As every seller using Fulfillment by Amazon (FBA) is keenly aware, Amazon implemented some pretty drastic changes to their FBA fees last year. Most notably, during November and December, Amazon tripled the Inventory Storage fees for standard-sized items, which we equated to Amazon’s version of surge pricing. Given the continued trend of sellers using FBA, we at ChannelAdvisor fully expected additional changes to the FBA fee structure designed to optimize the use of available space at FBA fulfillment centers.
Lo and behold, Amazon didn’t waste any time to announce more fee changes for the upcoming year, which will go into effect February 22. Here’s what you need to know:
Higher Monthly Inventory Storage Fees
Last year, as the storage fees for the holiday season went through the roof, the fees for the rest of the year remained untouched. No such luck this year. The monthly inventory storage fees are going up pretty significantly through September by as much 19% per cubic foot for standard-size items. The “surge pricing”-style fees for November and December are still in place with a slight increase of about 4% per cubic foot.
Higher Monthly Inventory Storage Fees this October
Last year, Amazon actually reduced the inventory storage fees during October. This was likely designed to entice sellers to send in their products early, making them ready to ship before the Cyber Five. Again, no such luck this year. The October 2017 inventory storage fees will go up to align with the November and December storage fees. This is more than a 4X increase from last year for standard-size items and almost a 3X increase for oversize items per cubic foot.
Lower Fulfillment Fees this October
On the plus side for October, Amazon will be decreasing fulfillment fees to align with December and November fees. In a sense, Amazon is now treating October as a true “holiday season” month from a fee perspective, perhaps driven in part by the trend toward earlier holiday shopping. Whatever the reason, this change represents a continued push to entice sellers to only store products that move, especially during Q4.
Higher Fulfillment Fees for Large, Heavy Products
Fulfillment fees are actually going down a bit for small and lightweight items by as much as 6%, depending on size and time of year. The fees for large and heavy items (anything over a pound), however, will be going up by as much as 6% for standard-sized products and as much as 20% for some oversize products.
Significantly Higher Fulfillment Fees for Media
Amazon is making a major change to fulfillment fees for media. Fees will increase between 38% and 97% depending on the size of the item and time of year. The effects on media sellers are compounded by additional fee changes starting in March in which Amazon will be raising the closing fee from $1.35 to $1.80, and starting to charge referral fees on shipping in addition to the sale price of the item.
Elimination of the Zero-Fee Fulfillment Discount
Amazon currently provides free fulfillment for any standard-sized product that sells for $300 or more. Yet again, no such luck moving forward. Fulfillment fees will now be based on the product size tier just like any other product.
More Requests to Ship to Multiple Fulfillment Centers (FCs)
One of the biggest pain points we hear about from FBA sellers is having to ship to multiple fulfillment centers, and for good reason: It takes longer to prepare the inbound shipments, and it’s not as cost effective to ship. Starting in July, Amazon will be increasing how often you’re asked to send your shipments to multiple locations. Sellers still have the option to use the Inventory Placement Service to have Amazon do the work of sending your products to different fulfillment centers, but Amazon is changing the fee structure. The fees for Inventory Placement will now be based on how many fulfillment centers they ask you to ship to versus how many you actually ship to. Although the frequency of multi-FC requests will increase, the plus side is that the placement fees won’t go up for standard-sized items. They will actually be cheaper should you adhere more closely to their request. For example, if Amazon asks you to ship to three FCs, and you decide to only ship to two, you will actually pay less in placement fees than you have in the past.
How does this affect you?
If you’re “100% FBA,” this is generally bad news for your bottom line — especially if you’re a media seller, sell large products, or are dependent upon the zero-fee fulfillment discount.
So what should you do?
If you’re 100% FBA, you should really reconsider.
At ChannelAdvisor, we strongly advise our sellers not to put all of their eggs in one basket when it comes to marketplaces. The same is also true for fulfillment. There’s no doubt that the popularity of FBA continues to grow. In fact, the number of sellers using FBA last year increased by 70%. But with this growth comes a need for a hard look at the revenue-generating capacity of the available space, which Amazon is clearly doing. As a result, sellers have and will likely continue to be treated with a “carrot and stick” approach to encourage them to be smart about which products they fulfill through Amazon and when.
Use Seller Fulfilled Prime.
Given that one of the major advantages of using FBA is that your products are eligible for Prime, you might be hesitant to throw that away by fulfilling your own products. Good news: you no longer have to use FBA to make your listings Prime-eligible if you use Seller Fulfilled Prime. As you consider which products make sense to keep in FBA and which ones to fulfill yourself, you should also consider which products make financial sense to offer via Seller Fulfilled Prime.
Use ChannelAdvisor to make informed decisions about what you send to FBA.
If the product you sell is being offered at a lower price by twenty other FBA sellers and perhaps even Amazon themselves, having your product at FBA is probably not worth the investment. ChannelAdvisor provides you with this type of information in our FBA Inventory Management view. Once you’ve decided which products to send and how much to send using our Suggested Inbound Quantity, you can start an inbound FBA shipping plan directly through ChannelAdvisor.
Use Sponsored Products, especially during Q4.
For long-tail products, the best chance of them selling might be during Q4, so it still may not be an easy decision to just pull them out. If you decide to leave your long-tail products in FBA, get them to move during Q4 by using Sponsored Products. ChannelAdvisor’s Smart Select feature makes it easy to build and manage your Sponsored Products campaigns.