FBA Sellers, the most wonderful time of the year is fast approaching! No, we aren’t talking about Christmas. We are talking about Amazon’s annual tradition of upping its FBA (Fulfillment by Amazon) program fees. On January 18th, 2022, the new FBA fees will go into effect.
Considering you’ve probably got your hands full with all the other delights of the retail this holiday season, we thought we’d outline a quick summary for you.
Key Takeaways for FBA Sellers
Amazon’s significant fee increases are just one of the various increases in the cost to sell via Amazon in 2022. It is time for all Sellers to take serious stock of their item profitability, retail pricing, and target margins.
Here are some Harvest Group recommendations as you plan for these 2022 adjustments:
- Get item-level profitability data: While it can be a bit painful to extract the data from Amazon’s payments portal, it is crucial that you have visibility to your bottom line at an item level. Invest the time or find a partner to help you see what you need to see.
- Run the numbers: Identify which tier your top items fall into and how their profitability will change. How will you respond? Can you cut costs in the supply chain, or will you need to pass some of these fees through to your retail price?
- Reconsider Amazon Small and Light: The changes to the program may mean that your products now qualify. A Seller can save from $0.50 to over $1 on every unit sold by switching qualifying items to the S&L program.
- Tighten your inventory strategies: It will cost you about 10% more to hold your inventory from month to month, and over 2x more to manage inventory disposal/removal. For Sellers who have loaded inventory loosely in the past due to low fees, it may be time to reconsider your strategy.
- Play to your strengths: Just because an item is a top seller, doesn’t mean it’s a top contributor. Know which items sell well, but also know which items bring you profit. Highly profitable items that are underperforming need more attention. Best Sellers with poor profitability may not be the “powerhouse” items you think they are. Learn your strengths and play to them.
FBA Core Fulfillment
For the FBA Core Fulfillment program, per unit fulfillment fees are seeing an average increase of about 5% with the spread from 1.9% to 8.1%, depending on the size tier.
- Small Standard is being hit hardest, with the entire tier seeing an 8.1% increase, regardless of weight.
- Large Standard is more variable, with as little as a 2% increase for lighter products in the tier up to a 7.9% increase for the heaviest items in the tier.
- Oversized tiers saw several flat fee increases, but Medium oversize is receiving the steepest increase, with a $1.36 added to the flat fee, plus an additional $0.05 per pound after that.
While the exact implications of the per-unit fulfillment fee changes will depend on your products’ specific size and weight tiers, all Sellers should plan for increased margin pressures. We encourage all FBA users to specifically identify their products’ size/weight tiers and count the costs of these increases before they go into effect.
FBA Small & Light
For Sellers utilizing the Small and Light program (currently only for items that measure 18 x 14 x 8 inches or less, weigh 12 oz or less, and are priced at $7 or less), some major changes are in store.
Starting on January 18th, 2022, the FBA Small and Light Program will increase the weight limit for FBA Small and Light from 12 oz to 3 lb, introducing 4 new weight tiers.
There is no indication yet if the retail pricing limit of $7 or less is expected to adjust as well, but the new, higher pricing tiers for heavier items could be a harbinger of a higher retail price minimum for the program.
Existing Tier Changes
The existing Small Standard tiers will see the following changes:
- 8% increase for the 6 oz or less weight tier
- 0% increase for the 6+ to 12 oz weight tier
The existing Large Standard tiers will see the following changes:
- 7% increase for the 6 oz or less weight tier
- 7% increase for the 6+ to 12 oz weight tier
New Tier Definitions
The Small Standard size tier will introduce one new weight tier:
- 12+ to 16oz – $3.00
The Large Standard is adding three new tiers with respective fulfillment fees:
- 12+ to 16 oz – $3.59
- 1+ to 2 lb – $4.21
- 2+ to 3 lb – $4.94
FBA Storage Fees (Beginning Feb 1, 2022)
FBA storage fees will not see an increase for peak season months of October to December. However, off-peak months (January to September) will encounter an 11% increase in cost per cubic foot for standard size and a 10% increase for oversized items.
Disposal and Removal Fees
Disposal and removal fees will be getting some of the heftiest fee hikes, largely due to Amazon’s continued push for FBA inventory discipline and Sellers’ over-reliance on product disposal/removal for poorly performing items.
- Standard size items will see a per unit disposal fee increase ranging from 63% to 138%, depending on the product weight.
- Oversize items will see increases ranging from 107% to 172%, depending on the product weight.
Harvest Group Can Help
Harvest Group is helping clients manage their Amazon business efficiently and effectively with deep retail expertise. Ready to talk about your Amazon strategy? Reach out to us at email@example.com or fill out our Contact Us form.