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eSeller World – Amazon Marketing Agency
Introduction:
As we enter 2023, Amazon continues to lead the way in the ever-changing world of e-commerce by consistently adapting and improving its services to cater to the demands of both sellers and customers. To maintain the sustainability and effectiveness of its Fulfillment by Amazon (FBA) program, Amazon has recently unveiled a series of new fees that will be implemented. These fee adjustments will have an impact on several key aspects of selling on the platform, such as storage, shipping, referral fees, and advertising. Let’s explore further into these updates and understand their implications for sellers.
Inventory Storage Fees:
Inventory storage fees are an essential component of Fulfillment by Amazon (FBA) and directly impact the financial aspects of sellers utilizing Amazon’s fulfillment centers. These fees are calculated based on the amount of space your inventory occupies in cubic square footage and are subject to periodic adjustments by Amazon. In 2023, Amazon has introduced new storage fee rates that will affect both non-dangerous goods and dangerous goods.
During the non-peak fulfillment period, which spans from January to September, there will be an increase in fees for storing non-dangerous goods of standard size. The previous rates were $0.83 per cubic foot in 2022, and in 2023, these fees will rise to $0.87, reflecting a 4.8% increase. Similarly, oversize storage fees for non-dangerous goods will also experience an increase, with rates going up from $0.53 per cubic foot in 2022 to $0.56 in 2023, representing a 5.6% increase.
For the peak fulfillment period from October to December, the rates for storing non-dangerous goods of standard size will remain unchanged at $2.40 per cubic foot in 2023. However, fees for oversize storage during this period will see an increase. In 2022, the rate was $1.20 per cubic foot, and in 2023, it will rise to $1.40, resulting in a 16% increase.
It is important to note that storage fees for dangerous goods follow a different fee structure. To determine if your product falls under the classification of dangerous goods, Amazon provides a Manage Dangerous Good Classification tool for reference. The changes to standard storage fees will come into effect on February 1, 2023.
These adjustments in storage fees are a reflection of the dynamic nature of the e-commerce industry and Amazon’s efforts to optimize the utilization of its fulfillment centers. By implementing higher storage fees during the peak holiday season, Amazon encourages sellers to manage their inventory efficiently and make the most of the available warehouse space.
Sellers should carefully consider the dimensions and categorization of their products to minimize costs associated with storage fees. By strategically managing inventory size and planning fulfillment timing, sellers can optimize their financial performance and mitigate the impact of increased storage fees.
New Long-Term Storage Fees (LTSF):
In 2023, Amazon is implementing changes to its Long-Term Storage Fees (LTSFs), which are fees charged based on the age of inventory stored in fulfillment centers. These changes will require sellers to adopt more efficient inventory management practices and make smaller, more frequent shipments to avoid incurring higher costs. Monitoring low sell-through rate inventory and taking proactive advertising or promotional actions will also be crucial to prevent reaching the threshold for these fees.
Previously, LTSFs were applied to inventory that had been in fulfillment centers for 271 days. However, in 2023, these fees will be triggered earlier, at 181 days, almost three months sooner. The new fee structure includes charges of $0.50 per cubic square foot for inventory aged 181-210 days, $1.00 per cubic foot for inventory aged 211-240 days, and $1.50 for inventory aged 241-270 days.
Existing fees for items aged 271-300 days will increase significantly from $1.50 to $3.80, marking a 153% increase. Similarly, fees for items aged 301-330 days will rise from $1.50 to $4.00 (166% increase), and fees for items aged 331-365 days will increase from $1.50 to $4.20 (180% increase). On average, existing fees will see an increase of around 166%.
FBA Outbound Fees:
Amazon is implementing changes to its FBA outbound fees, which are the fees associated with shipping products to customers. These adjustments reflect the costs involved in fulfilling orders and ensuring timely delivery. On average, the FBA outbound fees will increase by $0.22, resulting in a 10% rise compared to the previous rates.
To provide an illustration, let’s consider the shipping cost of a small standard-size product weighing 6 ounces or less. Previously, this would have been priced at $3.07. However, with the updated fee structure, the shipping cost will now be $3.28.
Refund Administration Fees:
When a customer requests a refund for a product for which you have already received payment, Amazon imposes a fee to process the refund. This fee is determined based on two factors: it is either a flat fee of $5.00 or 20% of the refunded charge, whichever amount is lower.
To settle the refund administration fee, Amazon offers two options. If you have sufficient funds available in your Amazon account balance, the fee will be deducted from there immediately. Alternatively, if your account balance is insufficient to cover the fee, it will be charged to the credit card linked to your account.
These refund administration fees are implemented by Amazon to account for the costs associated with processing and managing refunds. It’s important for sellers to be aware of these fees as part of their overall cost calculations and financial planning when selling on the platform.
Referral Fees:
Amazon has recently announced an adjustment to its referral fees, which are charges that sellers incur for each product sold on the platform. In addition to storage and shipping fees, referral fees play a significant role in the overall cost structure for sellers on Amazon. These fees are calculated as a percentage of the product’s selling price and vary based on the category in which the product is listed.
As part of the fee update, Amazon is increasing referral fees across various product categories by an average range of 0.5% to 2%. This change aims to reflect the evolving market dynamics and ensure the sustainability of the platform. For example, products falling under the Electronics category will now be subject to a referral fee of 15%, as opposed to the previous rate of 14.5%.
The adjustment in referral fees should be considered by sellers as they evaluate their pricing strategies and profitability. It is crucial to factor in these revised fees to maintain a competitive pricing structure while accounting for the associated costs of selling on the platform.
FBA Returns Processing Fees:
The FBA returns processing fee is applicable when customers return products purchased on Amazon, specifically in the apparel and shoes categories. It’s worth noting that certain items such as watches, luggage, sunglasses, handbags, and jewelry are exempt from this fee.
The returns processing fee is determined based on the size tier and shipping weight of the product. However, effective from January 17, 2023, Amazon will be reducing the returns processing fee in the apparel and shoes categories. On average, the fee reduction will amount to $0.20 per item.
The returns fees vary depending on the size and weight of the product. For small standard-size items, the returns fee ranges from $2.12 to $2.32. Larger items fall in the range of $2.40 to $3.41 or more. Oversize products have returns fees ranging from $4.19 to $75.08.
These adjustments to the returns processing fee in the apparel and shoes categories demonstrate Amazon’s commitment to providing a more cost-effective experience for sellers. Sellers should take note of these changes to accurately account for returns-related costs and ensure a streamlined process for customers returning products.