Amazon Announces 2018 FBA Fee Changes

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Fulfillment by Amazon Seller Fees Increased

Attention Amazon and potential Amazon sellers on the Fulfillment by Amazon (FBA) platform: Amazon recently announced changes that may affect your bottom-line. The modifications are effective immediately. We’ll outline what they are and what steps you may need to take to protect your brand in the marketplace moving forward.

What happened?

As of February 22, 2018, Amazon has issued FBA fee changes, increasing Fulfillment by Amazon costs for the marketplace’s sellers.

Fulfillment by Amazon allows sellers to send their items to various fulfillment centers for distribution. After an FBA seller’s items are delivered to the appropriate fulfillment center, Amazon fulfills the packing, shipping, customer service and the returns for the items sold.

Amazon charges sellers to use the FBA service in the form of fees. Primarily, FBA sellers pay three fees: the fulfillment fee, the monthly storage fee, and the seller’s fee — and, as of February 22, 2018, the fulfillment fee has increased for almost all items sold via the FBA platform.

Why did Amazon increase the FBA fulfillment fees?

According to Amazon, the higher fees were put in place to adjust for their rising cost of business (specifically in areas of transportation, fulfillment, and customer service). Since Amazon’s costs have increased, FBA sellers costs have increased accordingly.

What are the specifics?

First, know that FBA fees are determined by the weight and size of the items sold, and Amazon has increased the fulfillment fees for almost all product size and weight categories. The adjusted fulfillment fees will apply all year long, including the months October to December. Previously, Amazon used one fulfillment fee rate for the months of January to September and then another for October, November, and December. Now, the cost is the same per each size category, regardless of the month.

Second, realize that in some categories, Amazon factors in dimensional weight. Amazon (like many shippers) may apply the dimensional weight when determining shipping costs. And, as of February 22, 2018, Amazon will calculate the dimensional weight as the unit volume (length x width x height in inches) divided by 139 – instead of 166. The dimensional weight (or volumetric weight as it is also known) only applies to large standard-size items weighing more than 1 lb. and all (small, medium, and large) oversize items.

This table compares the old and new fulfillment fees

*Add $0.40 per unit for clothing items

What are some size category examples?

To help illustrate the new FBA fee structure and size tiers, here are some popular product examples

MOBILE DEVICE CASE FBA FEE CHANGES

SMALL STANDARD SIZE (1 lb. or less)

Mobile device case Dimensions: 13.8″ x 9.0″ x 0.7″ Unit weight: 0.18 lb. Outbound shipping weight: 1 lb.

FBA users selling small standard-size devices, such as iPad cases (typically below the weight threshold of 1 lb.), will only see an increase in the cost of business for the months of October, November, and December, during which the new rates have increased by 2 cents per unit.

The change in the dimensional weight calculation does not apply to this product example because the item weighs less than 1 lb.

T-SHIRT FBA FEE CHANGES

LARGE STANDARD SIZE (1 lb. or less)

T-shirt Dimensions: 8.5″ x 4.8″ x 1″ Unit weight: 0.35 lb. Outbound shipping weight: 1 lb.

*All clothing items will continue to incur an additional $0.40 per-unit fulfillment fee regardless of size tier.

Because the t-shirt weighs less than 1lb. the updated dimensional weight standards do not apply. However, note that the current fulfillment fee for a t-shirt ($3.59) is higher than the typical large standard-size fulfillment fee ($3.19) because of the $0.40 surcharge for clothing items.

IRON FBA FEE CHANGES

LARGE STANDARD SIZE (over 2 lb.)

Iron Dimensions: 12.6″ x 6.6″ x 5.5″ Unit weight: 3.35 lb. Outbound shipping weight: 4 lb.

The updated dimensional weight calculation applies to large standard-size items weighing more than 1lb., such as this iron. However, because the dimensional weight of this product equals 3.29 lbs., while the unit weight is 3.35 lbs., the dimensional weight is disregarded. Amazon rounds up and applies the heavier of the two weights to determine the fulfillment fee.

MONITOR FBA FEE CHANGES

LARGE OVERSIZE

Monitor Dimensions: 54″ x 35″ x 3.5″ Unit weight: 41 lb. Outbound shipping weight: 49 lb.*

*Based on a dimensional weight of 47.59 lb., which is greater than the unit weight.

The monitor is an example of the dimensional weight factoring into the fulfillment fee. As seen, the newer calculation results in a heavier dimensional weight. And, because the dimensional weight calculates higher than the unit weight, Amazon uses the volumetric (dimensional) weight when determining the fulfillment fee for this item.

However, the per-pound surcharge only applies to items weighing more than 90 lbs. So, in this example, the total cost remains the same despite the heavier dimensional weight.

Does the fee increase apply to products that arrived at fulfillment centers before February 22, 2018?

That depends.

The fulfillment fees apply to items shipped from the fulfillment centers after February 21, 2018, regardless of the order date.

Will the benefits of using Fulfillment by Amazon outweigh the increased costs?

You may wonder if FBA is still right for you.

It’s a serious business calculation (depending on factors such as product margins), but most likely the right answer is YES.

Amazon is a worldwide trusted name and countless sellers find success selling their brand on Amazon. Although some FBA sellers consider the Amazon fees high, the upside is access to one of the world’s largest distributors and retailers. Additionally, FBA takes away the responsibility of packing, customer service, and item delivery.

Furthermore, selling via FBA is less expensive than the associated costs of a brick and mortar storefront or a large e-commerce site, and it can support your other selling channels and overall growth. Finally, note that FBA continues to upgrade. Last year, Amazon made the following improvements to the service and added:

• Faster Free Shipping via Prime FREE One-Day Shipping and Same-Day Delivery
• International Selling Tools
• SKU Performance
• Inventory Performance Tools

It’s highly probable that Amazon will continue to improve the FBA seller experience in 2018; if so, this will add to the many benefits of sticking with the FBA platform.

What’s the best course of action?

The FBA changes mean that some sellers will need to consider a change in strategy. Depending on your particular product, you may consider passing down the costs to customers, offsetting the extra expenses from elsewhere in your business or even (if it fits your model and with the right product) selling lighter items.

In conclusion, remember that Amazon has started 2018 with significant changes. The FBA fulfillment fee has increased and Amazon has changed its dimensional weight calculation. These changes may affect your bottom-line, so plan accordingly!

Maureen Lomo