New Amazon Fees
Amazon recently introduced new fees for seller inventory management in its warehouses.
Sean’s take:
So, what’s actually going on?
Breakdown
We summarize the new fees below but you can get them in detail here.
The good
- Referral fees down
- FBA fulfillment fees more granular, many drop.
The bad
- Some fulfillment fees are up.
- Inbound placement fees exist now. They can be worked around though.
- Low inventory level fees exist now, too.
- Removal, liquidation and disposal fees are up.
- Returns and processing fees are up for high return-rate products (except shoes and apparel)
What does this mean in practice? It gets complicated. Inbound placement fees charge you for sending all of your inventory to one warehouse. Split your package between 4+ warehouses and the fee goes away. But now you’re paying more for shipping.
Molson Hart says the new fees are costing him $0.83 per unit. For 400,000 units, that’s $300,000 his business needs to absorb this year. Which it can’t. He has to crunch the numbers and find out which of 30 shipping options will work best for his company.
DTC Operators will note that switching to Amazon Warehouse Distribution (AWD) makes storage much cheaper. AWD hasn’t attracted as many as Amazon hoped, and these new fees could be a move to incentivize the transition (credit: eCommerceJack for the idea).
If you do switch, however, be wary. Amazon has a history of undercutting competitor shipping costs, only to gradually increase prices over time and end up far more expensive. They are following the same pattern with AWD.
Takeaway: Amazon seems to enjoy making life more difficult and more expensive for its sellers. There will be a breaking point past which it becomes more interesting to switch to DTC and other platforms.