Effective February 18, 2020
You probably received the daunting email from Amazon on Friday, Update to Amazon US referral and FBA fees: Effective February 18, 2020. If you're like most and haven't had a chance to decipher the message, relax we've got you covered. This is a quick and to the point summary of what you need to know.
Most of the referral fee changes aren't significant and impact specific categories. However FBA, storage, labeling, and removal fees are rising across the board.
Referral Fee Changes
Referral fees or the percentage based fees determined by sales price are changing for specific product categories. Below is a short list of those categories and changes. If you don't sell products in those categories, your referral fees aren't changing. Move on to FBA Fee Changes.
- Shoes, Handbags & Sunglasses - Decrease from 18% to 15% for products with a sales price above $75.00
- Outdoor furniture - Decrease from 15% to 10% on an portion of the sale above $200.00
- Personal care appliances - Decrease from 15% to 8% on items $10.00 or less.
- Activewear - Increase to 17%
- Ring Accessories - Increase to 45%
- Amazon Business - Eliminating tiered fee structure and replacing with flat rate per category
FBA Fee Changes
This change will affect all sellers using Fulfillment by Amazon. The driving force behind this increase is Amazon's $15 billion dollar investment in their fulfillment network and things like free one day shipping. Amazon defines the increase as moderate and states it is about 3% which is below industry average.
The big take away here is the core per unit fulfillment fee is raising for most size tiers. This increase ranges from $0.00 to $1.58/unit. This list below shows each size tier along with the amount and percentage of increase.
- Small Standard 10 oz or less - $0.09/unit (3.7%) increase
- Small Standard 16 oz - $0.15/unit (6%) increase
- Large Standard 10 oz or less - $0.12/unit (3.8%) increase
- Large Standard 10 to 16 oz - $0.20/unit (6%) increase
- Large Standard 1 to 2 lb - $0.14/unit (2.9%) increase
- Large Standard 2 to 3 lb - $0.16/unit (3%) increase
- Large Standard 3 to 21 lb - $0.16/unit (3%) increase
- Small Oversize 71 lb or less - No Increase
- Medium Oversize 151 lb or less - $1.58/unit (16%) Increase
- Large Oversize 151 lb or less - No increase
- Special Oversize - No increase
As you can see, most of the increases are approximately 3%. Keep in mind this is 3% of 2019's fee structure not 3% of total sales price. However, medium oversize items are going to be seeing a significant increase of $1.58/unit which is a 16% increase compared to 2019. If you are unsure what size tier your products are in, feel free to contact us for help. Or you can also download your Fee Preview report under the payments section of your fulfillment reports.
Storage, Labeling & Removal Fee Changes
This group of increases might be the most important, especially if you are using Amazon's labeling service. Historically, Amazon's labeling service has cost $0.20/unit. On February 18th, 2020 that fee increases to $0.30/unit. This increase is one to make note of as it could add up quickly with high volume items. Many of our clients use Amazon's labeling service when an Amazon bar code is required. I have often heard $0.20/unit is less than what it costs many businesses to label or relabel products in house. Depending on your situation, you may need to reevaluate your packaging and labeling processes to see if Amazon's labeling service is still the best option.
The next increase is straight forward. Amazon's monthly storage fees for standard size items are increasing during the 1st - 3rd quarters. The increase is $0.06/cubic foot raising the monthly fee to $0.75/cubic foot. Oversize storage fees and all 4th quarter storage fees are not changing. This change goes into effect March 2020 and will be reflected on April storage charges.
Finally, removal and disposal fees are also going up. In the past Amazon charged a flat rate to remove or dispose products. I've always thought this was incredible as it only cost $0.50 to have product returned regardless of size. Apparently Amazon thought it was incredibly unprofitable as they are implementing a removal and disposal fee schedule that is based on weight.
If Amazon is disposing your unfulfillable inventory you'll notice the increase. Disposal fees have jumped from a fixed $0.15/unit to a base rate of $0.25/unit with the highest charge being $1.90 + $0.20/lb above first 10 lb. This is something all sellers should be aware of as unfulillable inventory is part of using FBA. Below are two tables that explain the new fee structure.
(Not So) Honorable Mentions
This last group of changes aren't as significant as the others but definitely worth mentioning.
The first is related to the Small and Light Program. Amazon is now offering labeling service for $0.10/unit. This service wasn't previously available for products enrolled in the program.
The next change to the Small and Light Program is related to how fees are reported. Beginning February 18th, Amazon will consolidate order handling, pick & pack, and weight handling fees into a single per-unit fulfillment fee by weight like all other FBA orders. The lack of consistency in Small and Light fee reporting has caused confusion for some of our clients and we see this as a plus.
Finally, Amazon is releasing a new program called "FBA New Selection Program". The program provides benefits to new sellers and ASINs, including free monthly storage, free removals, and free returns processing. Although this reminds me of other promotional programs Amazon has launched in the past, it does seem like something worth looking into especially if you are launching new products.