Despite several pandemic-related challenges throughout the last two years, eCommerce has exploded with success, and Amazon is leading the charge. Amazon FBA customers have benefitted from Amazon’s vast, efficient fulfillment network to drive sales and reduce headaches, all for a rather low FBA fulfillment fee structure. It’s been a win-win scenario for buyers and sellers throughout two years of trying times.
Amazon has taken steps to continue its growth and offer even more benefits for customers and eCommerce businesses worldwide. As a result, after two years of holding down rate hikes, Amazon has finally decided to increase its fulfillment by Amazon (FBA) selling fees. These changes in what Amazon charges will come just after the holiday shopping season and won’t affect any products sold before the new year.
What are the new Amazon FBA Fees?
The new Amazon FBA fees into effect on January 18, 2022, and will include the following changes:
- Fulfillment fee rates will increase by an average of 5.2%.
- Amazon will use the greater of either unit weight or dimensional weight to calculate shipping weight for most items sold, except apparel.
- Removal and disposal fees will increase, but liquidation fees will remain the same.
- Monthly fees for off-peak storage fees between January and September will increase.
- Amazon is launching a tiered structure for long-term storage fees, which will be charged in addition to monthly inventory storage fees.
- Amazon will increase FBA Prep Service fees.
- Increase the maximum weight eligibility for the FBA Small and Light program from 12 oz. to 3 lb.
- Amazon will launch FBA Grade and Resell, which will allow for easy resale of customer-returned items, which may help to offset returns processing fees.
- Reduce the referral fee for lawn mowers and snow throwers to 8% on items with a total sale price of over $500.
- Run free liquidations promotions at different times during the year.
- Amazon will offer a 5% sales rebate on new items for sellers who complete Brand Registry.
Why did Amazon FBA change how its fees are calculated?
Amazon saw tremendous growth throughout 2020 and 2021 despite unprecedented challenges. That growth required massive investment in labor, technology, and infrastructure –– at a cost of over $15 billion. In response to demand, Amazon hired over 628,000 people, and in response to the national labor movement, they increased the starting wage of fulfillment personnel to $18.00 per hour. They plan to hire more than 150,000 new people to staff 350 new operating locations.
The cost associated with Amazon’s expansion has been tremendous, so they’ve finally decided to raise their prices. This is a reflection of the value they’ve added to both customers and sellers throughout the pandemic. These changes will help Amazon continue to help sellers fulfill orders on time and provide a stellar customer service experience.
What do the new Amazon FBA fees mean for sellers?
Amazon’s new fees aren’t arbitrary –– they’re part of a carefully calculated growth plan. But don’t fret over higher fees, because Amazon intends to offer even more value to Amazon FBA customers with several new programs and incentives:
- The Brand Referral Bonus: An initiative to reduce the cost of marketing for Amazon FBA sellers
- The Search Analytics Dashboard: Search insights to help Amazon FBA sellers make adjustments to product titles and descriptions
- The Product Opportunity Explorer: AI-driven suggestions for Amazon FBA sellers to expand their assortments
- The New Seller Starter Pack: An initiative to accelerate growth for first-year Amazon FBA sellers, including bonuses for sellers who complete Brand Registry.
Tips for adjusting to new Amazon FBA fees
Evaluate your costs
The new FBA fees will impact not only sellers but also buyers. This means that if you order materials from Amazon and also sell through Amazon FBA, you might get hit by the new fees twice –– once when you buy, and once when you sell.
To offset the cost of Amazon FBA fees, consider shopping around for suppliers, evaluating your labor cost, and updating your SOP to eliminate redundancies. By implementing better eCommerce inventory management and taking advantage of bulk pricing on raw materials, you can potentially offset some of the cost of the new Amazon fees.
Raise your prices
Cutting costs alone won’t solve your problem. It might be time to raise your prices. Recent supply shocks and pandemic uncertainties have increased prices in all sectors. If you’ve been keeping your prices down to attract more clicks, now might be the time to reexamine your pricing structure to find ways to continue delivering high value to customers without losing your profits.
Look over your marketing results
If you pulled out all the stops to drive traffic throughout November, you did the right thing. Now is the time to analyze the conversion rates of your October and November marketing campaigns and cut anything that had a low ROAS. Double down on what‘s working, and lean into a final major marketing push through the end of Q4 2021.
Improve your conversion rate
If your marketing efforts are pulling people in from PPC campaigns, social media posts, influencer marketing, print ads, and more, but people aren’t buying, you need to update your product descriptions. Spend some time reviewing your product titles and descriptions for typos or distractions. Be thorough and specific when describing your products –– answer customers’ questions before they even think of them.
Also, incentivize your customers to leave reviews by asking them directly over social media and in order confirmation emails. Use coupons and flash sales to build urgency. Engage with your customers by answering questions as quickly as possible.
Communicate with your customers
Every business takes a different approach to price increases. Some roll them out slowly, a little bit at a time, in hopes that no one notices. However, modern shoppers appreciate transparency, and many customers will appreciate it if you approach the issue head-on by informing them of the upcoming price increases.
You could even turn this challenge into an opportunity to drive short term revenue. You could announce your price increase a few weeks ahead of time to drive urgency. By giving your most loyal customers a final chance to lock in lower prices, you may be able to drive more sales.
Streamline Your Cash Flow
Cost increases hurt but don’t let them slow your growth. Accelerate your cash flow with a little help from Payability.
Instant Access from Payability provides daily payouts for Amazon sellers. Stop waiting for long holding periods –– get your money when you need it.
- Quick and Simple: Don’t wait for a credit check –– apply online with your seller account and start getting payouts the same day
- Daily Payouts: Get access to the funds from eCommerce sales immediately instead of waiting around for funds to clear.
- Fast, Free Transfers: Stop waiting around for the bank. Get your money when you need it with Instant Transfer, Same Day ACH, or wire.
- Cash Back: Earn up to 2% cash back on every purchase you make with the Payability Seller Card.
Instant Advance from Payability provides instant funding for eCommerce businesses that are ready to scale. Don’t let slow money hold back your growth plans –– get up to $250K so you can act now!
- No Credit Checks: You don’t need a credit check to get funding from Payability –– qualify with your sales history and your account health!
- Fast Approval: Payability won’t keep you waiting –– apply online with your seller account to get funds in as little as one business day.
- Easy Transfers: Access your money on your schedule with Instant Transfer, Same Day ACH, or wire.
- Cash Back: Get up to 2% cash back from all purchases you make with the Payability Seller Card.