From January 2023 Amazon is introducing a range of fulfilment fee increases that will significantly affect third-party sellers in the US. The effects will impact storage and shipping costs whilst introducing new charges. The increase in Amazon’s fulfilled by Amazon (FBA) will see many third-party sellers opt for fulfilment by merchants instead to avoid the storage costs, bearing the brunt of the alternate costs coming from finding their own storage and fulfilment systems. Albeit, not every area will be affected for example the special overweight products category will not increase.
Historical fee increases
Amazon has steadily increased their fulfilment fees each year using a little-but-often system. Comparing it to a Freddo frog in supermarkets, a slight increase over time can be overlooked, but since 2020 there has been a 30% increase for small and light inventory. Andy Jassy spoke on the increasing prices to CNBC in April, claiming that you cannot ‘run a business that’s economic’ if you keep absorbing the costs. However, it causes a ripple effect for sellers and consumers, producing an overall cost increase. Considering the economic climate these fee increases are just that more significant.
Which areas will be affected?
Outbound fee rates will be affected.
These fulfilment fees will be increased by an average of $0.22 per item. As a result, Amazon will introduce a greater amount of weight tiers for small and light items as an attempt to balance out the shipping costs. The main benefit to this adjustment falls between the 6 oz or less or 12+ to 16 oz shipping costs as these fulfilment fees remain the same at $3.45- $4.15. Although these fees still mean third-party sellers will be charged more per item for large standard-size items year-round. This is likely due to the space they take up in the fulfilment centres.
Fees for apparel sellers
February will see an introduction of a new method for calculating shipping costs for apparel and non-apparel sellers. This means the greater unit weight or dimensional weight will be used to determine the shipping weight for all large standard-size products. For instance, if your product has a unit weight of 6 oz and a dimensional weight of 7oz, it would be the dimensional weight used to calculate fees. This is in combination with the greater number of weight categories to reduce the hit of the fees, but it is definitely a change that sellers should be aware of. However, it will mean Amazon will charge the most it can for the shipping weight per item.
Storage fees
As well as shipping charges, there is an increase in storage fees. The monthly storage fees will be increasing for both peak and off-peak periods. The off-peak fees for standard-size products will increase by $0.04 per cubic foot per item and oversized products by $0.03 per item. However, the biggest change that will occur for peak times will be a fulfilment fee increase of $0.20 per cubic foot. This will prove to have a significant impact on businesses that sell a large range of products during seasonal periods. On top of this Amazon will charge third-party sellers a storage utilisation surcharge based on the storage utilisation ratio of items stored: to items shipped. Assuming this, sellers using a large cube foot of storage without proving the necessity of it will be charged. Sellers can avoid the charge by reducing the amount of inventory they are storing.
Aged inventory surcharges
There is a clear pattern regarding the storage fees, Amazon wants to ensure sellers are utilising fulfilment by Amazon efficiently. An indication of this is the effect on aged inventory through the changes. Amazon will charge for inventory stored between 180-270 days; with an increase in charges for aged products stored between 180-270 days. There is a significant increase of 167% for items aged over 300 days. These storage fees will be per item and will exclude: apparel, shoes, bags, jewellery, and watches. Increasing the fees, forces sellers to be more conscientious of how they use Amazon fulfilment. This will force sellers to increase their prices to cover the costs of the selling fees.
Removal and disposal fees
Due to the increased cost of services, there will also be an increase in removal and disposal fees but liquidation fees will remain unchanged.
Small and Light programme expansion
There will also be an expansion of the Small and Light programme. There will be an overall price increase per item as well as an expansion of the weight tiers. The category will go from $10 or less to $12 or less. This adjustment enables sellers to take advantage and engage in the lower prices of the category.
US FBA New Selection Program
The U.S. FBA New Selection program will have fees lowered this year. For eligible new-to-FBA parent ASINs, there will be an average decrease from 5% to 10%. There will be a rebate from 5% to up to 10%, applying to eligible sellers. Regarding eligible items, the rebate will apply to up to 30 units per parent ASIN for up to 90 days; the refund will apply to up to 100 units per parent ASIN for up to 120 days for standard items. There will also be a reduction of the returns processing fee, which will be reduced by an average of $0.20 in the Apparel and shoes categories.
Collection fee category removal
Amazon will be removing specific collection product fee categories. The following collectable fee categories will be removed and placed into their most suitable product category: coins, entertainment, sports, and collectable cards. These products will be recategorised into their most suitable product categories. Naturally, this will affect sellers of collectables. However, it may not be for the worst as there is potential for the ASIN to be moved to a product category with a lower fulfilment fee.
Fees That Won’t Be Changing
Some fees won’t be changed. These include:
- Liquidation fees will not be touched in response to the disposal and removal fee increase.
- Peak storage fees for the sortable network.
- Special oversize items will remain the same.
- Referral fees for all sellers will remain, with every seller being required to pay. This is the percentage of the total price, shipping cost, and any gift-wrapping charges
Why are Fees Changing?
Amazon’s statement identifies that these fees are being implemented as a way to continue to provide good customer service and aid third-party sellers who are using the space efficiently. Looking at the specifics of the fees added it appears they are drawing-out inefficient sellers by implementing surcharges for aged items.
The drive for the change is efficiency, with the suggestion that effective use of the storage space will lead to a greater customer experience and inventory health. Amazon explained that “this year, we saw some sellers use more of our storage than we expected or believed was needed to serve customers well, and that constrained how much product from other sellers could be sent into FBA.” By implementing these significant fulfilment fees they are forcing more sellers to use Fulfilment by Merchant (FBM), and they are reducing the overload of inventory from sellers in storage.
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