To thrive on the Amazon marketplace, you need to do more than just list products. It demands an eye for optimization and a proactive approach to identifying hidden revenue leaks.

Regular FBA audits are your secret weapon for maximizing profits, streamlining operations, and staying ahead of the competition. Keep reading to learn how to conduct a thorough FBA audit, discover opportunities to boost your bottom line, and support your business’ long-term success.

What is a business audit?

A business audit is a systematic examination of an organization’s financial records, operations, and systems to assess compliance, efficiency, and overall performance. It involves a detailed evaluation of various business aspects to:

• Ensure compliance: Verifying the business operates within legal and regulatory frameworks
• Optimize operations: Honing in on inefficiencies, risks, and bottlenecks to streamline processes and reduce costs
• Improve overall business performance: Making data-driven decisions to enhance profitability and growth

An Amazon FBA audit is a specialized business inspection tailored to the specifics of selling through the FBA program. It focuses on:

• Dependency on Amazon’s platform and policies: Assessing how effectively the business leverages Amazon’s tools and resources while complying with the company’s ever-evolving policies
• Specific fees and charges: Analyzing fee structures to reveal cost-saving opportunities and optimize profitability
• The role of Amazon’s fulfillment centers: Evaluating inventory management strategies, storage fees, and fulfillment performance metrics to enhance efficiency and cut expenses

5 Categories of FBA audits

To fully comprehend your Amazon FBA brand’s health and pinpoint areas for improvement, focus on these five key FBA audit categories.

1. Inventory management

Effective inventory management is critical to a successful FBA business. Accurate inventory records help you avoid stockouts and overstocking, both of which can be costly.

• Ensure precise records: Update your inventory levels and reconcile them with Amazon’s records to track your stock accurately. Verify the accuracy of your inventory levels on Amazon against internal records regularly. Adopting inventory management software can automate this process and reduce human error.
• Identify slow-moving and excess inventory: Slow-moving and excess stock ties up capital and increases storage costs. Analyzing the sales velocity of each SKU helps uncover these items, allowing you to take corrective actions like running promotions or bundling products to move them faster. Review your inventory reports to pinpoint the products dragging down your business.
• Evaluate inventory turnover rate and calculate days of inventory on hand (DIOH): These metrics provide insight into how quickly your inventory is selling and how long your stock will last. Evaluating your inventory turnover rate and calculating DIOH can help you manage stock levels more effectively.
• Incorporate best practices for inventory forecasting and planning: Robust inventory forecasting and planning are vital to meet customer demand and minimize storage costs. Leverage historical sales data and market trends to predict future demand. Implement demand planning tools to refine your forecasts and ensure you always have the right amount of stock.

2. Pricing strategy

Your pricing strategy directly impacts your sales and profitability. Reviewing and adjusting your prices based on market trends and competitor analysis will help you stay competitive.

• Review current pricing strategies: Evaluate your current pricing strategies to determine if they align with your business goals. Are you competitive within your market? Do your prices attract your target customers? Regular reviews can answer these questions and guide you to make necessary adjustments. Compare your pricing to competitors’ and analyze market trends to ensure your prices remain relevant.
• Adjust prices based on market trends and competitor analysis: Stay informed about market trends and competitor pricing. Use repricing tools to alter your prices dynamically based on these factors. This enables you to stay competitive and maximize sales without sacrificing profitability. Evaluate profit margins for each item and consider the price elasticity of demand for key products to make informed pricing decisions.
• Quantify the impact of different pricing strategies: Experiment with various pricing strategies, such as discounting and bundling, to understand their impact on sales and profitability. Quantify these effects to determine which strategies are most effective for your business.
• Determine the effectiveness of dynamic pricing tools: If you use dynamic pricing tools, regularly assess their performance to ensure they are helping you achieve your pricing objectives. This includes evaluating how well these tools adjust prices in response to market changes and competitor actions.

3. Fee management

Amazon FBA fees can significantly impact your profitability, so it’s important to find ways to minimize them to maintain a healthy bottom line.

• Learn FBA’s fees: The FBA charges for fulfillment, storage, referral, and other fees. Familiarize yourself with these expenses and how they’re calculated. That knowledge will show you areas where you can cut costs. Itemize all FBA fees incurred and calculate their percentages as a portion of total sales to understand their impact on your profitability.
• Pinpoint unnecessary fees: Review your fee statements on a set schedule to identify unnecessary charges. For example, you might be paying for long-term storage fees due to excess inventory. Mitigating these fees requires strong inventory management and strategic planning. Look for opportunities to reduce fees through packaging optimization, weight management, and inventory planning.
• Employ strategies to lower FBA costs: To minimize other FBA costs, consider optimizing inventory turnover, using smaller, lighter packaging, and leveraging Amazon’s fee promotions. Review long-term storage fees and implement strategies to eliminate or lower them. These reduction tactics will boost your profitability.
• Monitor refund rates and chargeback fees: Monitor refund rates and chargeback fees to discover potential fraud or areas needing improvement. This can help you address issues promptly and avoid unnecessary costs.

Want to learn more about navigating Amazon FBA fees? Check out our guide to Amazon seller fees.

4. Customer experience

An excellent customer experience encourages high ratings and reviews, which then drives sales and customer loyalty.

• Monitor customer feedback: Continually comb through buyer reviews to identify areas for improvement. Address negative feedback promptly and take the opportunity to enhance your products and services based on it.
• Ensure timely and accurate order fulfillment: Reliable order fulfillment is a major driver of customer satisfaction. Check your fulfillment processes periodically and make necessary adjustments to ensure orders are delivered on time and as described.
• Manage returns and refunds effectively: Adequate returns and refunds management helps maintain customer trust and satisfaction. Develop a clear returns policy and ensure your team is trained to handle returns efficiently. Additionally, analyze the reasons for returns to uncover insights into product quality and consumer preferences.

5. Sales performance

Analyzing your sales performance helps you understand which products are performing well and which are not. That information in turn supports informed business decisions.

• Review sales data and trends: Look at your sales data to identify trends and patterns. Pinpoint the factors that influence your sales, such as seasonality, marketing campaigns, and competitor actions. Examine sales trends over time (daily, weekly, monthly, and yearly) to make strategic decisions about inventory, pricing, and promotions.
• Hone in on top-performing and underperforming products: Knowing which products are bestsellers and which are slow-movers is essential for optimizing your product mix. Identify top-performing and underperforming products, focusing on promoting and stocking top-performing items while addressing issues with underperforming ones.
• Calculate key performance indicators (KPIs): Calculate KPIs like average order value (AOV), conversion rate, and customer lifetime value (CLTV) to get a comprehensive view of your sales performance. These metrics help you understand customer behavior and the effectiveness of your sales strategies.
• Add up sales for each product category and sales channel: This breakdown allows you to see which categories and channels are contributing most to your revenue. Adjust your efforts accordingly to maximize sales across all categories and channels.
• Gauge the effectiveness of marketing and advertising campaigns: Evaluate how well your marketing and advertising campaigns are driving sales. This assessment helps you allocate your marketing budget more effectively and refine your campaigns for better results.

Tips for maximizing efficiency and profitability with an FBA audit

Your FBA audit provides valuable insights to optimize operations and reduce expenses. Here’s how to transform data into action.

Hone inventory management

Refine your inventory management using your FBA audit findings to ensure optimal stock levels and reduce carrying costs. You can do so by utilizing advanced forecasting tools that analyze historical sales data, market trends, and seasonality to predict future demand more accurately. This helps you maintain the right inventory levels, which prevents stockouts and overstocking.

You should also identify products that aren’t selling as expected. Develop strategies to move these items, such as running targeted promotions, assembling bundles, or even offering markdowns. This will free up warehouse space and reduce long-term storage fees.

Revise pricing strategies

Adjust your pricing strategies regularly based on market trends and competitor analysis to stay competitive and maximize sales. In this regard, competitive analysis tools are an asset to track how competitors price their products. You can also adopt automated repricing tools that alter your prices in real time according to competitor prices, market demand, and your sales goals. Continuously monitor the market to understand pricing dynamics.

Learn more about pricing strategy through our interview with Mark Perone, head of partnerships at Feedvisor.

Reduce fees

Identifying and mitigating unnecessary fees is crucial to improve your bottom line. To spot and eliminate avoidable charges, regularly review your fee statements. For example, analyze your warehousing fees to determine if you incur long-term storage charges due to excess inventory.

You can reduce storage fees by optimizing your inventory turnover. Consider using smaller, lighter packaging to lower fulfillment fees. Also, take advantage of any fee promotions or discounts Amazon offers.

Enhance customer experience

An exceptional customer experience is vital for maintaining high ratings and reviews, which drive sales and consumer loyalty. Regularly comb through feedback to identify common complaints or suggestions, then use that information to improve your products and services.

You should also assess your fulfillment processes to ensure orders are processed quickly and accurately. This will strengthen buyer satisfaction and reduce the likelihood of returns and negative reviews. Relatedly, use your data to establish clear and efficient returns policies.

Train your team to handle returns promptly and analyze the reasons why products are sent back to identify and address any underlying issues.

Wrapping up — Begin investing time and resources into regular FBA audits

A well-executed Amazon FBA audit is an indispensable procedure for sellers aiming to optimize operations, boost profitability, and achieve sustainable growth. By systematically examining your business, honing in on areas for improvement, and implementing data-driven strategies, you can uncover hidden potential and gain a competitive edge.

An audit is not a one-time event though, but an ongoing process. Continuous monitoring and adjustments are key to maintaining peak performance in the dynamic Amazon marketplace. Invest time and resources into regular audits to safeguard your business’s success.