA, for the first time ever, has broken even. They're not going to be satisfied with that. They are going to make it a revenue source. And I think that they're going to we've already seen they're doing it aggressively.

Chelsea Cohen 00:39:09  So continuing on that, they're going to continue to grow the supply chain by Amazon, a portion of their business. They took lemons and they made lemonade. In 2020, 2021. They just overbought they over you know they overinvested in logistics. And now they're working on making that a huge revenue source for them. So I think that in five years you know we're paying what I think someone said 40% of our money is going to Amazon. At that point, I would imagine that, you know, we'd be looking more more at 70%, like the majority of our of our costs will probably be going to Amazon. it'll be harder for, you know, it'll be harder for you to make it make sense to go anywhere else, unfortunately. they're going to make it financially incentivized in many, many ways.

Josh Hadley 00:39:53  So true or false as Amazon continues to mature. Do you see in the grocery category? Right. And in big box retail, typically you're going to be looking at like single digit, profit margins. Do you see that? That's where Amazon heads for Amazon sellers.

Josh Hadley 00:40:08  Like long gone are the days of 20% 25% profit margins. And you're into the single digit profit margins 5 to 10 years from now.

Chelsea Cohen 00:40:15  I think I don't think so because Amazon wants diversity, right? It's all about, you know, inventory in terms of listings and catalog. They need small businesses. They are going they've been pushing out some of the small businesses, but they need small businesses. you know, that are the lifeblood of Amazon. The majority of their money comes from small businesses. And with the low amounts of volume, the only way you can have the single digits is if you have high amounts of volume and the volume that's being done by the sellers who are in, you know, who are really the lifeblood. They can't survive on single digit. So I don't think that there's got to be a balance. Amazon's going to have to, you know, find that balance between, you know, their profitability and then losing, catalog items.

Josh Hadley 00:40:53  Yeah. Makes sense. I love it. Chelsea, as we wrap up this episode, I love to leave the audience with three actionable takeaways from every episode.

Josh Hadley 00:41:00  So here are the three actionable takeaways that I noted. Let me know if you feel like I'm missing something. Okay, number one, I feel like the biggest action item that you can take that's probably going to make the biggest difference is going to be negotiating supplier terms. Right. As shipping becomes more expensive as shipping lead times get longer, the people that are going to win are going to be the people that are more nimble and have cash reserves. And so not locking up all of your inventory, having a, you know, 70% upfront payment on your inventory or even 50% the like Chelsea talked about, is there an opportunity for you to get net 90 day terms? Is there an opportunity for you to get 30 day terms or net sorry, 30% upfront, but then have them store the actual inventory for maybe a year, but you're continually dripping stuff into Amazon, and you're only having to pay that remaining 70% when stuff actually gets shipped out, right? There's a lot of creative strategies there, but that I think is going to make the biggest difference and also allow you to grow your business faster because you'll have more cash on hand.

Josh Hadley 00:41:57  Action item number two is focusing on your aged inventory and having a plan of action for it. So making sure that you have somebody in your business that is actively focused on, hey, you know, what is my action plan? As soon as something crosses 180 days before we get close to that 270 day, you know, really high fee that Amazon's going to charge you, how are you going to get rid of this product? Okay. so having that in place and also I think that just leads further into forecasting inventory management and projections, knowing that Amazon FBA needs to be seen as like, can I sell out of this product in the next 60 to 90 days? That's probably like the healthy amount you want to continue to send in to Amazon. And then last but not least, is getting really efficient with the product packaging that you're putting your products into. re measuring your, your products and having Amazon remeasure to make sure it's actually in the correct weight, correct dimensions, correct FBA tier, because there's a lot of opportunity to save money there.

Josh Hadley 00:42:51  And maybe there's a way that you could become more efficient if everything's poorly bagged and it's a loose poly bag right now, what does it look like to go into like a box? Because if it's in a box, you might be might need to pay an extra $0.05. But what if that now drops you down into a lower FBA fee tier and you're saving $0.70? Right. So a lot of give and take. But you can see that the people that, in my opinion, are going to win over the next 5 to 10 years, I think it's going to be very challenging for a small business owner on Amazon. I think the single guy that just hit seven figures, it's going to be really challenging to maintain profitability, whereas the people that got started early, if you build a team now that can oversee these little like nuances, the Re measurements, the aged inventory, building out a team like that is going to allow you to maintain profitability while Amazon continues the margin squeeze on sellers because like you said in your projection over the next five years, I think Amazon is going to want more of the piece of the pie, and they're going to continue to squeeze to make sure that they show Wall Street.

Josh Hadley 00:43:47  Andrew, Andy Jassy that's what he's focused on, right? He wants profitability. He's speaking to Wall Street and he's not speaking to Amazon sellers. So he's going to be 100% focused on like, how do we show great profitability on the FDA side of the business that's going to increase shareholder value, etc.? And so if you're not watching those things, Amazon is going to eat you up and eat all your margin if you're not paying attention. So Chelsea, anything else?

Chelsea Cohen 00:44:09  You know, I think that's I think that's great. I think that, yeah, just the final piece is, you know, strategically planning your business. there's a quote that I love by Peter Drucker who is, you know, business. I think they call him the, the father of modern business management. And he said strategic planning does not deal in future in future projections, as a strategic planning does not deal in future. It deals in the future of present actions.

Josh Hadley 00:44:38  I love that which is really well summed up very much.

Chelsea Cohen 00:44:41  I think that's the that's the one of the biggest takeaways for any Amazon seller nowadays is that it's not as easy as it used to be. And so being able to plan out what is your business look like in six months? What does it look like in a year? because you should never be. You should never be surprised when Amazon takes like in November last year. People were surprised when Amazon took, you know, $25,000 out of their account from storage fees. And that's just that shouldn't be happening. So I think that's, projections is is to be agreed.

Josh Hadley 00:45:06  I love it. All right, Chelsea, final questions I love to ask each guest. So number one, what's been the most influential book that you've read and why?

Chelsea Cohen 00:45:12  so the, the best book is that I've read is the one thing it's, you know, the, the idea that multitasking is a myth and that there's always one thing that is the most important thing. And, to be able to figure out what that one thing is and then focus on it, get it done.

Chelsea Cohen 00:45:30  Otherwise, you're building half bridges to nowhere.

Josh Hadley 00:45:33  I love that that is one of my favorite all time books. One of those books that you need to read every like 1 to 2 years to reset your mind. So I'd be like, yeah, that's right, that's right. I need to cut this out. I need to focus on this. So I can't recommend that enough as well. Question number two. What's your favorite AI tool that you're using that other people should be sure?

Chelsea Cohen 00:45:50  I would say it's not necessarily, you know, that fancy in terms of an AI tool, but I use ChatGPT for I do a lot of work in spreadsheets. you know, when I do product development and I use a lot of, you know, spreadsheets, create formulas, create scenarios, and I'm proficient in Excel, but I'm not an expert, so I like to use it to help me to build formulas. It's very, very good at that. And it's one of those things that you can directly, validate whether it's right or not, because you may know how to, you know, you may know what answer the answer should be in the spreadsheet, but it will you may not be able to get there formula wise.

Chelsea Cohen 00:46:23  So I like to use ChatGPT or basically take a formula that I think is right. And then I throw it up there and I say fix or I say make it do this and it will just build the whole formula. And then you can just plug it in and generally works.

Josh Hadley 00:46:33  I love it. So allowing ChatGPT to be your Excel wizard for you. Yeah, exactly I love it. All right. Final question here for you. Who is somebody that you admire or respect the most in the e-commerce space that other people should be following and why?

Chelsea Cohen 00:46:43  Sure. I would say Tomer Rabinovich, he is he thinks differently. he he he sees those things that other people are not seeing. Like he finds us missing pieces when everyone's looking over here, he's saying, well, what about this? You know, whenever anyone says, you know, here's the rules. The rules that we were all taught and selling, you know, you find something that's, you know, less expensive. It doesn't need a lot of, you know, changes that don't go into electronic products.

Chelsea Cohen 00:47:06  All of those things. He goes, well, you know, do you know, this is why you should do those? So this is why you should do the hard things. and then he just has this view on understanding the profit and the cash flow and being able to think with the end in mind in terms of if you're exiting a business, this is how you should build it and build it from day one like that. So he gives a very good perspective on that side of things. And I think that, you know, he's probably one of the smartest people that I've talked to where I was like, I felt like having to keep up with him because his mind works so quickly. And so he's just I think he's great. I think that people should follow him for those reasons.

Josh Hadley 00:47:39  Yes. That's a great person to be following and I agree with that. Chelsea, this has been so much fun. If people want to follow you, they want to learn more. Where can people learn more and follow you up?

Chelsea Cohen 00:47:48  Sure.

Chelsea Cohen 00:47:48  So if you go to. Com forward slash connect those are all my social media. You can find the tools that we talked about. And then I believe my emails there as well.

Josh Hadley 00:47:57  Okay awesome Chelsea this has been such a good podcast episode. I know I've got some notes and takeaways. So thanks again for your time today.

Chelsea Cohen 00:48:04  Of course. Thanks.