Every year, Amazon announces changes that affect brands enrolled in Fulfillment by Amazon (FBA). Some of these updates are more important than others. For your convenience, below is a detailed explanation of the most recent (and impactful) fee changes that you need to know.
Inbound Placement Service Fee – Effective March 1, 2024
By far, the most significant FBA fee change for 2024 is the new inbound placement fee for standard and Large Bulky-sized products. According to Amazon, this fee reflects the cost of distributing inventory to fulfillment centers close to customers.
The new inbound placement fees average $0.27 per unit for standard-sized products and $1.58 per unit for Large Bulky-sized products, but these can fluctuate depending on where you are sending inventory.
It’s important to note that Amazon offers the option to pay reduced or even no fees based on whether you send your shipment to a single location or multiple locations. When you create a shipping plan, you must select one of the following inventory inbound placement options:
- Amazon-Optimized Shipment Splits: Send your inventory to four or more inbound fulfillment centers. While this option eliminates inbound placement fees, the increased cost of shipping smaller parcels across the country might outweigh any savings.
- Minimal Shipment Splits: Send your inventory to a single location and have Amazon spread your shipment across its network on your behalf. This is the most expensive option in terms of the new inbound placement fee, which varies by inbound location. For example, there may be higher fees for shipments sent to fulfillment centers in the western U.S. versus other parts of the country.
- Partial Shipment Splits: Send your inventory to 2 or 3 fulfillment centers selected by Amazon. You will be charged inbound placement fees for Partial Shipment Splits, which will be lower than the Minimal Shipment Splits option because you are sending to more than one fulfillment center.
Note: Regardless of what inbound placement option you choose, the new fee changes make sending FBA shipments to Amazon fulfillment centers much more expensive.
Low-Level Inventory Fee – Effective April 1, 2024
Another important FBA change for 2024 is the low-inventory fee. This will apply to standard-size products with consistently low inventory compared to customer demand. As Amazon explained, when brands carry low inventory relative to unit sales, it makes it more challenging and costly for Amazon to distribute products across its network.
A low-inventory fee will only apply if a product’s inventory level relative to historical demand (known as “historical days of supply”) is below 28 days. Amazon will only charge a low-inventory fee when both the long-term historical days of supply (last 90 days) and short-term historical days of supply (last 30 days) are below 28 days (4 weeks). For example, if a product’s short-term historical days of supply is above 28 days but it’s long-term historical days of supply is below 28 days, the low-inventory fee won’t apply.
Amazon will calculate the historical days of supply metric at the parent-product level and add the low-inventory fee to the FBA fulfillment fee for all shipped units of eligible products.
Strategies to Avoid the Low-Inventory Fee
Adapting to Amazon’s low-inventory fee requires a shift toward more dynamic and responsive sales inventory and forecasting. This not only helps avoid additional fees, but also plays a crucial role in delivering a superior customer experience through consistent product availability and expedited deliveries. The following strategies can help you eliminate and/or reduce the low-inventory fee:
- Proactive Inventory Monitoring: Keep a vigilant eye on your inventory levels through Amazon’s FBA Inventory portal, ensuring they consistently exceed the 28-day benchmark. Regular adjustments based on this data can help avoid the fee.
- Leverage Amazon’s Tools: Take advantage of tools and initiatives offered by Amazon, like the FBA New Selection and Amazon Warehousing and Distribution programs. These resources can help brands manage inventory more efficiently, potentially qualifying for fee waivers.
- Anticipate Demand Fluctuations: Understand your product’s demand cycles, especially for items with seasonal variances or those affected by promotions. Preemptively increasing your stock before high-demand periods can keep your inventory levels within safe margins.
- Balance Your Inventory: Strategically manage your inventory to avoid overstocking while preventing stock shortages. Consider enhancing your product’s sell-through rate or utilizing Amazon’s liquidation and return services to manage excess stock.
- Opt for Auto-Replenishment: By enrolling in Amazon’s auto-replenishment program, your products may benefit from automated stock management and an exemption from the low-inventory fee.
- Get Acquainted with Inventory Metrics: Familiarize yourself with Amazon’s inventory metrics, such as the historical days of supply and the FBA Minimum Inventory Level. These metrics offer deeper insights into how Amazon assesses inventory health, which can help guide your restocking strategies.
Reduced Non-Peak Monthly Storage Fees
To help enable brands to carry sufficient levels of inventory, Amazon has reduced the non-peak monthly storage fees for standard-size products by an average of $0.09 per cubic foot, from an average of $0.87 per cubic foot to $0.78 per cubic foot, from January through September. Monthly storage fees for non-standard sizes will stay the same. This change will take effect on April 1, 2024.
Using Amazon’s Revenue Calculator to Estimate FBA Fees
The Revenue Calculator is a preview tool that enables brands to compare revenue estimates for products based on different fulfillment channel options. With this feature, brands can easily see which fees apply to each fulfillment option and enter sales volume estimates to calculate total proceeds. To use the Revenue Calculator, follow these simple steps:
- Search or Define the Product
To find a product that already exists on Amazon or in your listings, search by ASIN or product name. For a product that isn’t on Amazon yet, select Define productand provide the dimensions and product category. - Enter Price and Shipping Charge Details
If you select an existing product, the price and shipping details will automatically populate from the Featured Offer. For products not yet listed, you can update the Item price and Shipping charge for seller fulfillment at any time. - Generate FBA Fee Estimates
To estimate US FBA inbound placement service fees, select the Inbound placement options, Number of locations, and Inbound regions in the Inbounding Cost section of the Revenue Calculator. Provide your Shipping cost (per shipment) to Amazon to include shipping cost per unit in your Inbounding Cost total, cost per unit, and net profit calculations for the product. - Enter Cost Estimates
To get accurate estimates of profit per unit, enter an estimated cost of goods sold for each fulfillment option. Include your estimated fulfillment costs and any other fees that you may incur, such as FBA bagging and labeling service add-ons.
Additional Fee Changes for 2024
- Amazon now offers fulfillment fee discounts ranging from $0.04 to $1.32, depending on item size and weight, for eligible products in the Ships in Product Packaging (SIPP) program. These discounts began February 5, 2024.
- Amazon has reduced referral fees for apparel products priced below $20. For items priced under $15, Amazon has decreased referral fees from 17% to 5%. For products priced between $15 and $20, Amazon has decreased referral fees from 17% to 10%. Other referral fees will remain unchanged. These reduced fees began January 15, 2024.
- Amazon has introduced a new, lower pricing structure for Amazon Vine. This program is designed to help brands get insightful reviews and help customers make informed buying decisions. The new fee tiers apply to products enrolled in the program on or after October 19, 2023.
- Amazon has expanded benefits as part of the FBA New Selection program. Amazon will provide an average 10% rebate on sales of eligible new-to-FBA parent products, newly including these benefits for non-branded selection. In addition, Amazon has expanded the program eligibility for oversize selection and newly offer Vine benefits for eligible sellers and associated selection. These changes took place on March 1, 2024.
- Amazon has decreased the Buy with Prime service fee minimum from $1.50 to $1 per order. This improves your profitability on lower-priced orders. These reduced fees took place on January 8, 2024.
- Amazon has decreased Buy with Prime fulfillment fees by 0.5% on average. For Small and Large Standard size bands less than 1 lb., fees remain unchanged or decreased by an average of 3.3%. For size bands greater than 1 lb., fees increased by an average of 1.6%. These reduced fees took place on February 5, 2024.
Channel Key Takeaway
Amazon routinely updates the way it charges brands that sell on its marketplace. It’s essential to adapt to these fee changes for several reasons:
- Cost Management: Amazon’s fees directly impact profit margins. As these fees change, brands should review their pricing strategies to maintain profitability. Ignoring fee changes can lead to unexpected cost increases, which can eat into profits.
- Competitive Edge: Adapting to Amazon’s fee changes allows brands to remain competitive. By understanding the different fee structures and optimizing operations accordingly, brands can ensure they offer competitive pricing while maintaining healthy margins.
- Budget Planning: Amazon fee changes can impact budget planning. By staying informed about the latest fee changes, brands can adjust their financial forecasts and allocate resources accordingly. This helps prevent unexpected financial strain and ensures that brands can continue to invest in growth initiatives such as marketing, product development, and customer service.
- Inventory Management: Amazon’s fee changes can influence inventory management decisions. For example, if storage fees increase, brands may need to reconsider their inventory levels to minimize storage costs. Similarly, changes in fulfillment fees may affect decisions regarding which products to prioritize or whether to fulfill orders through alternative methods.
- Long-Term Strategy: Understanding and adapting to Amazon’s fee changes is integral to a brand’s long-term success on the platform. By closely monitoring fee updates and trends, brands can anticipate future changes and proactively adjust their strategies. This adaptability is essential for building a sustainable business that can thrive despite evolving market conditions.
Overall, staying informed and adaptable to Amazon’s changing fee structure is crucial for brands to maintain profitability, competitiveness, and long-term viability on the platform. Ignoring these changes can lead to financial setbacks and hinder a brand’s ability to succeed on Amazon’s ever-evolving marketplace.
