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Amazon Fees in 2024: What You Need To Know

If you’ve not already experienced it firsthand, you’ve heard talk about the newest Amazon fees related to warehousing, inventory, and returns that rolled out this and last month. But have you taken the time to dive in and investigate what they mean for your business? How concerned should you be?

We’re here to break it down for you to make sure you forge ahead in 2024 aware of the challenges you face.

Before we do that, let’s set some table stakes: you need to clearly understand your ASIN-level profitability and what fees are part of your current cost structure. So that you can understand what has changed, you need to know what state things were in previously. These new fees might be a problem for individual products but might not have much of an impact on others. If reading through Seller Central Help makes you feel like you need a PhD in Amazonology just to understand what the impact of these changes will be, you’re not alone. 

Throughout this piece, we’ll link to both official Amazon pages and analysis from others in the e-commerce space. With that set, let’s jump in.

Inbound placement service fee

 

Let’s start with the change that launched a thousand LinkedIn posts. The inbound placement service fee is intended to cover Amazon’s cost of spreading products around fulfillment centers all across the country. Until now, Amazon has allowed sellers to ship all of their products to a single warehouse, leaving Amazon’s algorithms and logistics network to handle shuffling products around their network. This was a far easier and more affordable shipping workflow than batching out inventory to different warehouses individually.

The change to this model is that Amazon is now passing those costs along to sellers, so the automatic inventory distribution service now comes at a cost of $0.27 per unit for standard-sized items and $1.58 per unit for large, bulky-sized products. The fee is charged 45 days after your shipment reaches Amazon. There is an option to pay reduced fees or even no fee based upon whether you send your shipment to a single location or multiple locations, with 4 different locations being a common outcome, but the issue there is that shipping to multiple locations adds a lot of cost and complexity.

Low inventory fees

 

This next fee is, in our opinion, an even trickier balancing act to walk: the Low Inventory fee. If your product has consistently low stock, you’ll be hit with various fees that change depending on the size of the product. If it seems odd for Amazon to charge you for not having enough product sitting in their warehouse when they already charge fees for storing too much product, it is. This fee will apply to products where inventory is below 28 days of supply or historical days of supply. This fee will only be charged if the last 90 (long-term) and the last 30 (short-term) days are both below the 28-day supply threshold. For example, if a product’s short-term historical days of supply are above 28 days, but its long-term historical days of supply are below 28 days, the low-inventory-level fee will not apply. 

Amazon says that “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.” So it’s there to encourage brands to stay up to date with their FBA shipments and do better demand forecasting. 

The difficulty with this fee is that even in the best of conditions with careful preparation, planning, and forecasting, conditions beyond your control can lead to low inventory levels. Just to name a few, last-mile issues with transporting products, items getting stuck at sea (remember the ship that got wedged in the Suez Canal!?), and health crises like COVID. Other concerns we’ve heard include: What happens to seasonal products? What if Amazon themselves receives your inbound FBA shipment slowly? What happens if you discontinue a product?

The seller community has made so much noise about it that Amazon decided to implement a grace period, the details of which were announced directly by Dharmesh Mehta himself:

From April 1-30, Amazon will charge sellers the FBA low-inventory-level fees as they are incurred, but after the end of the month, we will credit back sellers for all low-inventory-level fees charged during this period.

More recently, Amazon extended that timeframe to the 14th of May and made a few other changes which seem to be in direct response to the outcry from brands.

These include:

  • The fee not applying to any products that have sold fewer than 20 units in the last week
  • Fees related to excessive inbounding and processing times caused by Amazon
  • An exemption for products that are part of Prime-exclusive sales for the four weeks following Prime Day

These carve outs demonstrate that Amazon is listening and willing to make changes based on feedback.

Return processing fees

 

Amazon is also adding fees for returns processing if your product has an elevated return rate vs the benchmark for your category. These fees don’t go into effect until June 1st, so Amazon has given us ample time to understand how they work, and we won’t see their impact until later on. On May 1st, they released information on what exactly constitutes a high return rate threshold, information they’d previously not provided. It’s still unclear if they will differentiate returns based on the reason why the item was sent back. For example, “unwanted item” vs “defective” mean two very different things.  There are also some unresolved questions about how Amazon accounts returns across different variations.

Here’s a few more things to know from a close reading of the help article:

  • There’s a 180-day window for returned products to reach a fulfillment center
  • The return rate is calculated in a 3-month window
  • If a product ships less than 25 units a month, it’s exempt
  • There is an FBA new selection Perk, basically the fee is waived for up to 20 units of each new product

    These fees don’t apply if you sell apparel products, which by their very nature have unstable rates of return and are highly subject to individual consumer taste.

Where is Amazon cutting fees?

 

To bring some balance to these changes, Amazon is reducing fees in a few places. The standard FBA fulfillment fee has been reduced by an average of $.20 per product for standard products and $.61 for large, bulky products. Amazon is also cutting referral fees for apparel products under $20. 

Amazon is also making further efforts to encourage businesses to optimize packaging. To reflect the cost savings when products can be shipped in their existing packaging, they will offer a fulfillment fee discount ranging from $0.04 to $1.32, depending on item size and weight. This is only for products in the Ships in Product Packaging (SIPP) program, so taking advantage of that program now becomes a higher priority for all sellers.

Amazon has estimated that sellers can expect to see a $0.15 average increase in fees per unit sold on the platform, with some sellers potentially seeing a decrease. Amazon didn’t address the fact that an average of $0.15 increase per unit seems reasonable for using the FBA infrastructure; however, this is an overall average and is not the reality of what each seller and each product will face.

Despite these cuts, the majority of business owners we’ve spoken to and read testimonials from online expect to be paying more than before.

Can I avoid these fees?

 

Some sellers are saying that the Inbound placement service fees appear designed to pressure them to utilize a new Amazon service called AWD, or Amazon Warehousing and Distribution. Along with inbound placement fees being waived, AWD has no long-term storage fees and auto-replenishes to FBA. Amazon wants to get involved in an earlier stage in the supply chain, and AWD is an effort to replace 3PLs while trimming the fat in their own warehousing operations while making more revenue in fees.

Another approach we’ve seen comes from tools that are rolling out features to try and compensate for these fees by offering software workarounds or loopholes. These will be swiftly noticed and shut down by Amazon, and we don’t recommend using any of them. A clear example is a business who tried making multiple shipping plans to game the system and get their products split up into fewer locations were punished for doing so.

Consider a key advantage 1P has over 3P. With 1P, there are no fulfillment or storage fees. Amazon absorbs the stock and deals with all logistical costs.

How can I measure the impact of Amazon’s new fees?

 

Thinking about it from Amazon’s perspective, these fees are there not only to make them money (duh) but to push businesses to make changes in their existing systems, processes, and  actual products (like packaging) to make their massive logistics operation run smoother.

An Amazon spokesperson, Mira Dix, said in a statement: “This allows us to create incentives for sellers to use our network more efficiently so we can share the cost savings.”

It’s a classic carrot-and-stick dynamic, where working within their changes to find reduced fees will help your cost structure, just as it does theirs. 

Inbound placement service fees are being put in place to shift the cost of moving inventory between fulfillment centers from Amazon back to sellers. This is a bill Amazon has footed the cost of for years, and now they’re changing how it works.

Conclusion

 

With recent changes such as the introduction of inbound placement service fees, low inventory fees, and return processing fees, understanding and mitigating these costs is essential for maintaining profitability on the platform. While these changes present challenges, there are opportunities to adapt and optimize your operations. Whether it’s testing Amazon’s AWD service, optimizing product packaging, and supply chain operations, or considering the advantages of 1P and FBM over FBA, there are strategies to minimize the impact of these fees on your business.

At AMZ Pathfinder, we specialize in helping sellers navigate challenges and maximize their success on Amazon. From ad management to full account management, our expertise can help you mitigate the impact of these new fees. Get in touch with our team today! 

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Amazon Fees in 2024: What You Need To Know

If you’ve not already experienced it firsthand, you’ve heard talk about the newest Amazon fees related to warehousing, inventory, and returns that rolled out this and last month. But have you taken the time to dive in and investigate what they mean for your business? How concerned should you be?

We’re here to break it down for you to make sure you forge ahead in 2024 aware of the challenges you face.

Before we do that, let’s set some table stakes: you need to clearly understand your ASIN-level profitability and what fees are part of your current cost structure. So that you can understand what has changed, you need to know what state things were in previously. These new fees might be a problem for individual products but might not have much of an impact on others. If reading through Seller Central Help makes you feel like you need a PhD in Amazonology just to understand what the impact of these changes will be, you’re not alone. 

Throughout this piece, we’ll link to both official Amazon pages and analysis from others in the e-commerce space. With that set, let’s jump in.

Inbound placement service fee

 

Let’s start with the change that launched a thousand LinkedIn posts. The inbound placement service fee is intended to cover Amazon’s cost of spreading products around fulfillment centers all across the country. Until now, Amazon has allowed sellers to ship all of their products to a single warehouse, leaving Amazon’s algorithms and logistics network to handle shuffling products around their network. This was a far easier and more affordable shipping workflow than batching out inventory to different warehouses individually.

The change to this model is that Amazon is now passing those costs along to sellers, so the automatic inventory distribution service now comes at a cost of $0.27 per unit for standard-sized items and $1.58 per unit for large, bulky-sized products. The fee is charged 45 days after your shipment reaches Amazon. There is an option to pay reduced fees or even no fee based upon whether you send your shipment to a single location or multiple locations, with 4 different locations being a common outcome, but the issue there is that shipping to multiple locations adds a lot of cost and complexity.

Low inventory fees

 

This next fee is, in our opinion, an even trickier balancing act to walk: the Low Inventory fee. If your product has consistently low stock, you’ll be hit with various fees that change depending on the size of the product. If it seems odd for Amazon to charge you for not having enough product sitting in their warehouse when they already charge fees for storing too much product, it is. This fee will apply to products where inventory is below 28 days of supply or historical days of supply. This fee will only be charged if the last 90 (long-term) and the last 30 (short-term) days are both below the 28-day supply threshold. For example, if a product’s short-term historical days of supply are above 28 days, but its long-term historical days of supply are below 28 days, the low-inventory-level fee will not apply. 

Amazon says that “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.” So it’s there to encourage brands to stay up to date with their FBA shipments and do better demand forecasting. 

The difficulty with this fee is that even in the best of conditions with careful preparation, planning, and forecasting, conditions beyond your control can lead to low inventory levels. Just to name a few, last-mile issues with transporting products, items getting stuck at sea (remember the ship that got wedged in the Suez Canal!?), and health crises like COVID. Other concerns we’ve heard include: What happens to seasonal products? What if Amazon themselves receives your inbound FBA shipment slowly? What happens if you discontinue a product?

The seller community has made so much noise about it that Amazon decided to implement a grace period, the details of which were announced directly by Dharmesh Mehta himself:

From April 1-30, Amazon will charge sellers the FBA low-inventory-level fees as they are incurred, but after the end of the month, we will credit back sellers for all low-inventory-level fees charged during this period.

More recently, Amazon extended that timeframe to the 14th of May and made a few other changes which seem to be in direct response to the outcry from brands.

These include:

  • The fee not applying to any products that have sold fewer than 20 units in the last week
  • Fees related to excessive inbounding and processing times caused by Amazon
  • An exemption for products that are part of Prime-exclusive sales for the four weeks following Prime Day

These carve outs demonstrate that Amazon is listening and willing to make changes based on feedback.

Return processing fees

 

Amazon is also adding fees for returns processing if your product has an elevated return rate vs the benchmark for your category. These fees don’t go into effect until June 1st, so Amazon has given us ample time to understand how they work, and we won’t see their impact until later on. On May 1st, they released information on what exactly constitutes a high return rate threshold, information they’d previously not provided. It’s still unclear if they will differentiate returns based on the reason why the item was sent back. For example, “unwanted item” vs “defective” mean two very different things.  There are also some unresolved questions about how Amazon accounts returns across different variations.

Here’s a few more things to know from a close reading of the help article:

  • There’s a 180-day window for returned products to reach a fulfillment center
  • The return rate is calculated in a 3-month window
  • If a product ships less than 25 units a month, it’s exempt
  • There is an FBA new selection Perk, basically the fee is waived for up to 20 units of each new product

    These fees don’t apply if you sell apparel products, which by their very nature have unstable rates of return and are highly subject to individual consumer taste.

Where is Amazon cutting fees?

 

To bring some balance to these changes, Amazon is reducing fees in a few places. The standard FBA fulfillment fee has been reduced by an average of $.20 per product for standard products and $.61 for large, bulky products. Amazon is also cutting referral fees for apparel products under $20. 

Amazon is also making further efforts to encourage businesses to optimize packaging. To reflect the cost savings when products can be shipped in their existing packaging, they will offer a fulfillment fee discount ranging from $0.04 to $1.32, depending on item size and weight. This is only for products in the Ships in Product Packaging (SIPP) program, so taking advantage of that program now becomes a higher priority for all sellers.

Amazon has estimated that sellers can expect to see a $0.15 average increase in fees per unit sold on the platform, with some sellers potentially seeing a decrease. Amazon didn’t address the fact that an average of $0.15 increase per unit seems reasonable for using the FBA infrastructure; however, this is an overall average and is not the reality of what each seller and each product will face.

Despite these cuts, the majority of business owners we’ve spoken to and read testimonials from online expect to be paying more than before.

Can I avoid these fees?

 

Some sellers are saying that the Inbound placement service fees appear designed to pressure them to utilize a new Amazon service called AWD, or Amazon Warehousing and Distribution. Along with inbound placement fees being waived, AWD has no long-term storage fees and auto-replenishes to FBA. Amazon wants to get involved in an earlier stage in the supply chain, and AWD is an effort to replace 3PLs while trimming the fat in their own warehousing operations while making more revenue in fees.

Another approach we’ve seen comes from tools that are rolling out features to try and compensate for these fees by offering software workarounds or loopholes. These will be swiftly noticed and shut down by Amazon, and we don’t recommend using any of them. A clear example is a business who tried making multiple shipping plans to game the system and get their products split up into fewer locations were punished for doing so.

Consider a key advantage 1P has over 3P. With 1P, there are no fulfillment or storage fees. Amazon absorbs the stock and deals with all logistical costs.

How can I measure the impact of Amazon’s new fees?

 

Thinking about it from Amazon’s perspective, these fees are there not only to make them money (duh) but to push businesses to make changes in their existing systems, processes, and  actual products (like packaging) to make their massive logistics operation run smoother.

An Amazon spokesperson, Mira Dix, said in a statement: “This allows us to create incentives for sellers to use our network more efficiently so we can share the cost savings.”

It’s a classic carrot-and-stick dynamic, where working within their changes to find reduced fees will help your cost structure, just as it does theirs. 

Inbound placement service fees are being put in place to shift the cost of moving inventory between fulfillment centers from Amazon back to sellers. This is a bill Amazon has footed the cost of for years, and now they’re changing how it works.

Conclusion

 

With recent changes such as the introduction of inbound placement service fees, low inventory fees, and return processing fees, understanding and mitigating these costs is essential for maintaining profitability on the platform. While these changes present challenges, there are opportunities to adapt and optimize your operations. Whether it’s testing Amazon’s AWD service, optimizing product packaging, and supply chain operations, or considering the advantages of 1P and FBM over FBA, there are strategies to minimize the impact of these fees on your business.

At AMZ Pathfinder, we specialize in helping sellers navigate challenges and maximize their success on Amazon. From ad management to full account management, our expertise can help you mitigate the impact of these new fees. Get in touch with our team today! 

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