Understand the Recent Amazon FBA Fee Changes and their Impact on Sellers
- by eSellerHub
With Amazon FBA, sellers can earn the prime badge, which attracts more sales and allows them to sell their products faster. Fulfillment by Amazon offers a seamless way to store, pack, and ship products through Amazon’s vast logistics network and customer service capabilities. However, along with the several benefits of FBA, sellers are also subject to various Amazon fees, which significantly impact a seller’s bottom line.
Recently, Amazon updated its FBA fee structure, which is crucial for FBA sellers to understand to maintain profitability. The recent Amazon FBA fee changes and updates in 2024 have hugely impacted sellers, leaving many sellers scrambling to adjust their business strategies.
In this blog, you will understand FBA fee changes for sellers and their effect on business, and you will be provided with actionable tips to mitigate their impact.
Overview of Recent Amazon FBA Fee Updates
To complement the change in global eCommerce, industry giant Amazon has updated its FBA fee structure to reflect changes in operational costs and market conditions and meet strategic goals.
The updated Amazon fee is designed to encourage sellers to use Amazon’s platform services, including faster delivery and efficient use of Amazon fulfillment centers. Amazon has mainly focused the fee changes on fulfillment, referral, storage, unit sales, and return processing.
The updated FBA fee reflects an average increase of $0.15 per unit sold. However, as per the Amazon team, the increase is significantly lower than that of other logistics providers.
Let’s move ahead and understand the FBA and overall fee changes and their effect on sellers.
1. Inbound & Outbound Placement Fees
Let’s start with the newly introduced Inbound and Outbound placement fees. Amazon has stated that it will charge inbound and outbound inventory processing fees separately. To be more precise, these fee changes include a new inbound fee, a decrease in FBA fulfillment rates, and a discount on the SIPP program.
Also, considering the climate-friendly program, the new inbound service placement fee will vary depending on whether sellers ship to one FBA location or several. If a seller sends an “Amazon-optimized” shipment for multiple inbound locations, more than at least 3 locations, Amazon will waive waive the inbound fee.
- The average inbound fee for a standard product size is $0.27 per unit, whereas it is $1.58 per unit for large and bulky products.
- For outbound products, sellers will see an average fee decrease of 0.20 for standard-sized products and $0.61 for large bulky-sized products.
Also, products certified as SIPP will have discounted fulfillment fees compared to the others.
Impact of Amazon FBA fee update
This imposed extra charges on sellers, as some needed to pay extra new inventory placement on top of the shipping cost, which, according to the sellers, is unsustainable for their business. By sending shipments to multiple locations, Amazon allows sellers to qualify for reduced or no fees.
Still, some sellers report that they are not even getting the option to split shipments to various locations. The best solution to these is collaborating with other fulfillment options or third-party fulfillment centers.
Read more: Understand the Amazon inbound FBA API updates
2. Low-Inventory-Level Fee
Amazon has imposed these new fees on Amazon sellers, recommending they maintain healthy inventory levels to minimize order fulfillment costs, shipping costs, and more. As per the released guidelines, Amazon states that the new low-inventory-level fee applies to sellers if they consistently maintain low inventory levels relative to unit sales.
Nevertheless, a custom Amazon FBA Management software helps sellers accurately manage their inventory and shipment process. The products below 28 days of inventory supply are entitled to these fees based on the criteria if the last 90 days and the last 30 days are below the 28-day supply threshold.
Moreover, the storage fee is reduced to an average of $0.09 per cubic foot for non-peak monthly storage of standard-sized products. On the other hand, monthly storage fees for non-standard sizes will remain unchanged.
Impact of Amazon FBA fee update
Most sellers are not happy with this fee, as it is imposed as an additional fee other than inventory storage fees. Sellers find it difficult to manage their inventory accurately, most notably when they purposely reduce their stock or discontinue a product. In such scenarios, sellers cannot be exempt from this fee.
3. Referral Fee Update
The referral fee is Amazon’s commission for every item sold on the marketplace. The percentage varies from as low as 6% to as high as 45% for each sale. However, Amazon referral fees for media products are 15% of the total sales price of a product, not the item price by itself.
In the recent update, the referral fee changed only for apparel products; it remained unchanged for the rest. The apparel category, priced under $20, now has a lower referral fee than before. Referral fees have seen minor adjustments, with some categories experiencing increases while others see slight reductions.
- Referral fees have been reduced from 17% to 5% for products priced under $15.
- The referral fee is reduced from 17% to 10% for products priced between $15 and $20.
Impact of Amazon FBA fee update
The decrease in the referral fee for apparel has made sellers happy, but only for those selling affordable products under $20. Brands or higher-priced apparel products still need to pay the exact charges.
4. Fulfillment Fees
The good news for sellers is that the FBA fulfillment fee has been decreased. The cost has been reduced by $0.20 per unit for standard-size products and by $0.61 per unit for large bulky products.
Changes in the size tiers as per the Amazon:
- The small standard-size tier will be measured at intervals of 2 ounces
- The large standard-size tier from 1+ to 20 lb will be measured at intervals of 4 ounces.
So now, Amazon FBA sellers do not need to worry about shipping, handling, or packaging the product themselves. Instead, they can ask Amazon to do this for a seller fee based on the size and weight of the products.
Impact of Amazon FBA fee update
Even this fee update made sellers happy, as most products now have a reduced fulfillment rate. However, some may face increased charges based on the product’s weight and size tier.
5. Ships in Product Packaging Program (SIPP)
This newly introduced Amazon program allows sellers to qualify their products through Amazon to qualify for Ships in Product Packaging, i.e., products are shipped to customers in the seller’s unique brand packaging and not Amazon’s.
This saves sellers from paying extra packaging costs to Amazon. SIPP also allows sellers to provide a heightened customer experience through excellent packaging, resulting in increased sales. For SIPP-certified products, Amazon has announced a fulfillment fee discount of $0.04 to $1.32, depending on the weight and size of the product.
Impact of Amazon FBA fee update
If a seller qualifies for the SIPP, they can ship their products in their original packaging by saving on Amazon fulfillment costs for packaging. Sellers can check with Amazon if their product is eligible for the program and, if so, how they can improve their packaging.
6. Storage Utilisation Charges
Amazon has also revised its storage utilization surcharges to apply to sellers when they maintain excess inventory that surpasses recent demand and sell-through rates in Amazon’s fulfillment centers. These charges are based on the storage utilization ratio, i.e., the ratio of the seller’s average daily inventory volume stored divided by the average daily shipped volume during the past 13 weeks.
The storage utilization ratio is calculated separately for each product size tier: standard-size and large-size products. If the seller has a storage utilization ratio above 22 weeks on the last day of the month, your inventory during that month will incur a storage utilization surcharge.
Impact of Amazon FBA fee update
These additional charges require sellers to maintain a high sell-through rate to avoid storage utilization surcharge. Sellers need to identify the slow-selling products through the FBA dashboard in Seller Central. The seller is highly impacted by dual charges, storage utilization charges, and aged inventory surcharges if they have inventory in the Amazon fulfillment center for more than 271 days.
Read more: Amazon FBA inventory storage criteria and limitations
7. FBA Removal, Disposal & Liquidation Fees
The new FBA fee update also includes removal and disposal order fees changes. So, the seller now has to pay an increased cost to remove and dispose of inventory from Amazon’s fulfillment centers for inventory that the seller no longer sells or to avoid inventory surcharges. However, there are no changes in the liquidation fee.
Impact of Amazon FBA fee update
If sellers do not plan to restock or remove products from the listing, they must pay Amazon charges for the remaining units. Whether sellers want to remove their inventory or do not want it back, they are charged unnecessary charges. To recover a portion of the inventory cost, we recommend sellers opt for Amazon’s liquidation services.
8. Return Processing Fees
Sellers are imposed with a return processing fee for products with high return rates. Two product categories, apparel, and shoes, are exceptions to this cost. Amazon has levied these charges to manage the operational cost of returns and reduce waste. A return fee is charged for products surpassing the return rate threshold specific to each category.
Impact of Amazon FBA fee update
If your product returns exceed the threshold for that specific category, sellers will be charged additional return fees. Sellers must determine the biggest reason for product returns and try to remedy that. Returns are inevitable in e-commerce, but you must do everything possible to reduce the number of returns.
Conclusion
Navigating the complexities of Amazon FBA fees requires a proactive and strategic approach. By staying informed about fee changes and implementing effective cost-saving strategies, sellers can mitigate the impact of fee increases on their business. Regularly reviewing fees, optimizing inventory management, and exploring alternative fulfillment options are essential to ensure continued profitability.
Understanding and adapting to Amazon’s fee structure is crucial for any seller aiming to thrive in the competitive marketplace. With the right strategies in place, sellers can turn fee updates from potential challenges into opportunities for growth and efficiency.
