Third-Party Sellers Deal with Amazon Fee Increases in 2022
Amazon sellers of every size have been coping with some big changes recently. When the ecommerce giant announced increases to its seller fees, the reaction was far from positive. Of course nobody wants to pay more of any type of fee than they have to, but this was different. Amazon’s fees were already high, and now they were going to get even higher.
One complicating factor is the way these fees are structured. They were already pretty confusing, but the fee increases add another layer to the mess – they’re anything but uniform. Since Amazon has published all of the details for the new fees online, it’s technically possible to do the math yourself, calculate what your new profit margins will be, and determine where to go from there. However, a lot of sellers are turning to services like Shopkeeper.com in order to understand not only what’s going on, but how to strategize their approach moving forward. Regardless, it’s vital to start working things out as quickly as possible; given how much these changes could affect the bottom line of a business, this isn’t something you want to sleep on.
This being the case, here’s a brief introduction to the changes in Amazon’s seller fees, and how they might affect the average Amazon seller.
FBA Fulfillment Fees
This particular category is where some of the most dramatic changes could happen for sellers. For example, people who sell mainly smaller products could be hit hard by the fee increase in their size tier. However, others might get lucky and only see a tiny bump in their total fulfillment fee. This is partly why it’s so important to get accurate data; you can’t just say “well, I guess I’ll be making less now” and leave the rest up to fate. You might find out that while some of your items are now losing money, the rest of them aren’t actually affected that much. Then you’ll know exactly what to do: discontinue anything that isn’t turning a decent profit, and keep going with the rest.
Here's how it might look when one of the new fees really eats up your profit margin. Say there’s an item that sells for $10, and has a gross margin of 20% - that was with the previous fulfillment fee. With the new one, you’re only getting a gross margin of 10%. It’s now up to you to decide whether you want to stop selling the item, or just keep carrying it and accept that it simply isn’t as profitable anymore.
FBA Removal and Disposal Fees
Just like sellers pay FBA (Fulfillment by Amazon) warehouses to store and ship their items, they also pay when an item has to be gotten rid of because it’s unsellable. The cost is the same regardless of what they decide to do, but they can either have the FBA send them the defective item, or let them destroy it at the warehouse.
With nine size tiers, there’s a lot of math involved here – and sellers usually don’t like the numbers they’re calculating. Just as an example, an item in the 1 – 2 lb. size tier formerly cost $0.48 for this service, but now (as of January 18th, 2022) it’ll cost $1.14. Yes, this only applies to items that are damaged or otherwise unsellable, but this still happens often enough to affect a seller’s bottom line.
Aged Inventory Surcharge
While this fee will put a dent in profit margins, it’ll probably also change the way sellers prioritize their products. If they’re having to pay more in storage fees for items that don’t sell quickly enough, it would only make sense to stop selling those items in favor of the ones that never incur aged inventory surcharges. It could also discourage sellers from trying out new items in their stores; if those items don’t end up being as popular as expected, that’s just more money they’ll have to pay for extended storage. The good news is, some sellers have already come up with a solution: use alternative fulfillment centers for the slower-moving products, and keep their bestsellers in FBAs. This way they get to keep offering Amazon Prime, while saving money on inventory costs.
In this instance, the fee in question isn’t an increase of an already existing charge; it’s a whole new fee. FBAs were already charging sellers for items that were in storage past the 365-day mark, but now there’s another time frame that’ll cost extra. Items that sit in an FBA from 271 to 365 days will cost $1.50 per cubic foot, and that’s on top of the regular storage fees.
FBA Storage Fees
As of the 1st of February, 2022, basic inventory fees are going to increase at FBAs. There were already two separate rates, one for peak season (October – December) and one for the rest of the year (January – September). The peak season rates will stay the same, but the fees for the rest of the year are increasing. Standard items went from $0.75 per cubic foot to $0.83 per cubic foot, and oversize items went from $0.48 per cubic foot to $0.53 per cubic foot. The October – December fees were already a good bit higher: standard items are $2.40 per cubic foot, and oversize items are $1.20 per cubic foot.
Referral Fees
It may not make a huge difference for most sellers, but for some, referral fees will actually be going down. Products with a total sales price that’s over $500 will now have a referral fee of 8% (formerly 15%), and in a weirdly specific move, snow throwers and lawnmowers will also enjoy a reduced referral fee.
Is there a lesson to be learned here?
On the surface, it may seem like the main lesson is that Amazon loves making money. However, any sellers that are proactive and can adjust quickly could come out on the other side in good shape. The situation definitely isn’t ideal, but maybe this is just a case of “what doesn’t kill you makes you stronger”.
