If you’ve been paying attention to the news lately, you’ve no doubt been hearing about both the spike in inflation and ongoing supply chain issues. Well, those chickens of economic dysfunction have come home to roost for Amazon sellers in the form of new referral and FBA fee increases for 2022.
In a somewhat surreal announcement on the Seller Central forum, Amazon spends several paragraphs patting itself on the back about capital improvements, wage increases and building new warehouses. It’s all for your benefit, they say.
But then the hammer drops – our costs have gone up, and now yours are going up too. For sellers, this means there will be notable increases in fees next year across five categories: referrals, fulfillment, small and light, removal and disposal orders, and storage fees.
While fee increases for referrals, fulfillment, and small and light will rise only incrementally, it’s the final two categories of removal and storage where costs are really skyrocketing. What does this mean for sellers, and what can they do about it?
These Amazon fees will double next year
Back in the “good old days” of FBA, storing your inventory in an Amazon facility was akin to cloud storage – you could stick a whole lot of products in there, and it didn’t cost that much per month. There were seasonal fee increases in Q4, but in general, sellers got a lot of storage for a relative pittance. Well, those salad days are long gone.
The cost of standard-size storage is up around 10%, but long-term storage (now called “aged inventory storage”) has a new tier of fees for items that remain in fulfillment centers for 271 to 365 days, coming in at $1.50 per cubic foot. The surcharge only kicked in after a year previously. This 90-day run-up to the 365 day+ fees (unchanged at $6.90 per cubic foot) seems designed to inflict a little extra pain on sellers before the main event.
Closely related to storage is the increase in removal and disposal fees, which have more than doubled in many cases. If your products aren’t selling, it’s going to cost you a lot more to have Amazon return them to you, or dispose of them.
One wonders if the removal and disposal order fee increases are, in part, designed to motivate sellers to use Amazon’s FBA Liquidations program, which we’ve covered before in this space.
Why are these particular fees being targeted with eye-watering increases? One educated guess: the surge in Amazon shopping due to the pandemic has put monthly storage space at a premium, even with 350 new fulfillment-related facilities opening up. It’s all about turning over that inventory quickly and making room for more – whether that’s yours or someone else’s. With that said, what can a savvy seller do to minimize their exposure?
The best answer is to double down on managing your inventory. First, identify any existing inventory issues and which of your ASINs may be subject to additional fees. Then try to eliminate them as quickly as possible, whether through offering discounts, disposal, the liquidation program, or whatever means is most cost-effective. This may even mean having the items returned and selling them on Amazon or elsewhere, but fulfilling the orders yourself instead of using FBA.
Next, proactively manage future inventory with an eye on storage fees. Having products trickle in might be better than big batch orders, so negotiate lower MOQs with your suppliers or use a 3PL to store your inventory before sending it into FBA.
Ultimately, like everything else these days, FBA prices are going up – and sellers need to get creative and proactive to get the most value for their efforts.
But the message from Amazon is clear, as succinctly stated in the Seller Forums by vurbanmx:
As a way of saying thank you for making us billions of dollars, we will now charge you even more fees, and provide less customer support. You’re welcome.
Read more at Amazon Seller Forums.
Amazon and Visa showdown over payment fees
In a battle of the titans that no one saw coming, Amazon and Visa are facing off over high transaction fees in the UK. The marketplace giant has announced it will stop accepting Visa credit cards for payment from January 19, 2022.
Amazon has even gone as far as offering customers gift cards of £20 ($27) for Prime members and £10 ($13.50) for non-Prime members to change their preferred payment method to another card.
Who’s at fault here? Well, you can blame Brexit. At least, that’s what Visa did, citing the UK’s departure from the EU as their reason to raise credit card transaction fees between the UK and EU from 0.3% to 1.5% – a move that provoked a serious backlash from the world’s biggest online retailer. Post-Brexit, the UK is no longer subject to an EU interchange fee cap, allowing card networks to hike their fees. Mastercard has recently raised its fees as well.
On the Amazon side of things, it’s quite a power play to push back against a global credit card company. While the goal is most likely to force Visa to lower its fees, Amazon seems to have calculated that customers can and will be willing to pay another way to keep shopping on the marketplace.
Most retailers would not be willing to turn away potential customers like this. However, Amazon has a unique position in the UK and globally at this point. This also may be a preemptive strike against one major credit card company to send a message to the rest, in the face of globally rising card transaction fees.
