How Will FBA’s Fee Changes Affect Your Bottom Line?
- January 11, 2016 | Marcus DeHart
If you started selling with Fulfillment by Amazon (FBA) back when it started in 2006, then you know that their fee structure was relatively easy. Aside from the regular referral fee that applies to all sellers on Amazon, there were three additional fees for every sale: order handling, pick & pack, and weight handling.
The only variables you had were binary: media vs. non-media and standard-size vs. oversize. Then there was the nominal monthly storage fee that bumped up during the holidays.
A Short History of FBA Fees
These prices remained fixed for about six years before Amazon realized that the fees didn’t accurately reflect their cost of fulfillment. Sellers also picked up on this and found a few “sweet spots” in the fees that made selling certain products extremely profitable through FBA. Small, lightweight products, such as computer cables, and large, expensive products like big-screen TVs became very popular to sell through FBA because the fees didn’t reflect the actual cost of shipping them.
That all changed back in 2012 when Amazon announced its first fee change. But the change wasn’t just about increasing fees. It was about restructuring fees. New classes of product size were introduced and complicated calculations were necessary to figure out which products fell into which size. Some products became more expensive to fulfill, others cost less, and still others remained unchanged.
Every year since then, Amazon has reassessed the cost of doing business and adjusted their fees to reflect those changing costs. This year won’t be any different.
If you haven’t already received the announcement, get ready. On February 18, 2016, you’ll have new fees applied to your orders through FBA. Pick & pack, weight handling, and storage fees will be changing, so let’s take a look at which products will be affected most with this change.
Pick & Pack
All products are charged a pick & pack fee. As the name suggest, it’s the cost of grabbing your product off the shelf and putting it in a box for shipment. Across the board, all standard-size products will be charged 2¢ more per unit after February 18. For most products that’s an increase of less than 2 percent. For oversize products the fee increase will vary by size. Small oversize will go up 4¢, medium oversize 8¢, large and special oversize 19¢.
The biggest increase by percent will affect lager, standard-size, non-media that are less than one pound. Going from 63¢ to 96¢, these items will be charged 52 percent more with the new prices. Large, standard-size media products will see the next biggest increase for weight handling. Large media less than one pound will go up 22¢, which equates to an increase of 35 percent. But any large media products over one pound will go up 36¢, or 41 percent.
Conversely, oversize products will see a greater increase among the smaller products. Small oversize products will go up 47¢, or 30 percent, while medium oversize will go up 50¢, or 22 percent. Large oversize will increase 89¢, which is approximately a meager 1 percent increase. Special oversize, such as large-screen TVs, will not be increasing.
Overall, storage fees will be going up anywhere from 6 to 8 percent depending on the product size and time of year. For January through September, you will be paying an additional 3¢ per cubic foot. For the remaining holiday months, you’ll see an increase of 4¢ per cubic foot. For standard-size products that's approximately a 6 percent increase. Oversize products will see the biggest hit from October through December, with an approximate increase of 8 percent.
Planning for 2016
Take a look at your FBA inventory and your adjusted gross margin to determine which products will be affected the most. If the cost is too high, you might need to adjust the price to make up for these additional costs. If that makes the price too high, it might be time to stop replenishing your inventory that will be affected the most and start fulfilling those items yourself. That’s assuming, of course, that it will cost less for you to fulfill the orders. In a worst-case scenario, you might find it best to drop some products from your inventory line up.
Visit U.S. Fulfillment by Amazon Fee Changes 2016 for a complete summary of all changes and how they will affect you.