Understanding Amazon's Latest Fee Changes

Author

adam ginsberg
March 15, 2024

Understanding Amazon’s Latest Fee Changes

Starting any growing any business can be a daunting task. Selling on Amazon is no different. With that said, it’s worth the journey!

We hope you enjoy this weeks issue of the Internet Mastery Global Newsletter.

This weeks newsletter will be shorter than usual since the Weekly Training Video is 70 minutes of fire content!

Weekly Training Video

This weeks video relates to updates with regards to Amazon Fees. This video is pure fire with serious content that can positively impact anyone’s Amazon Business - Click here!

Amazon Has Changed the Game

Amazon has made dramatic changes to the fees they charge 3rd party sellers (like me and you).

And, while they make changes every year, this year is different.

Amazon typically increases FBA fees 7-9% each year. And while it doesn’t impact all sellers the same way, most sellers do see an increase in their fees to Amazon.

In the last 10 years, here are some of the biggest changes in fees that Amazon has made:

1. Switching from pick and pack fee to a flat fee.

2. Switching from package weight to dimensional weight.

3. Introduction of the Q4 storage fee.

4. Constant updates to the long-term storage fees. Now, at six months, the fees hit harder than ever.

Why does the inventory placement fee feel different?

For starters, we see it right in front of us.

What costs us $500 now costs $3000.

It might not be as impactful at the unit level as other changes (at 50 cents a unit, it is a big one).

It hits your balance sheet immediately instead of some line item on a profitability statement like previous changes.

Each year, as Amazon fees increase, Amazon sellers complain. Understanding Amazon, realizing it costs more to run a business each year, and participating in the business model presents both opportunities and challenges.

FedEx/UPS. Amazon could raise fees by 50%, and every seller would cry and mourn that the sky is falling. Then, the next day, they would look at the alternatives and quickly ship products back into FBA. Sellers raise prices a dollar, and everything goes back to normal."

In this case though, Amazon is charging the fee upfront. So, even if you raise the price on your items you will need to wait for the items to sell, ship and get paid by Amazon to get your money back. In addition, Amazon states they won’t know the “real” fees until 45 days after the items are received at a fulfillment center.

Suddenly, small businesses have to make impossible calculations. Do we pay the placement fee, or do we pay higher inbound freight? What about the additional labor to split the shipments in our warehouse?

It's a lose lose and every time you think about it, you see this new placement fee.

So why didn't Amazon just increase FBA fees and we can go back like previous years?

Amazon uses fees to incentivize behavior. This year, they want to incentivize sellers to optimize the entire network and reduce transshipping.

If sellers can do that, then they will have lower fees. This sounds great on paper, but here's the thing:

99% of Amazon sellers can't help Amazon optimize their network.

99% of sellers don't have multiple warehouses with inventory spread across the United States, just waiting to get sent into FBA.

So now Amazon sellers have to pay a placement fee "tax." They will pass this fee onto consumers just like in previous increases, but they'll feel like they're being bamboozled.

Every shipment.

For many professional sellers, this is done several times a week. So what should you do?

OPTION 1: Ensure you're correctly accounting for the increase and update your prices accordingly.

OPTION 2: Use the Internet Mastery Prep Center and save. As explained in the video at the top of this newsletter - use of the IM Prep Center will reduce your inbound shipping fees to Amazon by 30% or more.

Amazon Fee Changes 2024 Summary

Product Size Tiers

New size tiers and more granular tier intervals are being added.

This will affect the Amazon fees associated with various product sizes, ultimately impacting the overall costs for sellers. It’s important for sellers to carefully review the upcoming fee changes to understand how they may be impacted.

Referral Amazon Fees

Inbound Placement Service Amazon Fees

Referral Fees for certain price ranges in the apparel category are being decreased.

  • A new charge category has been introduced, which will be applied based on the destination or distribution of inbound shipments.

  • The additional charge is applied to account for factors related to the destination or distribution process. Its purpose is to ensure that costs are accurately allocated and priced.

  • The new category will allow better cost management for inbound shipments based on their destination or distribution needs.

Inbound Defect Fee

A new category of charge is being added based on problematic and/or delayed shipments.

FBA Fulfillment Fees

As a result of the Size Tier changes mentioned earlier, certain products will experience adjustments within this fee category.

Ships in Product Packaging Program

Fee discounts are being rolled out to products active in this program (formerly known as SIOC).

Prep Service Fees

Prep fees for Sharp and Fragile classifications are on the rise.

Removal/Disposal Fees

Removal fees are increasing based on size/weight tier.

Returns Processing Fee

This fee group is expanding to most categories and will incur added fees based on excessive return rates.

Monthly Storage Fee

Off-peak Amazon storage fees are being reduced for some product tiers.

Storage Utilization Fee

This fee group is getting more granularity in the fee structure based on storage vs sell through metrics.

Aged Inventory Surcharge

This fee group is becoming more detailed by implementing fee changes across various additional age categories.

Amazon Vine Program

Amazon has updated this program to tier out the cost, resulting in a lower fee for lower quantity enrollments.

FBA New Selection Program

Amazon is expanding rebates and benefits for new ASIN activations in this program.

Supply Chain Updates

Amazon is updating rates and benefits for the Amazon Global Logistics, Partnered Carrier, and Amazon Warehousing & Distribution programs.

NEW Inbound Placement Service FBA Fee (Effective March 1, 2024):

  • When building shipments, sellers can choose between “Premium Service” to send inventory to a single location and pay a fee, or “Discounted Service” to send inventory to multiple locations with no or a reduced fee.

  • Various factors determine the eligibility of a shipment. Amazon will generate cost estimates for each available option during shipment creation. The Inbound Placement Service Fee is based on the product’s classification and is charged per unit 45 days after the shipment is received.

  • The fee will range from $0.00 to $6.00 per unit, depending on the above eligibility factors.

  • As of March 1, 2024, a new Inbound Defect Fee will be implemented, ensuring the smooth and timely flow of shipments. The fee is only charged in certain situations. These include when shipments are sent to different locations than planned, domestic shipments that take longer than 45 days to arrive, international shipments that take longer than 75 days to arrive, and multi-destination shipments that do not reach facilities within 30 days of the initial shipment in the shipping plan.

  • Rest assured, this fee will be applied on a per-unit basis, with prices ranging from a mere $0.02 to $0.07. Amazon is implementing this fee to ensure high-quality and efficient services that will provide a positive experience for everyone involved.

  • Effective April 15, 2024, FBA Fulfillment Fees will change due to updates in product tiers. These adjustments will impact apparel and dangerous goods as well. The changes lead to a decrease of $0.20 per unit for Standard-sized products and $0.61 per unit for Large bulky-sized products on average.

  • Additionally, items below $10 will still benefit from an extra $0.77 discount through the Low Price program.

  • The Ships in Product Packaging (SIPP) Program, starting on February 5, 2024, brings an exciting update to what was formerly known as Ship in Own Container (SIOC). By participating in this program, products will not only benefit from a brand-new name but also receive a discounted FBA fulfillment fee ranging from $0.04 to $1.32.

In conclusion, the new Amazon FBA fee changes for 2024 will have a significant impact on sellers.

With increased storage and fulfillment fees, sellers will need to carefully evaluate their product costs and pricing strategies.

The changes also highlight the importance of optimizing inventory management and using efficient fulfillment methods.

Sellers should proactively assess the financial implications of these changes and adapt their business models accordingly to maintain profitability in the competitive FBA marketplace

If you are not part of the Internet Mastery Community and do not have access to the IM Prep Center, join us at an upcoming 2 day virtual summit to learn more. Tickets are $49.95 for 8 hours of live, interactive training. Get your tickets here: https://www.gettbace.com

Seller Performance Feedback

  • Request a review through Seller Central. You can manually request reviews within 4 to 30 days of purchase.

  • Enroll in the Amazon Vine Program to have trusted reviewers post honest insights into your product. (Use this tool if you have your own brand”

  • Send “Permitted Messages” asking for genuine reviews from buyers. Click the link to learn more.

  • Build a community off Amazon via email subscription or social media. This way, customers can directly tag or send you their rants or raves.

  • Maximize your product inserts by including messages that ask buyers to share feedback. This is ideal for bundles or your own Branded products.

  • Mitigate negative reviews by providing proactive customer service.

Congratulations!

We are super proud of the Internet Mastery Community - now surpassing more than $173,680,410.74 - UP $1,000,000 (Since LAST week) in sales on Amazon.

Check it out for your self here: https://app.internetmasterycommunity.com

Story of the week!

To Be Continued…

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That’s all we have time for today!

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Knowing No Boundaries,

Internet Mastery Newsletter Team!

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