Are You Feeling Overwhelmed By The Recent Amazon changes?
I certainly can relate… it’s a difficult time to be an Amazon Seller right now.
Amazon FBA is an incredible business model where you don’t have to worry about fulfilling products or refunds and returns so you can focus all your energy on selling, which is the most important part anyways, right?
As competition gets heavier, interest rates rise, and inflation soars (causing people’s money not to go as far), Amazon has to subsidize this somehow.
And the customer doesn’t feel this burn, you and I as sellers do.
Ok, it makes sense, but dang we are getting straight nickel and dimed by the eCom Giant known as Amazon at this point.
It has caused a huge stir in the eCommerce world, as sellers scramble to try to make sense (and profit) from the new fee heist, I mean hike.
Moreover, margins are lower and PPC costs are higher.
It feels like a punishment and it really takes some time to decipher all the fees.
Let’s dive into what the heck is going on so you can walk away from this article with clarity on your next steps in case you need to pivot.
6 Takeaways You Must Know About The Fee Heist
- The Good – There are now reduced referral fees for low priced apparel products under $20 (other sites had cheaper fees so Amazon fought back)
- More Good – There is new lower pricing structure for Amazon Vine to secure reviews (be careful and do your research though as Vine isn’t the best for all categories)
- The Bad – there are additional fees for fulfillment center (FC) transfers. You are offered discounts if you ship your stock to multiple warehouses instead. If you send to a single warehouse you will have significant fees and be nickel and dimed to death. So you get hit on the inbound and outbound (if you are transferring all over the place plus only sending to a single location)
- More Bad – there are Increasing LTSF (Long Term Storage Fees) and aged inventory Fees. To store something 180 days or longer, just know you will be face significant fees
- Even More Bad – Increasing fees for products with a high return rate such as apparel and shoes (bad for these categories) – lot more fees – this will really sting
- The Ugly – in my opinion, the new Low Inventory Fee is the worst of it. Talk about kicking someone when they are down. As an example, basically if you have 500 units and now you have 50 units you will be charged a fee. If you consistently have low inventory you will pay for it… literally. The change could really hurt a lot of business on Amazon.
Fees, Fees and MORE Fees…
I mean come on, a Low Inventory Fee?
People go out of stock so this is pretty crazy to penalize sellers for.
As if balancing inventory wasn’t hard enough (there are services out there just to help with this) and now you have to worry about not having too much inventory as well as not enough.
Fees for long term storage… fees for too much inventory… fees for too little inventory… I hate complaining about anything but this definitely changes the landscape on Amazon FBA.
Some businesses might not be profitable anymore and have to completely change up their strategy because of the fee updates.
The forums are going crazy and they are tired of Amazon stealing from them to increase their own profitability.
Because of that Amazon has made some changes to save face…
From Amazon:
We’ve continued to listen to your feedback and are making three additional changes that are designed to better target these low-inventory-level fees to where you have the most control to ensure healthy inventory:
- Because of the greater unpredictability in managing inventory levels for seasonal, end-of-life, and other low-volume products with varying demand, starting May 15, the low-inventory-level fee will not apply to products that have sold less than 20 units in the past 7 days.
- Low-inventory-level fees incurred due to excessive inbounding and processing times caused by Amazon or Amazon-managed services will be credited back to you by the 15th day of the following month. For example, May charges with excessive inbound delays will be credited back by June 15.
- Prime Day is an important sales driver for your business that is coming up soon, and we want to ensure that you are set up for success. For Prime Day 2024, we’ll provide a time-bound exception on low-inventory-level fees for products that are included in Prime-exclusive Lightning Deals and Best Deals. The fee exception will apply for the four weeks following Prime Day when inventory levels may be more unpredictable based on Prime Day sales.
Even still, this is still crappy news and a huge hit to Amazon sellers.
So now you know the lowdown regarding the Amazon fee updates, but how should you navigate forward (and generate profits)?
First off, the fee change is here and you can’t control Amazon, so you must pivot.
You can only control the controllables, and Amazon is not one of those.
Please understand me, I still think Amazon Sellers shouldn’t leave the platform yet without a fight, but you should definitely look at alternative options.
I always preach never keeping all your eggs in the same basket, especially when you don’t own the customers on Amazon.
I always say you should build a list off of Amazon and off of ALL platforms that are not your own.
To help you in these trying times on Amazon, here is a massive list of ideas to help you overcome the challenges these fees present to your business aimed at minimizing costs and maximizing profit:
Here are some things that we do…
Brain Dump Of Ideas To STILL Win Against The Monopoly Known As Amazon
- Master Your Inventory: Even top sellers struggle with this but you should make it a point to manage your inventory like a pro. It is even more important now with the intro of these ridiculous low inventory fees. Either use a spreadsheet (if you like that type of manual thing), tools provided by Amazon or a service such as SoStocked, SellerBoard or SellBrite… also watch out for overstocking to avoid LTSF since it has been reduced from 12 to 6 months.
- Build OFF The Amazon Channel: future-proof your business and build off of Amazon with email, DTC website, other ecommerce sites such as Etsy, Walmart, Social Media and more
- Re-visit your pricing strategy: do this to take into account the new fulfillment fees (5-8% on average)
- Follow The Numbers: using your current sales data and reviews to optimize your pricing and product listing. (always know the result of every damn dollar)
- Wow Your Customers (or continue to do so): always go above and beyond and continue to dial in your target audience to increase conversion rates
- Use The SIPP Program: The “Ships in Product Packaging Program” allows you to benefit from discounted FBA fees when you ship your products in your own packaging.
- Master Return Management: as we discussed, the return processing fee has gone up so you should have a solid product listing that answers ALL customer questions and accurately represents what you are selling… or you are in for a world of hurt, bad reviews and returns. And that my friend will add on unnecessary fees.
- Send Your Shipment to Multiple Locations: with the intro of Inbound Placement Fees, Amazon is rewarding sellers with no or reduced fees if you send your shipment to multiple locations when setting up your shipping plan. If you only send to one location or partial locations then you will be charged a fee. Understand these costs to help you minimize expenses. You can estimate these fees now that Amazon’s Revenue Calculator includes inbound placement service fees.
- Check Your Incentives: Amazon also rolled out new or expanded services and benefits such as offering incentives such as free monthly storage, rebates, and waving return fees for eligible new-to-FBA parent ASINs. Also, lower pricing structure for Amazon Vine. Check the link for the full scope.
- Stay On Point: Pay more attention to and know these fees inside and out to be able to minimize expenses and roll with Amazon’s punches. (as I said, some of these fees may make your entire business model unprofitable, so re-evaluate now). Check with your 3PL’s and other experts to ensure you come out on top.
Here are links to the fee updates so you can dive deeper into your own company:
- 2024 US referral and FBA fee changes summary – https://sellercentral.amazon.com/help/hub/reference/G201411300
- 2024 returns processing fee changes – https://sellercentral.amazon.com/help/hub/reference/GZGEQLTM3RZXUV6T
- 2024 US FBA fulfillment fee changes – https://sellercentral.amazon.com/help/hub/reference/GABBX6GZPA8MSZGW
- Low-inventory-level fee – https://sellercentral.amazon.com/help/hub/reference/GV43F6S76Y9DHYRH
In Conclusion…
These are critically important updates that may and probably will affect your profitability on Amazon.
With the recent 2024 FBA fee heist, it is mandatory that you as a seller know these intimately so that you can effectively manage your costs and lessen the impact on your bottom line.
I wish I could say it’s Amazon and us against the world but unfortunately it is us Amazon Sellers against Amazon.
I am still very bullish on Amazon and believe the future looks incredible, with it expanding even more.
We just have to stick together and make a few changes.
Let me know your thoughts below and also how these fee updates have made it challenging for your own business.