Amazon has announced that on January 18, 2022, Fulfillment by Amazon (FBA) fee changes will take effect in the US. The company stated that Amazon put all efforts into supporting the FBA sellers by postponing and maintaining fee charges low and making vital investments in people, technology, transportation and infrastructure during the pandemic.

However, the changes are imminent, and it is helpful to review them. Amazon will change the following FBA fees:

• FBA fulfilment fee
• FBA monthly storage fee and aged inventory surcharge
• Amazon referral fee
• FBA removal and disposal order fee
• FBA Small and Light fee
• FBA prep and label service fee

Such categories as fulfilment fees, storage, removal and disposal fees will face significant changes. Let‘s have a look at every new FBA fee closer.

FBA fulfilment fee

 According to sellercenter.amazon.com, US FBA fees will consist of three following fulfilment fees:

• Core FBA fulfilment fees (excluding apparel)
• FBA fulfilment fees for apparel
• FBA fulfilment fees for dangerous goods

Amazon announced the increase of the fulfilment fees at approximately 5.2% to cover the increasing operations costs. The fees will impact every size tier (starting from small standard to special oversize). The increase of percentage will vary from 2% to 12% respectively.

FBA monthly storage fee and aged inventory surcharge

As Amazon Seller Central informs: “off-peak monthly inventory storage fees will be increased by $0.08 per cubic foot for standard-size products and $0.05 per cubic foot for oversize products from February 1, 2022.“

Also, Amazon introduces the brand new „aged inventory surcharge“ for units that have been stored in fulfilment centersfor 271 to 365 days, starting from May 15, 2022.

FBA removal and disposal order fee

Many Amazon FBA business owners will face higher removal and disposal order fees. From January 18, 2022, FBA fees for removal and disposal orders will double in price.

For instance, FBA removal and disposal order fee for oversize and special handling items when shipping weight is 1+ to 2.0 lb will boost 172%, increasing from $0.72 to $1.96.

FBA Small and Light fee

From January 18, 2022, Amazon will change FBA Small and Light program fees. Amazon announcement states that these changes will include:

• Large standard shipping weight range will increase from 12 oz to 3 lb;
• The greater unit weight or dimensional weight determines the shipping weight for all large standard-size units. Small standard-size units will use the unit weight.

FBA prep and label service fee

Finally, Amazon has decided to make higher prep and label services fees. The labelling and bagging fees for standard-size and oversize products will slightly rise from $0.20 to $0.40 on average.

The taping service fee, if applicable, will grow from $0.20 to $0.60 for standard-size items and from $0.40 to $1.20 for oversize items, claims Amazon Seller Center.

FBA fee changes in Europe

Earlier this year (from 8 June 2021), Amazon implemented slight changes to fulfilment fees for sellers in European Fulfillment Network (EFN). The company claimed that most referral fees would not change. Here is the list of FBA fee updates in Europe:

• 2021 Amazon referral fee changes
• 2021 FBA fulfilment fee changes, reductions and promotions
• 2021 FBA removal and disposal fee changes
• 2021 FBA prep fee and manual processing fee changes
• 2021 FBA lithium battery and dangerous goods fee changes
• 2021 FBA New Selection Program changes
• 2021 Multi-Channel Fulfilment fee changes

Most fee changes in Europe are moderate, but FBA sellers should notice that Amazon will constantly increase referrals, fulfilment, and other fees.

Selling the products at low margins is a risky and not sustainable strategy. The sellers on Amazon ought to emphasize the brand and product differentiation. This will ensure the higher prices of products and higher profit margin and help to face increased FBA fees.

What impact will FBA fee updates have on Amazon FBA sellers?

While some fees might not seem significantly larger, Amazon sellers know how even a few cents can impact the bottom line of low–margin products.

For example, if you are trying to sell a struggling item, you will face extended-term storage fees, and if you would like to dispose of the product, you will have to either pay more per unit accepting higher COGS or offer a lower price. Either way cutting into profits.

Some FBA sellers most likely will increase prices, while others will have to figure out how to maintain profit margins while keeping price at similar level.

How to prepare for Amazon FBA fee changes?

There is no universal advice for all, but it is essential to know about the upcoming fee changes and prepare for them based on individual circumstances.

First, an obvious consideration is off-loading some of inventory to third party logistics providers. Although in times of high inflation and supply chain uncertainty, getting competitive rates can also be challenging. Signing for long-term partnerships or comiting large volumes of inventory might help negotiating terms.

Moreover, finding balance between margin and scale could also help as that could result in faster business growth, because setting the margin too high might limit the pace of scale, and setting it too low eventually will force you out of business.

Lastly, putting even more effort into PPC campaign optimization. Due to the increases in PPC costs since 2020, Amazon sellers have to be more precise and cautious when setting their keywords for campaigns. The situation was contrary back in the early days of Amazon Ads because less precision was required, and business owners still faced success and healthy margins with low CPC‘s.

There‘s still a silver lining in this situation (at least from customer‘s point of view). Higher costs means that the amount of cheap and low-quality products on the Amazon marketplace will be (or at least should be) displaced by higher quality products. In other words, quality will win over quantity.