How Sellers Will Be Affected by Amazon's New 2024 Fee Structure
If you have been selling on Amazon for any length of time, you are aware of how often its fees are adjusted. However, two new Amazon FBA fees that cover how much inventory you should have at a fulfillment center and how your products are sent to Amazon FBA have angered a lot of Amazon sellers. This update was made recently.
If you browse any forum or group pertaining to Amazon sellers, you will notice that there is a lot of discussion about how the new fee structure will hurt their business.
We will discuss the changes that Amazon is making in this post, along with how they might impact your Amazon business.
Recognizing Amazon's updated FBA pricing?schedule
The referral fees, fulfillment fees, inventory fees, placement fees, and storage fees have all been modified in Amazon's updated fee schedule.
Here, I will give a brief overview of the fee adjustments before discussing the more significant ones that many sellers have been finding problematic.
Changes to FBA fulfillment fees in?2024
Generally, there will be a decrease in FBA fulfillment fees, which is undoubtedly good news for sellers.
As stated by Amazon, “Starting April 15, 2024, on average, we will decrease FBA fulfillment fees for standard-size products by $0.20 per unit and for Large bulk-size products by $0.61 per unit. This is the same date that the first inbound placement services fees will begin to be charged.”
Amazon modified its size tiers as follows:
This is the updated rate card:
The new bulky and extra-large tiers from Amazon are also taking the place of the small, medium, large, and special oversize tiers.
What impact does this have on?sellers?
For most products, this will mean a lower fulfillment rate, but for some, it might mean a higher rate. To make sure you understand exactly what your new fulfillment rate will be, please carefully go over this.
A new inbound placement service charge for?FBA
Sellers are extremely concerned about this new fee, and with good reason. Sellers could send their inventory to a single warehouse location with the previous FBA inventory placement service, and Amazon would divide it up for a nominal, manageable fee.
Now, with the new FBA inbound placement service fee, Amazon claims that the placement fees, on average, will increase the standard-size by $0.27 per unit and $1.58 per unit for Large Bulky-sized products, which may not sound like a lot, but it makes a big difference.
How are Amazon sellers impacted by?this?
Amazon does give you the option to pay reduced fees or even no fees based on whether you send your shipment to a single location or multiple locations, but some sellers in the Amazon Seller Central forums are reporting that they don’t have the option to split to multiple locations to have no fee.
Therefore, some sellers appeared to be compelled to pay the new inventory placement fee in addition to the shipping costs, which was occasionally two, three, four, or five times their shipment costs.
As you can see from the forums, a lot of sellers claim that their business cannot sustain those increases.
When preparing a shipment, sellers should have this appearance:
These three options should be yours, in theory. There is no further inventory placement charge if your shipment is divided into five parts. However, even without the placement fee, your total shipping cost will probably be higher than usual if you are shipping five different boxes as opposed to three.
“Amazon is charging a placement fee now to ship to one location. For me, it’s about an extra 27 cents per unit, at least on this shipment. I don’t even have the option to send to multiple locations because I’m not sending single SKU boxes (I never have). What should be a $30 UPS charge to send into Amazon FCs is now $170 with this new fee.”
Some sellers said they would investigate other fulfillment options, like shipping the products themselves or using a third-party fulfillment center. Some even said they would quit Amazon entirely.
Program for Ships in Product Packaging (SIPP)
This is good news, I assure you. With Amazon’s new Ships in Product Packaging program, formerly known as Ships in Own Container (SIOC), sellers can receive a discount on fulfillment from $0.04 to $1.32, depending on the product size and weight.
What impact does this have on?sellers?
Your product's original packaging may help you ship it and save money on Amazon fulfillment. In the event that your product is not currently eligible for the program, see if you can enhance your packaging to still benefit from it by working with your supplier.
Learn more about the requirements and how to enroll here.
Newly reduced inventory charge
Another new fee that has sellers furious is this one. Previously, you would have to pay a long-term storage fee if you kept an excessive amount of inventory. Now, if you have too little inventory, you will be charged a low inventory fee. Come on, Amazon.
Regarding the new charge, Amazon says the following:
“Effective April 1, 2024, a low-inventory-level fee will apply to standard-size products with consistently low inventory relative to customer demand. When sellers carry low inventory relative to unit sales, it inhibits our ability to distribute products across our network, degrading delivery speed and increasing our shipping costs.”
“A low-inventory-level fee will only apply if a product’s inventory level relative to historical demand (known as “historical days of supply”) is below 28 days. We will only charge a low-inventory-level fee when both the long-term historical days of supply (last 90 days) and short-term historical days of supply (last 30 days) are below 28 days (4 weeks). For example, if a product’s short-term historical days of supply is above 28 days but long-term historical days of supply is below 28 days, the low-inventory-level fee won’t apply.”
In other words, the charge is determined by your product's historical sales data. Amazon wants to make sure that its customers can always purchase your product.
It goes without saying that sellers are not pleased with this fee either. You will incur extra costs if you do not schedule your inventory precisely. This further complicates inventory management.
This new fee would also apply to sellers who are discontinuing a product or cutting back on their stock. Even if you do not intend to restock, there is sadly no way to have your products excluded from paying this fee.
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Now let us hear from sellers regarding the low inventory fees.
Changes in the FBA monthly inventory storage?fee
You pay monthly storage fees to Amazon for the inventory you store across their fulfillment network, as is common knowledge for all Amazon FBA sellers.
With effect from April 1, 2024, Amazon will actually lower the monthly storage fees for standard-size products by $0.09 per cubic foot during the off-peak months of January through September. Large, bulky, or extra-large products will not change.
What impact does this have on?sellers?
Any savings is a good thing, is not that right? Amazon claims that this fee reduction will assist sellers in keeping adequate stock levels.
Variations in the storage utilization surcharge
Amazon updated its policy regarding storage utilization surcharges on April 1, 2024. These fees are imposed when sellers keep more inventory on hand than what Amazon's fulfillment centers have been selling for, given the current demand and sell-through rates.
“The surcharge is based on storage utilization ratio, which is the ratio of your average daily inventory volume stored divided by the average daily shipped volume during the past 13 weeks. The ratio is calculated for each product size tier, which means you may have a storage utilization ratio for standard-size and a different storage utilization ratio for oversize.”
A storage utilization surcharge will be applied to your inventory for that month if, on the last day of the month, your storage utilization ratio is greater than 22 weeks.
What impact will this have on?sellers?
It is imperative for sellers to ensure that their rate of sale is sufficiently high to evade the storage utilization surcharge. Via your Seller Central FBA Dashboard, you can view your storage utilization ratio and sell-through rate.
Changes in the aged inventory surcharge
For items kept in Amazon's fulfillment network for more than 181 days, a surcharge known as the aged inventory surcharge—formerly known as long-term storage fees—is assessed.
From now on, this charge will go up for inventory held for 271 to 365 days. For inventory held for 365 days or longer, as well as for inventory held between 181 and 270 days, surcharges will not change.
What impact will this have on?sellers?
Aged inventory surcharges will increase significantly if your inventory has been in Amazon's fulfillment centers for more than 271 days. Once more, examine your sell-through rate and identify the products that are slow movers to avoid paying this fee.
Modifications to FBA removal, disposal, and liquidation order?fees
The cost to remove or discard your inventory from Amazon's fulfillment centers will go up as of February 5, 2024. There will not be any changes to the liquidation fee.
For sellers with unsold inventory or to avoid an aged inventory surcharge, Amazon provides inventory removal or disposal services. The new fees are as follows:.
What impact will this have on?sellers?
It will now cost you extra to remove inventory from Amazon if you need to for any reason. If you do not need to have the inventory sent back to you, we recommend looking into Amazon’s liquidation service, which allows you to recover a portion of your inventory cost.
The new processing charge for?returns
To control the operational costs of returns and cut waste, Amazon will implement a returns processing fee on high-return rate products in all categories starting on June 1, 2024, with the exception of apparel and shoes.
Only goods that meet each category's unique return rate threshold are subject to the charge. According to Amazon, on May 1, 2024, the return rate thresholds will be released.
From Amazon, “Your product’s return rate will be the percent of your product’s shipped units in a given month that’s returned by customers over that month and the subsequent two calendar months.
For example, for units shipped in June 2024, the return rate is the percent of those units returned over June, July, and August 2024. For a given month’s shipped units, the returns processing fee will be charged for each returned unit above the product category’s return rate threshold.
You will see return fees charged to your account between the 7th and 15th days of the third subsequent month. For example, for June 2024’s shipped units that are returned and are charged the fee, the charge will be made between the 7th and 15th of September, 2024.”
Sellers will be able to see their product return rates in Seller Central's FBA returns dashboard starting on May 1.
The return processing fees are as follows:.
What impact does this have on?sellers?
You will be assessed additional return fees in the event that the value of your returned products exceeds the threshold for that particular category. It is imperative for sellers to ascertain the primary cause of product returns and take steps to address the issue. In e-commerce, returns are unavoidable, but you should make every effort to minimize their frequency.
Extra, increased amenities and advantages
Not all of the news is bad! These are a few of the newly added features and advantages that Amazon will provide to sellers.
How will your Amazon business be impacted by these new?fees?
We understand that there has been a lot of change and that there are a lot of new fees. Make sure to save this article so you can refer back to it later and review all of Amazon’s fee changes within Seller Central.
Being a successful seller on Amazon is still more feasible than ever; all you need to do is make sure you understand all of the guidelines and, of course, the costs involved.