Yesterday, Amazon announced changes to their fees affecting FBA and other services. This annual fee increase announcement has become the new normal over the last few years and will increase costs for sellers on average by ~5-10%, depending on the product category. Experienced Amazon experts can navigate these annual fee changes with minimal impact on their business by understanding what Amazon’s goals are. In the case of this recent announcement, Amazon’s goal is to optimize logistical costs by spreading inventory throughout the Amazon network; if you help achieve that goal, then these fee increases can be minimized. Below we have a breakdown of each change, its effective date, and what that will mean for your business. As always, if you need help navigating the muddy waters of FBA Fee Changes, Hinge Commerce is here to help.
Here’s a breakdown of the changes:
Inbound Placement Service Fee (Effective March 1, 2024)
- Reflecting the cost of distributing inventory closer to customers, this fee will average $0.27 per unit for standard-sized products and $1.58 per unit for Large Bulky-sized products.
What this means for you: Per Amazon, when you create a shipping plan, you can select one of the following inventory inbound placement options:
- Premium service: You can send your inventory to a single Receive Center or Fulfillment Center and Amazon will spread inventory across our network on your behalf, for a fee. The fee may vary by inbound location, with higher fees for shipments sent to locations in the West versus other parts of the country.
- Discounted service: Send your inventory to multiple inbound locations yourself, for a reduced fee or no fee. The discount will depend on several factors such as the number of shipments and inbound locations you send your inventory to.
The premium or discounted Inbound Placement Service Fee will depend on several factors such as product type and the quantities you have in your shipping plan.
When you create a shipping plan, you’ll see a cost estimate for each of the options above. You’ll be charged the FBA inbound placement service fee 45 days after your shipment is received based on the inbound location and quantities received.
The following table outlines the per-unit FBA inbound placement service fees. When you create your shipping plans, you’ll see a cost estimate for each available inbound placement option. The fee will vary based on the following factors:
- Item size: Whether the item is small standard, large standard, or large bulky.
- Weight: Unit weight for small standard. The greater dimensional weight or unit weight for large standard and large bulky.
- Inbound placement service: Premium or Discounted.
- Inbound location: The fee range will vary by inbound location (i.e., location of receive center or fulfillment center), with higher fees for shipments sent to inbound locations in the West versus other parts of the country.
The tables below are from Seller Central and give a breakdown of the pricing for Small Standard, Large Standard, and more.
FBA Fulfillment Fee Rates Adjustment (Effective April 15, 2024)
- A decrease of $0.20 per unit for standard-sized products and $0.61 per unit for Large Bulky-sized products.
- Products priced below $10 will continue to enjoy an additional $0.77 discount on per-unit fees.
What this means for you: If you’ve got large “Bulky” items, think pet food, cases of energy drinks or soft drinks, etc., your products will receive a $0.61 decrease if they fall within the weights highlighted in the tables below. This is something to be excited about, but keep reading to see what Amazon has said about how they’re changing how they measure (Cubiscan) your products. Which determines which Product Size tier it will fall in.
Starting on February 5, 2024, the small standard-size tier will be measured at intervals of 2 ounces and the large standard-size tier from 1+ to 20 lb will be measured at intervals of 4 ounces. The changes won’t apply to Apparel products. Additionally, the small, medium, large, and special oversize tiers will be replaced by the new large bulky and extra-large size tiers with new weight and dimensions definitions. See definitions of each size tier in the below table. For more details, go to the Product size tiers page in Seller Central.
Ships in Product Packaging (SIPP) Program (Effective February 5, 2024)
- Fulfillment fee discounts ranging from $0.04 to $1.32 for eligible products shipped in their existing packaging.
What this means for you: Also known as the SIOC (Ships in Own Container) Program. This program is effective for products that are packaged in a way that can survive inbound to Amazon and outbound to your consumer without needing an additional Amazon box. These products are typically non-liquid, non-fragile and non-consumable. With the SIPP program, you can potentially save yourself $0.04 – $1.32 for inbounding eligible products. If you need help coming up with packaging that is SIPP compliant, reach out to us, our operations teams are happy to help.
Low-Inventory-Level Fee and Monthly Storage Fee Adjustments (Effective April 1, 2024)
- Introducing a fee for consistently low inventory levels for standard-sized products.
- Reduced non-peak monthly storage fees for standard-size products by an average of $0.09 per cubic foot.
What this means for you: This fee is causing a lot of stir among sellers, and for good reason. If you have excess inventory, your IPI (Inventory Performance Index) can be impacted, which in turn will impact how much storage you have access to. But now if you have too little inventory for Amazon to distribute across their network, optimizing shipping costs and logistical operations for them; they will penalize sellers with a fee. More than ever before, managing your inventory is quickly becoming a more critical aspect of your eCommerce business. It will now be a delicate balance of managing your inventory turns, to ensure you are not penalized for too much or too little inventory. The Hinge Commerce Operations team has years of experience in Forecasting and Demand Planning Amazon FBA inventory. We can help you figure out what your low inventory threshold is and help you run that balance between excess and low inventory.
Expanded Services and Benefits
- Reduced referral fees for apparel products priced below $20, aimed at fostering competitive pricing.
- Revised pricing structure for Amazon Vine, enhancing product review opportunities.
- Enhanced benefits under the US FBA New Selection program, including rebates and expanded eligibility.
What these mean for you: Reduced referral fees for apparel products priced below $20 are great for sellers who consistently sell within that price range. This should enable a greater selection of accessories and children’s clothing, and it’s likely to spur a significant decrease in overall pricing especially if your price point is around or below $25.00 but above $20.
The previously announced changes to the Vine Program are huge! Previously it was $200 to enroll your ASIN, period. With this new pricing structure, you can enroll 1-2 units in the program at zero cost! 3-10 units will run you $75, while 11-30 units will continue to have the $200 fee. Keep in mind that ratings and reviews are critical aspects of Amazon’s flywheel/search algorithm. Amazon states that even one review can help boost your sales, but it is a commonly held belief that it takes ~5 reviews for the algorithm to adjust. Hinge Commerce can help you with all aspects of new product launches, including a strategy for Vine (as not all products on Vine are a slam dunk). We’ll optimize your content, build your listings, develop a product launch plan (including Vine, promotions, and more), as well as manage advertising for you.
Enhanced Benefits under the FBA New Selection Program. Starting March 1, 2024, Amazon will continue to provide an average 10% rebate on sales of eligible new-to-FBA parent products, including new rebates for eligible non-branded or generic selections:
- For eligible non-branded non-standard size items, the rebate applies on up to 50 units per parent product for up to 120 days.
- For eligible non-branded standard-size items, the rebate applies on up to 100 units per parent product for up to 120 days.
It is worth noting that self-fulfilled unbranded child products with five or fewer unit sales per week (on a trailing four-week average) won’t be eligible for the rebate if introduced to FBA. There are some criteria that you must meet for your products to quality for the FBA New Selection Program. If you’re interested, hit that contact us button in the top right hand corner and an expert from our team will reach out.
Annual Updates and Returns Processing Fee (Effective June 1, 2024)
- Updated fees for various services to align with market dynamics.
- Expansion of returns processing fee to high return-rate products, excluding apparel and shoes, addressing operational costs, and reducing waste.
What this means for you: Starting on June 1, 2024, Amazon will introduce a returns processing fee for high-return rate products in all categories, excluding apparel and shoes, to address the operational costs of returns and reduce waste. The fee will only apply to products that have return rates above a threshold specific to each category.
Your product’s return rate will be the percentage of your product’s shipped units in each month that’s returned by customers over that month and the subsequent two calendar months. For example, for units shipped in June 2024, the return rate is the percentage of those units returned over June, July, and August 2024. For a given month’s shipped units, the returns processing fee will be charged for each returned unit above the product category’s return rate threshold. You will see return fees charged to your account between the 7th to 15th day of the third subsequent month. For example, for June 2024’s shipped units that are returned and are charged a fee, the charge will be made between the 7 to 15th of September 2024. An example of this looks like:
1,000 units of a product were shipped to customers in June 2024. In June, July, and August 2024, 120 of the 1,000 units shipped were returned. The returns threshold for this example product category is 10%*, so returns that exceed 100 units (10% of the 1,000 shipped) during the shipment month and subsequent two months will incur the returns processing fee. In this case, 120 units were returned, so 20 units would be charged the returns processing fee.
Those are a TON of changes, and your head might be spinning, but the key takeaway is to focus on how to mitigate these increases by leaning into what Amazon is trying to incentivize. Drop us an email via the Contact Us button above and let us help you build a strategy to grow your business profitability despite these fee increases.