Amazon sent out the dreaded annual fee updates email yesterday.
Here’s what you should know about it:
There’s no beating around the bush, fees are going to increase for most sellers. How much? Around $0.15/unit according to Amazon’s VP of Worldwide Selling Partner Services, Dharmesh Mehta.
For sellers that have consistent consumer demand and stock levels (4 weeks worth to be exact), the fees may not be that noticeable and may even decrease. For brands that haven’t prioritized stock for Amazon or products that are new to market, these adjustments are going to be noticeable.
What Sellers Should Know About 2024 Amazon Fees:
- Consider moving products towards the “Ships in Product Packaging” (SIPP) program. The fee reduction incentives are greatest if you have a product that could be adapted for the program.
- Strike a good balance between supply and demand. Low inventory amounts will be detrimental to your business. Amazon will start administering fees for less than a month of inventory on hand in FBA. We always advise our clients to aim for 45 days of stock per product to ensure good warehouse reach for customers, lower risk of out of stocks, and now, lower fees from Amazon!
- Understand that there will be an offset or reduction in non-peak monthly storage fees from January to September. This reduction should help balance out the increase in stock needed to avoid getting hit with low inventory fees.
- There will be major reductions in the referral fee for apparel products priced below $20. For items priced under $15, the referral fee will decrease from 17% to 5%. For products priced between $15 and $20, it will decrease from 17% to 10%. As touted by major publications, this is seen as Amazon’s attempt to fight off competition from cheap-fashion retailers like Shein and Temu.
- The changes in fees will be effective starting as early as January for the apparel referral fee change and as late as April 2024 for some of the others. For the full announcement and dates, visit here.
Why are Amazon Fees Rising?
Amazon continually evaluates its pricing strategy as their business objectives evolve.
The end goal for Amazon is lower outbound fees. That is, lower fees for shipping products out of their network. The balancing act is making sure inbound is as streamlined and operationally efficient as possible, in order to lower costs for goods that are actually being sold & shipped out to customers.
This should be seen as a positive development for companies that treat Amazon as an important partner in the growth of their business.
The Good News for Amazon Sellers
Amazon continues to be the leader in fulfillment and delivery services. As they claimed in their letter yesterday, “Amazon’s fulfillment fees will continue to remain an average of 70% less expensive than two-day shipping methods offered by other major third-party logistics providers.”
The changes implemented by Amazon will help illuminate sellers that have a strong grasp of inventory management and stock controls and will continue to push out sellers that don’t treat Amazon as a serious growth channel for their brand.