One of the features of fulfilment by Amazon that has attracted merchants is the ‘zero fees’ that Amazon charges for higher priced items. Prior to today that price point was $500 and Amazon just reduced that price to $300.
What this means for the seller
Normally, FBA charges an order handling fee ($.50/order), a P+P fee (.75-$1/order) and a weight fee (.40/pound). For higher value items, Amazon has waived this and now they are lowering that threshold by 40% from $500 to $300. Ultimately this makes FBA that much more attractive as Amazon is effectively bundling the FBA costs into the take-rate paid for the marketplace at these price levels.
The end result will be lower FBA fees for merchants already in the program and it makes the program even more attractive for a wide-base of merchants.
Amazon has a handy before and after P+L comparing self-fulfilled to FBA to show the impact: (click to expand)
Historically we’ve seen the zero fee program attract high ASP sellers (Jewelry, sporting goods, some CE, etc.) and this move will accelerate that and add some other categories/SKUs. But what’s REALLY interesting about this change is – are we seeing a move to effectively zero FBA fees?
Is this a trend towards completely zero FBA fees?
Having been an Amazon watcher for going on 10+years, one trend i’ve noticed and blogged about a good bit is how Amazon rolls out programs. They typically experiment and then if they seem to see good results they dramatically expand a program, usually by lowering the costs. If they dont’ see good results, they tend to kill it.
They also are very clever at bundling to create competitive moates and accelerate their virtuous cycle (consumers->selection+price+service->merchants->repeat).
So reading the tea leaves on this move, I imagine they will continue to push the zero fee fulfilment down in price to probably about the $50-75 level. That will make the FBA system that much of a no-brainer for retailers and increase the utilization – good for consumers, merchants and Amazon.
It’s a good thing they are building so many new fulfilment centres…