Automated FBM Pricing: Maximize Profits and Simplify Your Business

ShipmentBot’s Automated FBM (Fulfillment by Merchant) Pricing feature takes the guesswork out of pricing your merchant-fulfilled products on Amazon. Our intelligent system automatically calculates the optimal selling price for each of your FBM items, ensuring you maximize profitability while remaining competitive. No more manual calculations or spreadsheets – let ShipmentBot handle the complexities of FBM pricing for you!

Key Benefits of Automated FBM Pricing

• Increased Profitability: Our pricing algorithm considers all relevant costs, including the cost of goods, shipping expenses, and Amazon fees, to determine a price point that achieves your desired profit margin.
• Time Savings: Eliminate manual price calculations and updates. Automated FBM Pricing frees up your valuable time to focus on other aspects of your business.
• Competitive Pricing: Stay ahead of the competition with dynamic pricing that adapts to market conditions.
• Reduced Errors: Minimize the risk of human error in pricing calculations, ensuring accuracy and consistency.
• Customizable Settings: Tailor the pricing strategy to your specific business needs with configurable rules for margin, defectives, and freight.
• Simplified Shipping Cost Management: Our system automatically accounts for dimensional weight, ensuring accurate shipping cost estimations.

How Automated FBM Pricing Works

ShipmentBot’s FBM pricing engine uses a sophisticated algorithm that considers several key factors:

1. Cost of Goods

The foundation of your pricing is the cost of acquiring your item.

We call this our cost attribute, which can represent your landed cost, or the cost you pay to acquire the item from your supplier. This is the starting point for all pricing calculations.

2. Amazon Referral Fees

We automatically factor in the Amazon referral fee percentage, which is the 15% commission Amazon charges for each sale.

3. Accurate Shipping Cost Estimation

Shipping costs are a major component of FBM pricing. ShipmentBot goes beyond simple weight-based calculations by incorporating dimensional weight.

What is Dimensional Weight?

Dimensional weight (also known as volumetric weight) reflects the package’s density. Carriers use it to price shipments based on volume, not just weight. This is especially important for items that are lightweight but take up a lot of space. ShipmentBot automatically calculates dimensional weight using your product’s dimensions (length, width, and height).

Flexible Freight Rules

ShipmentBot understands that shipping costs can vary greatly. That’s why we provide customizable freight rules:

• Base Freight Cost: Set a fixed shipping cost that applies to every FBM order, regardless of size or weight. This is useful for covering fixed handling or packaging expenses.
• Variable Freight Cost: Add a per-pound shipping cost that scales with the weight of the item. ShipmentBot intelligently uses the greater of the dimensional weight or the actual product weight to ensure accurate cost calculation.

4. Your Desired Profit Margin

You have complete control over your profit margins. Set your desired margin percentage, and ShipmentBot will factor it into the suggested retail price.

5. Accounting for Defectives

To protect your bottom line, ShipmentBot allows you to specify a “defective rate.” This percentage accounts for potential losses due to returns or damaged items.

The Result: Optimized FBM Pricing

By combining all these factors, ShipmentBot calculates a suggested retail price that covers your costs, achieves your desired profit margin, and keeps you competitive on Amazon.

Business Pricing (Quantity Discounts)

For sellers offering bulk discounts, ShipmentBot’s Automated FBM Pricing also supports business pricing. You can define quantity tiers (e.g., buy 5 or more, get 10% off) and ShipmentBot will automatically calculate the discounted prices for each tier.

Getting Started

Automated FBM Pricing is easy to set up and configure within your ShipmentBot account. Simply navigate to the AutoPricr settings and customize the rules to match your business strategy. Let ShipmentBot take the complexity out of FBM pricing, so you can focus on growing your business!

1. Introduction

This document outlines the technical specifications of the Fulfillment by Merchant (FBM) pricing model used within ShipmentBot. The FBM pricing model is designed to calculate a suggested retail price for products that are fulfilled by the merchant, taking into account various cost factors, including product cost, shipping fees, and Amazon referral fees. This specification details the data inputs, calculations, and pricing rules that constitute the FBM pricing strategy.

2. Data Inputs for FBM Pricing

The FBM pricing model relies on several key data inputs to accurately calculate the suggested retail price. These inputs are primarily derived from the SupplierCatalogItem model and associated pricing rules.

2.1. Cost of Goods (COG)

• Source: SupplierCatalogItem.cost_cents
• Description: Represents the cost of acquiring the item from the supplier, stored in cents. This is the base cost upon which other pricing components are added.

2.2. Amazon Referral Fees

• Source: SupplierCatalogItem.amazon_referral_fee_percent
• Description: The percentage-based fee charged by Amazon for each sale on the platform. This is a variable cost directly related to the selling price.

2.3. Freight Costs (Small Parcel)

Freight costs are a critical component of FBM pricing, especially for physical goods. ShipmentBot’s FBM pricing model considers dimensional weight and configurable pricing rules to estimate freight costs accurately.

2.3.1. Dimensional Weight Calculation

Dimensional weight, also known as volumetric weight, is used by shipping carriers to price shipments based on volume rather than just weight. This is particularly relevant for lightweight but bulky packages.

• How Dimensional Weight Works:

  Dimensional weight is a shipping industry standard that accounts for package size in addition to actual weight. Here’s how ShipmentBot calculates it:

  1. We take your product’s dimensions (length, width, and height) in inches
  2. We multiply these dimensions together to get the total volume in cubic inches
  3. We then divide this volume by 166 (the standard carrier divisor) to get the dimensional weight in pounds

  For example:

  • A 12” x 12” x 12” box = 1,728 cubic inches
  • 1,728 ÷ 166 = 10.4 pounds dimensional weight

  This means even if your product only weighs 2 pounds, carriers may charge you based on the 10.4 pound dimensional weight because the package takes up more space in their trucks and planes.

  ShipmentBot automatically calculates dimensional weight for all your products and uses it to determine accurate shipping costs for your FBM orders.

2.3.2. Pricing Rules for Freight

Freight costs are not solely based on dimensional weight. ShipmentBot allows for configurable pricing rules to model freight costs more accurately. These rules are defined as PricingRule records associated with a Supplier.

• Freight Pricing Rules:

  • Base Freight Cost (fbm_base): A fixed cost applied to each FBM shipment, regardless of weight or dimensions. Configured via PricingRule with target: 'fbm_base'.
  • Variable Freight per Pound (fbm_base_freight): A variable cost that scales with the shipping weight. The shipping weight is determined by taking the maximum of the dimensional weight and the actual product weight (product_weight). Configured via PricingRule with target: 'fbm_base_freight'.

• Smart Freight Cost Calculation: ShipmentBot uses an intelligent two-part system to calculate your total shipping costs:

  1. Base Shipping Rate: A flat fee that covers the basic handling and processing of every shipment, regardless of size or weight. Think of this like the minimum charge you’d pay to ship any package.

  2. Weight-Based Rate: An additional cost that scales with your product’s weight. The heavier the package, the more it costs to ship. We automatically calculate this by multiplying your per-pound shipping rate by the package weight.

  For example, if you have:

  • A base shipping rate of $10
  • A per-pound rate of $2
  • A 5-pound package

  Your total shipping cost would be:

  • Base rate ($10) + Weight charge (5 lbs × $2 = $10) = $20 total

  This transparent, easy-to-understand pricing structure ensures you’re charged fairly for shipping while maintaining profitability on every order.

• Smart Weight Calculation: ShipmentBot intelligently determines your shipping weight by comparing two key measurements:

  1. Dimensional Weight: The space your package takes up in a delivery vehicle, calculated from its dimensions
  2. Actual Weight: The physical weight of your product on a scale

  ShipmentBot automatically uses whichever weight is higher to ensure accurate shipping costs. This protects you from surprises, since carriers charge based on whichever weight costs more to ship.

  For example, if you have:

  • A light but bulky item with 15 lbs dimensional weight but only 5 lbs actual weight
  • ShipmentBot will use the 15 lbs dimensional weight for cost calculations

  This smart system means you’ll always have accurate shipping costs factored into your pricing, whether your products are heavy, bulky, or both.

3. FBM Suggested Retail Price Calculation

The FBM suggested retail price is calculated to cover all costs and achieve a desired profit margin. The calculation incorporates the data inputs described above and utilizes configurable pricing rules for margin and defectives.

3.1. Cost Components

The total cost basis for FBM pricing includes:

1. Cost of Goods (cost_cents)
2. Freight Costs: Sum of base_freight_cents and variable_freight_per_pound_cents as calculated in section 2.3.2.
3. Amazon Referral Fees: Calculated as a percentage of the FBM suggested retail price using amazon_referral_fee_percent.

3.2. Margin and Defective Rate

• Margin (fbm_margin): The desired profit margin percentage for FBM sales. Configured via PricingRule with target: 'fbm_margin'.
• Defective Rate (fbm_defectives): An estimated percentage of sales attributed to defective or returned items, factored into the pricing to account for potential losses. Configured via PricingRule with target: 'fbm_defectives'.

3.3. Suggested Retail Price Formula

The FBM suggested retail price is calculated using a markup formula that considers all cost components and the desired margin and defective rate.

Suggested Retail Price = (Total Costs) / (1 - (Margin Percentage + Defective Percentage + Amazon Referral Fee Percentage))

Where:

• Total Costs = cost_cents + base_freight_cents + variable_freight_per_pound_cents
• Margin Percentage = fbm_margin
• Defective Percentage = fbm_defectives
• Amazon Referral Fee Percentage = amazon_referral_fee_percent