Amazon is expanding its network every year. We have seen its speed increase to four times compared to 2019. Recently, Amazon changed its FBA fees. These changes include how much inventory you should have at a fulfillment center, how your products are sent to Amazon FBA, and other fees. This update has made many Amazon sellers unhappy and concerned about future profitability on the platform.
Although Amazon updated its fees in 2024, it can help sellers cut costs. If sellers understand the fee updates and cope with them, they can reduce their additional costs.
In this blog post, we will discuss the details of the Amazon fee update and how to reduce Amazon FBA fees. We will also explain how to properly use Amazon PPC to successfully navigate increasing fees and continue thriving on Amazon.
1. Understanding Amazon’s New FBA Fee Structure
Amazon updated its fee structure in several areas, including referral fees, fulfillment fees, inventory fees, placement fees, storage fees, and others. Here, we will focus on the major changes and discuss the details.
a) Amazon FBA Fee Adjustments
Amazon adjusted FBA fees to enhance its fulfillment network. This ensures Small Parcel Delivery and Shipping Small Parcels to FBA Centers remain efficient and cost-effective. The per-unit sold price increased differently across regions. In the US marketplace, Amazon charges an average increase of $0.15 per unit sold. On the other hand, in the Canadian marketplace, sellers face an average increase of $0.22 per unit.
b) Amazon Fees: Product Size Tiers
From April 1, 2024, Amazon updated its policy on storage utilization surcharges. These surcharges apply when sellers maintain excess inventory that surpasses recent demand and sell-through rates in Amazon’s fulfillment centers.
Product size tiers are determined based on the unit’s weight, product dimensions, and the dimensional weight of the packaged item. For large standard, large bulky, and extra-large units, the greater value between the unit weight and the dimensional weight is used to calculate fees, except for extra-large units over 150+ lbs. Small standard units and extra-large units over 150+ lbs. use only the unit weight to calculate fees.
Note : Fees That Use This Attribute:
- FBA Fulfillment Fees
- Monthly Inventory Storage Fees
- Long-term Storage Fees
- FBA Inventory Storage Overage Fees
- FBA Removal Order Fees
- FBA Disposal Order Fees
- Fulfillment Fees for Multi-Channel Fulfillment Orders
- FBA Inventory Placement Service Fees
- FBA Prep Service Fees
c) Amazon FBA Fees: Fulfillment Fees Non-Apparel
Starting in 2024, Amazon has updated its FBA fulfillment fees for non-apparel items. These fees cover the costs of picking, packing, and shipping products from Amazon’s fulfillment centers. The new structure aims to reflect the increasing operational costs and to ensure efficient service.
Now we discuss some key point changes in non-apparel part:
I) New Size Tiers And Rate Cards
- More detailed rate cards will be introduced for standard-sized products.
- New size tiers for large bulky and extra-large products will be added.
II) Changes To FBA Fulfillment Fees
- Starting on April 15, 2024, FBA fees on fulfillment services will be reduced for standard-sized and large bulky-sized products.
III) Calculating Shipping Weight
- For small standard and extra-large units over 150 lbs. , shipping weight is based on the unit’s weight.
- For all other size tiers, the shipping weight is the greater value between the unit weight and the dimensional weight.
d) Amazon FBA Fees: Fulfillment Fees For Apparel
Amazon’s new FBA fee structure isn’t all bad! Here are some new and expanded services and benefits that Amazon will be offering to sellers.
- Starting on April 15, 2024, FBA fulfillment fee rates will be reduced for standard-sized and large bulky-sized products.
e) Amazon FBA Fees: Fulfillment Fees Dangerous Goods
FBA has separate fulfillment fees for dangerous goods, also known as hazardous materials or hazmat, which need special handling and storage. Some updates for this part are given below.
1. Changes To Size Tiers And Rate Cards:
- On February 5, 2024, Amazon will roll out new, more detailed rate cards for standard-sized products.
- They will also add new size tiers for large bulky and extra-large items.
2. Changes To FBA Fulfillment Fees:
- Starting on April 15, 2024, FBA fulfillment fee rates will be reduced for standard-sized and large bulky-sized products.
f) Amazon FBA Fees: Removal/Disposal/Liquidation Fees
Starting February 5, 2024, the fee to remove or dispose of your inventory from Amazon’s fulfillment centers will go up. However, the liquidation fee will stay the same.
Amazon provides removal or disposal services for sellers with unsellable inventory or to avoid aged inventory surcharges. Here are the new fees.
I) Removal/Disposal
- FBA removal and disposal fees are calculated when you place a removal or disposal order. These fees are charged when the shipment leaves Amazon’s fulfillment centers.
- Large, bulky, and extra-large items were previously called Oversize.
- Special handling items can include apparel, shoes, watches, jewelry, and hazardous materials.
II) Liquidation Fees
- Liquidation fees will remain unchanged.
- Amazon charges two separate fees for each item you liquidate:
- A 15% liquidations referral fee, based on the item’s gross recovery value.
- A liquidations processing fee, based on the item’s size and weight.
2. Does this Amazon fees Affect Amazon Sellers?
As a seller, we understand that you are unhappy with these fees, and we know you are worried about these new fees affecting your future business and profit.
With careful planning, strategy, and execution, you can overcome your worries and successfully run your business to gain profit. We will discuss some aspects and strategies that will help you cope with the new Amazon fees in the long run.
3. Amazon Cost Reduction Strategies and Planning
To succeed on Amazon, you must always be ready to adjust your strategies to reduce costs and increase profits. With recent fee increases, sellers should quickly adapt their plans to lessen the impact on their earnings.
Here we discuss some best practices based on the latest updates that will help a seller navigate the 2024 FBA fees, which can be challenging, especially with the recent changes and fee increases
a) Optimize Inventory Management To Minimize Amazon Storage Fees
Efficient inventory turnover is really important to avoid high FBA storage fees. You should check how fast your products are selling regularly to predict demand better. This helps to make sure you don’t run out of stock or have too many items sitting in Amazon’s warehouses for too long.
Analyzing your inventory properly can help you decide how much to restock and how old your inventory should be based on past patterns. You can also set the best times to reorder and keep extra stock to handle any sudden changes in demand or problems with getting supplies.
b) Regularly Review and Adjust Pricing On Amazon
As a seller you must watch your product prices closely and change them if needed to match Amazon’s new fees. Doing this can help you keep making money even if the fees go up or down.
Strategic pricing adjustments may temporarily reduce margins but can effectively move stagnant inventory. Every seller should use inventory management tools to find and track excess inventory. This helps identify optimal markdown price points for faster sell-through.
c) Reduce Your Amazon Product’s Dimensional Weight
Another important strategy is to make your products smaller and lighter. Make sure they’re the right size and weight to avoid extra fees. This means using packaging that’s efficient, which is really important for Amazon sellers because it affects how much it costs to ship through FBA.
Dimensional weight is a pricing method used by carriers and Amazon FBA to consider the space a package occupies relative to its actual weight. They charge based on whichever is higher: the package’s actual weight or its dimensional weight. This model is significant for larger yet lighter items as it ensures fair pricing based on the space used during shipping.
d) Amazon Smart Product Bundling Approaches
If a seller uses Multi-Channel Fulfillment (MCF), they should consolidate multi-unit orders to qualify for bulk discounts on fulfillment fees. Bundling similar products can encourage customers to buy more in each order, helping the seller save on fulfillment fees.
Another strategy is bundling related products at a lower price to increase your customer’s average order value. Cross-selling involves encouraging shoppers to buy complementary items along with their intended product. For example, if a customer adds a $15 shower curtain to their cart, suggest accessories like rings or hooks, liners, shower rods, bath mats, or towel bars to increase the overall order value.
e) Calculate Amazon FBA Fees
To understand the various FBA fees properly, every seller should use Amazon’s FBA fee calculator. This tool helps you understand the fees associated with different product dimensions, weight tiers, and categories.
Understanding the fees and their impact on profit margins is crucial for selling on Amazon. Many sellers incur losses due to unawareness of the true costs, leading to difficulties in setting accurate prices, finding cost-effective logistics, and managing overall costs.
So, how much does it cost to set up a store on Amazon? The costs of selling on Amazon can differ based on factors like account type, product category, and fulfillment method. Here are some important points to consider when understanding these costs
I) Amazon Seller Account Types
Amazon charged fees on two types of seller accounts. Let’s see these two types of accounts.
- Individual Seller Account: This account is suitable for sellers who plan to sell fewer than 40 units. There is no monthly subscription fee, but sellers pay a per-item fee for each sale.
- Professional Seller Account: This account is designed for sellers with high-volume units. It involves a monthly subscription fee, but individual item fees are typically lower than those for individual accounts.
II) Amazon Referral Fees
Amazon charges a referral fee on each item sold, which is a percentage of the item’s sale price. The referral percentage varies by product type, with most falling at 15% or below.
III) Amazon Storage and Fulfillment Fees
If you choose to use FBA fulfillment, there are fees associated with storage, picking, packing, and shipping your products. These fees depend on the size and weight of the products.
IV) Amazon Subscription Fees
The subscription fees depend on the type of seller account. Professional sellers pay a fixed monthly fee of $39.99, while Individual sellers pay $0.99 per item sold.
V) Amazon Advertising Costs
Using Amazon’s PPC advertising services, like Sponsored Products or Sponsored Brands, adds costs based on your ad spend. Sellers usually face higher costs due to advertising fees, cost-per-click models, competitive bidding, dynamic strategies, campaign budgets, and new product launches.
Understanding and managing ad costs is crucial for maximizing return on investment. So, You should balance PPC campaigns to boost traffic and improve organic ranking can be challenging for you.
4. Amazon PPC Helps Maximize Profits and Minimize Expenses
Amazon PPC advertising can significantly help sellers maximize profits and minimize expenses, especially in the context of 2024 FBA fee changes. Here’s how:
a) Enhanced Visibility and Sales On Amazon
- Increased Product Exposure: PPC ads help your products appear prominently in search results, increasing visibility and driving more traffic to your listings
- Higher Sales Volume: Greater visibility typically leads to higher sales, which can offset the impact of increased FBA fees by boosting overall revenue.
b) Amazon Targeted Advertising
- Precise Targeting: Amazon PPC allows sellers to target specific keywords, products, and audiences, ensuring that your ads reach the most relevant shoppers.
- Cost Efficiency: By targeting the right audience, you reduce wasted ad spend and improve your return on investment (ROI).
c) Improved Organic Rankings On Amazon
- Sales Velocity: Successful PPC campaigns can increase sales velocity, which in turn can improve your product’s organic ranking on Amazon. Higher organic rankings lead to more visibility without additional advertising costs.
- Keyword Relevance: PPC helps identify high-performing keywords that can be incorporated into your product listings to improve organic search performance.
- Better Ranking: Effective PPC campaigns can improve your product ranking in search results, leading to more organic sales and potentially reducing your reliance on PPC ads over time.
d) Amazon Campaign’s Optimization
- Analytics and Reporting: Amazon PPC provides detailed insights into campaign performance, including which keywords and ads are generating the most clicks and conversions.
- Optimization: Use this data to continuously optimize your campaigns, pausing underperforming keywords and increasing bids on high-converting ones.
e) Amazon Budget Strategy
- Budget Management: Set daily or monthly budgets to control how much you spend on advertising. This helps manage costs effectively, ensuring you don’t exceed your advertising budget.
- Bid Adjustments: Adjust bids based on performance to ensure you’re getting the best possible ROI for your advertising spend.
f) Promoting High-Margin Amazon Products
- Focus on Profitability: Use PPC to promote high-margin products that can absorb higher FBA fees more easily, maximizing your profit margins.
- Seasonal and Trend-Based Advertising: Increase ad spend on high-margin products during peak seasons or trending periods to capitalize on increased demand.
g) Clearance of Slow-Moving Amazon Inventory
- Inventory Management: Use PPC to boost the sales of slow-moving inventory, reducing long-term storage fees and freeing up warehouse space for faster-selling items.
- Promotions and Deals: Run PPC campaigns in conjunction with promotions and deals to accelerate the clearance of excess inventory.
h) Amazon Brand Building By Amazon PPC
- Sponsored Brand Ads: Utilize Sponsored Brand Ads to promote your brand, increasing brand awareness and driving more sales across your entire product line.
- Brand Loyalty: Building a strong brand presence can lead to repeat purchases and long-term customer loyalty, enhancing profitability.
By effectively utilizing Amazon PPC, sellers can improve their product visibility, drive more sales, and manage advertising costs, ultimately helping to mitigate the impact of FBA fee changes and maximize overall profitability.
Insight
Amazon Sponsored Video Ads are a magical tool for sellers who want to boost visibility, engage potential customers, and increase sales. With the new features introduced in 2024, these ads are more effective than before. By using this opportunity and following best practices, your brand can create ads that connect with your target audience and reach your marketing goals on Amazon’s platform.
So, get started today and harness the power of Amazon Sponsored Video Ads to take your business to new heights!
Here, at Ecomclips, we have been helping many Amazon sellers boost their sales and capture the market share with both PPC and organic SEO. If you need any help boosting your Amazon sales or making growth on your brand, please don’t hesitate to mail us at our email address info@ecomclips.com. Also, if you need an Amazon store or account audit for both PPC Ads and listings SEO, you can let us know via our email address, and we will provide you with a free account audit.
As an Amazon advertising agency, we have a dedicated Amazon Ads Certified expert team who can build an Amazon advertising strategy for your account whether it’s a newly launched or a running Amazon brand to build traffic and conversion.
Additionally, if you need any assistance, please reach out to us through the comment box. We are here to assist you in managing PPC advertisements to improve your profit, so we offer a personalized approach to our service.
