Based on a recent announcement from Amazon, starting from January 18th, a bunch of Fulfillment by Amazon (FBA) fulfillment fee changes will come into effect. Along with global logistics and supply chain crisis, the change put more pressure on sellers. What should we do to meet these challenges? Let’s take a look at the new changes first.
To have a clear understanding of the new policy changes, we collected key information below:
|Jan 1, 2022||FBA fee changes||Average increase 5.2%|
Apparal: average increase 9%
|FBA removal and disposal order fee changes||Average increase over 100%, more for oversize products.|
|FBA Small and Light fee changes||1. The weight limit for FBA Small and Light increase from 12 oz to 3 lb|
2. Will use the greater of unit weight or dimensional weight to determine the
shipping weight for all large standard-size units. Small standard-size units will
use the unit weight.
|Amazon referral fee changes||Lawn Mover and Snow Plow: for products over $500, referral fee decrease from |
15% to 8%
|Feb 1, 2022||FBA monthly storage fee changes||Off-Peak Season (Jan to Sep), well be increased by $0.08 per cubic foot for |
standard-size products and $0.05 per cubic foot for oversize products.
|May 15, 2022||FBA aged inventory surcharge||Will introduce an aged inventory surcharge $1.50 per cubic foot for units that |
have been stored in fulfillment centers for 271 to 365 days.
The Actual Impacts on Sellers
We picked FBA fee changes as examples. Based on the changes above, we performed a thorough investigation about the actual impact on costs, revenue, and other important indexes for our clients. Let’s take a look at some of them from different categories.
A brand sells sporting footwear and apparel. Based on their annual sales volume, we assume they will have similar performance in 2022, let’s say 40,847. After applying the new FBA fee, the transportation cost will rise to $258,643.05, which is $17,726.28 more than 2022’s cost of $240,916.77. There is a 7.36% increase.
A TVs and electronics brand sells smartphones, TVs, and other home appliances on Amazon. Let’s say they have the same sales volume in 2022 compared to 2021, 47,664. The transportation cost based on 2022’s new policy would be $231,396.34, which is $13,168.84 more than 2022’s $218,227.50. We see a 6.03% increase.
Beauty & Skincare:
A beauty and skincare brand’s 2021 annual sales volume is 36,898. Under the same assumption, their 2022 transportation cost is $142,116.65. That is $3,895.97 more than 2021’s $138,220.68; a 2.82% increase.
Solutions & Discussions
Based on the examples above, we can see the average transportation cost increase caused by FBA fee changes would range from 2% to 9%. And this doesn’t include storage and other fees.
How can we make better profits under such challenges? We summarized possible solutions and discussions below:
Rise in FBA Fee
The cost of Amazon delivery increased.
- Adjust the size of your packages can be the ideal solution. But it takes time, we can consider it as a long term strategy
- Transfer FBA to FBM. Some sellers moved their products to their own warehouse, requiring sellers to manage their logistics, costs, and efficiency.
- Rise in price. These are common solutions for most sellers.
Rise in Monthly Storage Fee
Monthly storage fee in Off-Peak Season increased, this left a huge impact on products with low turnover rate. Sellers need to have good control of their inventory. A possible solution is for companies to hold clearance sales.
Rise in Aged Inventory Fee
For low turnover products, especially over 271 days (fees different from 271 to 365, and 365 over), sellers need to pay more aged inventory fee. Sellers need to accelerate the turnover rate.
- Clearance sales
- Remove the products (need to charge a fee) and send to sellers’ own warehouse
- Disposal (need to charge a fee)
Rise in Removal and Disposal Fee
Based on the solutions above, we recommend removing and disposing of new products before the policy comes into effect. Usually, we apply this to products that are hard to sell or returned products that couldn’t sell again.
This time, the Amazon US Referral and FBA Fee Changes made it more difficult to earn a profit. We provided the solutions above, but there is no “no silver bullet.” It’s important to build long-term eCommerce sustainability. Wishing you all have a successful year selling at Amazon.