Part 2: Overview of Amazon Fee Changes

Last year, some Amazon Sellers were surprised to find out their FBA fulfillment costs were going to decrease during the 2017 calendar year.

This year, however, it is a different story. The 2018 fee increase set to take place on February 22nd is the largest increase to date. Amazon says that the increase in fees is to offset their increasing costs of fulfillment, transportation and customer service. Similar to last year’s changes, this fee increase will remain in place until further notice.

One big takeaway is the switch from peak and non-peak fulfillment rates to a year-round rate that varies by box and weight. The seller will pay the same price regardless of the season, simplifying the fee structure. There is no longer an advantage or disadvantage in being a highly seasonal company.

The price change is relatively insignificant for most product categories. If you deal primarily with Small Standard, Medium Oversize, Large Oversize and Special Oversize packages, your average fees will be nearly unchanged. However, sellers that package their products in Large Standard and Small Oversize boxes will experience 14.2%  and 16.6% increases respectively.Amazon is raising the price on heavier mid-sized items. Small items and very large, heavy items will remain a comparable price. Further, Items that are dim weighted will see an average increase over 22%, because the dimensional weight divisor was reduced from 166 to 133.

Here are some recommended next steps to make sure you aren’t unnecessarily tying up valuable capital your business needs.

First, create a list of your dim weighted items and actual weighted items. Use that list to create a spreadsheet that allows you to calculate and compare dim and actual weight FBA costs. Use these calculations to optimize your product fulfillment strategy.

Secondly, for all products, review the margin impact. For products that experienced a decrease in margin, review your packaging, and make adjustments wherever its applicable. If you can’t modify packaging size, consider raising the price to reflect the FBA fee increases.

Amazon is clearly putting an emphasis on precise and efficient demand planning and inventory management for its sellers. FBA fee increases are becoming an annual occurrence. Make sure your company continues to adapt and adjust to maintain profit margins.

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