To most people, Amazon is an online marketplace where they can buy anything from pet toys to luxury perfumes. For Amazon’s sellers, though, the platform doesn’t seem nearly as obliging. Amazon’s fees for third-party sellers have never been low; in fact, some of their fees make it hard to turn a profit at all on certain items.
Now that 2022 is here Amazon is increasing some of its fees once again, and sellers are having to puzzle out just how these changes will impact their bottom line. And with 72 different kinds of Amazon fees, that’s no easy task if you’re doing everything on your own. It’s possible to get an idea from Seller Central (a seller tool provided by Amazon), or by exporting Amazon reports to spreadsheets, where the information can be rearranged to calculate profits, losses, etc. A more efficient option is Shopkeeper, a margin tracker that helps sellers see real-time sales data for each item, all in one dashboard.
With some of these fee increases already in effect, it’s vital for Amazon sellers to stay one step ahead whenever possible – and the only way to do that is to make the data do the work. Keeping that in mind, let’s check out how Amazon’s fee increases will affect sellers.
FBA Fulfillment Fees
If you’re looking at the increases for these fees, you might not be too worried about it. Since this fee is calculated based on size, there are several categories; the smaller the package, the smaller the FBA fulfilment fee. In some cases, the cost per package is less than a dollar, and the increase seems equally insignificant. What’s missing from the picture here? The increase in each size category by percentage. Going from 2% to 12%, sellers could potentially take quite a hit to their profits.
Consider a hypothetical item that’s selling for $10 on Amazon. After all’s said and done, the item grosses 20% profit. Then the FBA fulfillment fee increases, and for this specific item that increase amounts to an additional 8% – now the item is only making a 10% profit.
Once you look at it that way, it’s easy to see how drastically even this one fee can affect profits. One way or another, sellers will have to do the math for every item they carry in order to determine if they’re even worth selling anymore.
Amazon’s seller reports can shed some light, and Seller Central may provide some insights as well. Shopkeeper, on the other hand, aggregates all of Amazon’s fees, plus costs, refunds, and more, to show the profit margin for every item in one place. Not only is it faster and easier than using Seller Central, but decisions to optimize selling strategies become a lot more straightforward.
Here’s a bit of good news for Amazon sellers: referral fees won’t be going up in 2022. In fact, some of them will be going down. This includes referral fees for lawnmowers and snow throwers, as well as any item with a total sales price higher than $500 (from 15% to just 8%).
FBA Storage Fees
Effective the 1st of February 2022, the cost of storing inventory at FBA warehouses have gone up (excluding the peak months of October – December). January – September storage fees have gone from $0.75 per cubic foot to $0.83 per cubic foot for standard-sized packages, and from $0.48 per cubic foot to $0.53 per cubic foot for oversized packages.
Aged Inventory Surcharge
Even though all the buzz has been about fee increases, that isn’t quite accurate here – this fee is entirely new to sellers. There was already a fee for aged inventory; that applied to anything that was stored in FBA centers over one year (365 days), and it cost sellers $6.90 per cubic foot, or $0.15 per unit (whichever comes out to the highest price). The new fee also has to do with aged inventory, but the time frame is now tighter for sellers – it applies to anything that’s stored in an FBA warehouse from 271 days up to a year. It’s a flat rate of $1.50 per cubic foot, and it’ll be stacked on top of what sellers are already paying in storage fees.
Aside from the fact that sellers will be paying more than before, this could cause other problems. If a seller can’t count on being able to get rid of certain products, they’ll be less likely to stock them – meaning there could ultimately be fewer options to choose from on Amazon.
One possible solution is to take advantage of Shopkeeper’s inventory planning tool, which is designed to help sellers prepare for high-volume months without over-or under-stocking at the FBA warehouse. If you can use Shopkeeper to apply accurate sales projections to your inventory needs, you’ll be less likely to incur aged inventory surcharges.
FBA Removal and Disposal Fees
Between one thing and another, some items at FBAs end up being unsellable and have to be disposed of. Sellers have the option to get the damaged items shipped back to them; they could also pay for the item to be destroyed at the FBA. Whatever they choose, though, it’s now going to cost quite a lot more. Out of the nine size tiers, all but the smallest have increased by over 200%. To illustrate, a package weighing between 1 and 2 pounds used to cost $0.48 to remove or dispose of, but now it costs $1.14. It may not seem like a lot of money if you’re just adding up the cents for an individual package, but when you factor in this fee to your profit margin calculations, you’ll probably see a noticeable difference.
What’s the next step for sellers?
Sellers don’t have to let Amazon call all the shots where their bottom line is concerned; with a tool like a Shopkeeper to give them data on sales and profits in real-time, they can stay ahead of the curve. Shopkeeper already offers a 14-day free trial, but anyone who wants to see if it’s right for them can now try a 30-day extended free trial.
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