Amazon Raises FBA Fees: What It Means and What Sellers Can Do About It
April 28, 2022
On April 13, 2022, Amazon announced the addition of a new 5% surcharge to its FBA (Fulfillment by Amazon) fees, effective April 28. This will impact United States based third-party Amazon sellers who use the popular storage and shipping service provided by Amazon.
Amazon revealed the price increase in a message just 15 days before the change was scheduled to take effect. This prompted some concern among Amazon sellers who utilize the FBA service.
So what does this fee actually change for Amazon sellers? How will it impact prices and profits? We break down the new surcharge, the reasons behind it, and provide some expert advice for managing the higher costs.
A Fuel and Inflation Surcharge
Amazon presented the new fee as a “5% fuel and inflation surcharge”. They cited the need to offset rising supply chain costs due to the high cost of fuel and inflation that have accompanied the COVID-19 pandemic. They also clarified that the 5% fee is subject to change.
“In 2022, we expected a return to normalcy as COVID-19 restrictions around the world eased, but fuel and inflation have presented further challenges,” the FBA team wrote. “It is still unclear if these inflationary costs will go up or down, or for how long they will persist, so rather than a permanent fee change, we will be employing a fuel and inflation surcharge for the first time—a mechanism broadly used across supply chain providers.”
The increasing price of fuel and continuing inflation have impacted those operating in all aspects of eCommerce. Amazon says that the increases are too high for the company to absorb. They implemented the fee in order to share the costs with sellers.
Many sellers were troubled by the news, especially since Amazon already raised fees at the start of 2022. That change that took effect on January 18. Amazon reminds sellers, however, that their FBA fees are, on average, still significantly lower than the price that sellers pay to fulfill orders themselves.
“Since 2020 and inclusive of this change, Amazon has increased fulfillment rates less than other carriers, and continues to cost significantly less than alternatives,” the FBA team claimed in their message to sellers.
How the Price Hike Impacts Sellers
The new surcharge only applies to FBA fulfillment fees and does not impact Amazon commission rates. It is also not connected to retail price. The fees do not affect sellers who fulfill their own orders, either.
The 5% increase is calculated per unit, based on the FBA fulfillment fee for each product. This is a set fee determined by the size tier of the unit and the shipping weight.
For example, the fulfillment fee for a 6oz or less item in the “small standard” category before April 28 was $2.92. After April 28, the price increases by 5%, bringing the fulfillment fee per item to $3.07.
The new surcharge raises prices an average of 24 cents per unit, which is still less than UPS, which charges a 42 cent fuel surcharge or FedEx, which charges a 49 cent fuel surcharge.
The percent increase is the same for items in all size and weight categories. The message from the FBA team to sellers clarifies that it applies to all product types including “non-apparel, apparel, dangerous goods and Small and Light items.”
What to Do About It
While a 5% fulfillment fee increase might sound daunting, there’s no reason it should harm your business. Sellers should be aware of the impact that this increase will have on their profit margin, and plan accordingly.
Here are a few things you can do to make sure you continue to profit:
Optimize Your Marketing Strategy
It’s always a good idea to continuously optimize your marketing strategy and product listings to enhance performance. If your products are selling well, you won’t feel the impact of the fee increase as much. You’ll be able to keep your business profitable despite the costs.
When it comes to marketing, it’s important to put in some extra time and effort. Keyword research is crucial if you want your marketing efforts to pay off. Ranking organically for keywords is an essential tool that can help your business. Utilize available data in order to improve your creatives and product listings.
Even your best-selling products can be improved. A/B testing, paying attention to customer reviews and feedback, and nurturing existing customer relationships are all great ways to make sure your products keep selling. Pay attention to branding as well, as this can be a great way to build an audience and attract new customers.
8fig knows that a marketing budget is important, so we provide eCommerce sellers with free planning tools that help you map your cash flow. We also offer continuous capital to help you at every stage of your supply chain, including marketing.
Keep Growing Your Business
Liran Hirschkorn, CEO of Incrementum Digital, recommends focusing on growing your business in order to minimize the effects of the FBA fee increase. Continue to launch new products and increase sales, and you’ll be just fine. “Focus on how you can grow the business so those fees become less impactful,” he advises.
As always, do plenty of research and make sure to set your products apart through design and packaging. If your products stand out, you can price them higher and continue to profit despite the higher FBA fulfillment cost.
Scaling your business takes capital, and 8fig is there to help eCommerce sellers during times of change. Sign up for a free Growth Plan and we’ll help fund your business. Then, you’ll be able to scale and overcome the challenges of the new fees.
Of course, when your costs increase, you may need to raise your prices to make sure that your profit margins are still where you want them to be. Many sellers expect to raise their prices on the heels of the new FBA surcharge. Keep up to date with your competitors’ prices so that you remain competitive, and don’t be afraid to follow the trend if you notice others raising their prices.
Despite the frustration that many sellers feel regarding the fee increase, FBA remains both the easiest and most cost effective solution to order fulfillment for many sellers. As long as you continue to optimize your business and keep on top of your price margins, you should be able to absorb the new surcharge without too much trouble.
Rebecca is an eCommerce writer at 8fig. She strives to provide sellers with the information and support they need to succeed in the ever changing eCommerce space.