Amazon is known for its continuous efforts to improve its marketplace for both sellers and customers. In keeping with this commitment, the company recently announced significant updates to its referral and Fulfillment by Amazon (FBA) fees, its popular service that lets sellers store, pack, ship, and customer service their products for them. These changes can have a substantial impact on how sellers operate on the platform, so it’s essential to stay informed.
In this blog post, we’ll summarize the key points from Amazon’s recent fee changes, what it means for sellers and how competition from fast-fashion giant SHEIN has made waves prompting Amazon to reevaluate its seller fee structure in certain categories.
To enable more efficient use of their network, Amazon will begin charging separately for inbound and outbound activities.
Outbound fees are charged for shipping products to customers. The new outbound fees will be lower overall, but there will be a new low-inventory-level fee. This fee will be charged if a seller’s inventory level falls below a certain threshold. This change is intended to incentivize sellers to keep their inventory levels high, which can help to improve customer service and reduce the risk of out-of-stock items.
Inbound fees are charged for placing inventory in Amazon fulfillment centers. The current fee structure is based on the size of the product and the number of locations it is sent to. However, the new fee structure will be based on a single fee for each product, regardless of its size or the number of locations it is sent to. This change is expected to simplify the fee structure for sellers.
Inbound Placement Service Fee
Amazon will also introduce a new inbound placement service fee. This fee will be charged based on the size of the product and the number of locations it is sent to. This fee is intended to cover the cost of placing products in fulfillment centers and ensuring that they are properly stored and handled.
Storage Fee Changes
FBA storage fees are being adjusted to incentivize sellers to manage their inventory efficiently. Sellers will now pay different rates for long-term and short-term storage, encouraging them to move products more quickly and reduce storage costs.
Amazon will reduce referral fees for apparel products priced below $20. This is a welcome change for sellers of these products, as it will reduce their overall selling costs. This change is likely to be offset by the new inbound placement service fee, but it is still a positive development for sellers of low-priced apparel products.
SHEIN’s Strong Performance Prompts Amazon to Lower Seller Fees
Amazon will lower the referral fees it charges sellers for apparel products priced below $20, in a move widely seen as a response to competition from SHEIN, who has rapidly been gaining popularity.
Currently, Amazon charges a 17% transaction fee for apparel products sold through its Fulfillment by Amazon (FBA) program. However, under the new changes, the fee will be reduced to 5% for products priced below $15 and to 10% for products priced between $15 and $20.
The move is seen as an attempt by Amazon to make its FBA program more attractive to sellers of low-priced apparel products, a category in which SHEIN has been particularly successful. SHEIN has been able to offer lower prices than Amazon by keeping its inventory costs low, in part by using its own distribution network and by producing its own private-label brands.
The reduced referral fees are likely to benefit sellers of low-priced apparel products, who will be able to lower their prices or increase their profit margins. However, they may also make it more difficult for Amazon to compete with SHEIN on price.
When Do the Changes Take Effect?
The new fee changes will go into effect on April 15, 2024. Sellers should familiarize themselves with the new fees in advance so that they can adjust their pricing and shipping strategies accordingly.
What Do Sellers Need to Do?
Sellers should review the new fee changes carefully and make any necessary adjustments to their pricing and shipping strategies as well as updating cost information in product information management services that utilize this for analytics, reporting profitability, etc. They should also consider using a fulfillment by merchant (FBM) service if they are not happy with the new FBA fees.
Overall, the new fee changes are a mixed bag for sellers. Some of the changes, such as the lower outbound fees and the reduced referral fees for apparel products, are positive. However, other changes could be a burden for some sellers. Sellers should carefully evaluate the new fee changes and make sure that they are making informed decisions about their business.