This article sheds light on the reason for the FBA fulfillment fee increase. It will also acquaint you with some of the specific FBA fees that will increase as the Amazon Black Friday, Amazon Christmas Sales, and other holiday shopping events draw near. 

Why Amazon Fees Will Increase for Q4 of 2022 

Amazon recently released a statement informing sellers of the impending fulfillment fee increase. According to Amazon, the Amazon fee update is brought about by the expected increased utilization of their fulfillment network during the busy holiday shopping season. 

Holiday shopping events such as Amazon Black Friday and Amazon Christmas Sales will generate concentrated volumes of shipments. Thus, increasing fulfillment and logistics costs for Amazon. 

Amazon also highlighted that they previously absorbed these fulfillment and logistic costs, but the seasonal expenses have reached new heights. Therefore, it prompts an update on specific FBA fees. 

Amazon Seller Fees Update – FBA Fee Changes You Should Be Aware Of

The Amazon FBA fulfillment fee increase will take effect on October 15, 2022, and is expected to last up to January 14, 2023. According to Amazon, the impending Amazon seller fee increase will affect items sold using the US FBA and remote fulfillment with FBA.

Additionally, the average fulfillment fee increase is around 0.35 USD per item sold. Here are some of the critical Amazon fee updates you should know. These fulfillment changes are based on product weight and size.

Updated US FBA Fees for Q4 of 2022 

For those Amazon sellers using US FBA, fulfillment fee updates will take effect between October 15, 2022, and January 14, 2023. The fees will then revert to their non-peak rates. For comparison, here are both non-peak and peak fulfillment fee rates.  

FBA Fulfillment Fees – Non-Peak Rates (excluding apparel)

Table Source: Amazon Seller Central

FBA Fulfillment Fees – Peak Rates (excluding apparel)

Table Source: Amazon Seller Central

FBA Fulfillment Fees – Non-Peak Rates (for apparel)

Table Source: Amazon Seller Central

FBA Fulfillment Fees – Peak Rates (for apparel)

Table Source: Amazon Seller Central

Remote Fulfillment with FBA – Updated Fees for Q4 of 2022

As mentioned earlier, fulfillment fee updates will also be implemented for remote fulfillment. Remote fulfillment is an FBA program that Amazon offers to all sellers in the US, allowing them to sell their products to consumers in Mexico and Canada without having to send inventory to the aforementioned countries. 

Remote Fulfillment with FBA – Mexico (standard-size product tiers)

Table Source: Amazon Seller Central

Remote Fulfillment with FBA – Mexico (oversize product tiers)

Table Source: Amazon Seller Central

Remote Fulfillment with FBA – Canada (standard-size product tiers)

Table Source: Amazon Seller Central

Remote Fulfillment with FBA – Canada (oversize product tiers)

Table Source: Amazon Seller Central

It is worth noting that the rates listed above are rounded off for simplicity. To better understand the rates and other specifics concerning the peak and non-peak fulfillment fees, you can further check Amazon’s US FBA and remote fulfillment with FBA fee changes.

Amazon Holiday Peak Preparation Tips – Best Practices

Apart from the fee updates, Amazon sellers should also be mindful of the potential increase in sales volume. Here is a list of best practices during the peak holiday season to help you prepare and successfully manage your store engagement, queries, and fulfillment.

Be Mindful of Seller Metrics

Regularly tracking your seller performance can help you address potential issues with your Amazon business. It is vital to maintain your account eligibility. Amazon suggests the following performance metrics for sellers to maintain account eligibility.  

• Order Defect Rate should be under 1%
• Valid Tracking Rate should be over 95%
• A Late Shipment Rate should under 4% 
• On-time Delivery Rate should at least be 97%
• Pre-fulfillment Cancel Rate should not be more than 2.5%

Always Recheck Order Fulfillment

Since you will likely receive voluminous orders during the holiday season, you should manage your orders closely. It means that you should regularly check order notifications. It would also help to update your notification settings.

Relying solely on “Sold, Ship Now” emails for orders notification is not enough; you should be on top of it. You should update your phone number on the Amazon Dashboard under merchant default contact if you recently made a number change.   

Product Data Accuracy

When creating or matching product detail pages, Amazon encourages sellers to provide accurate product data, including unique standard identifiers such as EAN/UPC barcode and International Standard Book Number (ISBN). 

More importantly, ensure that your product description and condition notes are clearly expressed when listing a product. Avoid adding unnecessary details that will confuse Amazon shoppers. 

To increase the likelihood of your listing appearing on the organic search result page of Amazon, make sure to use proper keywords. With the help of a keyword research tool, you can identify keywords with high search volume that you can use for your product descriptions. 

Develop an Effective Pricing Strategy

Although there will be more money for shoppers to splurge on Amazon during the holiday season, it is still best to offer them competitive prices. Create a pricing strategy that will entice Amazon shoppers to check your product and for the Amazon algorithm to consider your listing for the Buy Box.

The Amazon Buy Box is a crucial element for your profitable holiday sale. Winning more Amazon Buy Box means increased sales conversion. To increase your Buy Box win rate, you can use an Amazon repricer to help you obtain a competitive price point for your listings. 

Assess your Staffing Plans

As part of your store preparations, you should also review your staffing plans for the holiday season. Ensure you have enough staff to handle other business concerns, including customer service and checking orders. 

Although you will be using the FBA method, it is still worth having additional people to deal with mundane tasks. Thus, giving you more time to deal with crucial aspects of your Amazon business. 

Holistic Preparation 

Amazon has announced the Amazon seller fee changes affecting fulfillment fee rates in the US and those operating their business through remote fulfillment with FBA. The notice of FBA fee changes allows sellers to make the necessary preparations and adjustments to their business operations.

As part of improving your overall business process amidst the drawing holiday season, it is highly recommended that you consider utilizing Amazon seller tools.

Amazon seller tools such as repricing software, product research, and keyword research tools can create a massive difference in your business performance as it aids in providing you a competitive edge over other sellers in the Amazon marketplace. 

3 Types of Amazon Fees

1. Amazon Storage Fees

As the name suggests, these fees are charged for holding your inventory inside of an Amazon FBA warehouse. Amazon charges once a month based on the space your total inventory is taking up at that moment. The fees are charged per cubic foot (or meter) of space and they are different for 2 size categories: standard and oversize.  The fees also go up during the final three months of the year, since Amazon processes a lot more inventory during the holiday season.

There’s also an additional monthly charge of $0.15 per item per month if an item has spent a year or more in an FBA warehouse.

2. Amazon Fulfillment Fees

Amazon Fulfillment fees cover all the services Amazon provides moving your product inside the warehouse, handling the parcel, preparing it for shipping and sending it out. This fee is charged every time you make a sale. Depending on the size and weight of your item, it will be placed within 1 of the many fulfillment fee categories that each correspond to a fee bracket.

Fulfillment fees are also technically charged for handling returns, where in an event of a return of an item back into an FBA warehouse you’ll be charged the same amount as it was to fulfill the order in the first place. The only difference being that on the way back, the fee will be called a return processing fee.

3. Amazon Referral Fees

Amazon referral fees are also charged every time an item from your store has been sold. The fees are charged for having a listing and selling an item on Amazon. The fees are charged as a fixed percentage of the total selling price the customer has paid, in most cases that percentage is 15%. With the minimum referral fee being .30, meaning that if you’re selling an item for $1 you’d be paying .30 in referral fees instead of $0.15 which would be 15%.

How Much Do Those Amazon Fees Add Up To?

Let’s take a look at an example here, a set of silicone baking mats. Let’s calculate how much the seller of this item is paying in fees per every set of mats:  Now that we have an idea of how much fees can cost and how they are calculated, let’s look into some ways of reducing them.

Product Packaging Could Be Key

It’s obvious that the weight and the size of a packaged product unit has a substantial impact on how the fees are calculated by Amazon. It’s only natural to focus on that first if we’re to reduce our Amazon fees. Also if you manage to reduce the size or weight of your product you’ll save money on shipping as well. It’s like killing two birds with one stone.

Hint: Amazon Products Don’t Have To Work Like Retail Product Packaging

Whatever design you choose for your product packaging doesn’t have the burden of achieving the same effects that it would in a brick and mortar store. It doesn’t have to stand out on a rafter, it doesn’t have to entice someone to pick it up. That’s what your Amazon listing does! By the time your customer sees the packaging, the purchase has been made. You shouldn’t feel bad for trying to make adjustments to your packaging for the sake of reducing fees.

Use Compact Packaging

Try your best to keep Amazon product packaging as small as possible. Make sure you ask your supplier if there are any other options for packaging and examine them thoroughly. If your supplier doesn’t have any options that suit you, propose one yourself. See if you can move or bend your product around to fit differently than it is fitting now. Then measure it, and see if you can fall into a different fee bracket with that configuration.

Find Ways to Lighten Up

Looking into lighter packaging options for your Amazon products is an obvious route to explore. You should also look into making the product lighter as well, if possible. Maybe use a different material for some of the products you’re selling on Amazon. Or consider removing a feature that doesn’t seem to be relevant to buying preferences, based on your customer feedback.

Be Precise in Your Packaging

The dimensions of your product are measured by length, width, and girth. Amazon will put it into a straight-edged cardboard box. There’s no need to have any unorthodox packaging, such as flaps, bows or anything similar. Keep in mind that one of the products in each of your batches will be scanned by Amazon to check its dimensions. You don’t want any part of the packaging to go any further in any direction than it absolutely has to.

Relationship Between Amazon Fees and the Selling Price

Fulfillment fees are the only ones that change when you change your Amazon product price. It’s extremely important to keep that in mind. It’s true that you can’t do much about referral fees, being that they’re charged as a fixed percentage. However, if you change your perspective a bit by focusing on your margins rather than on fees, you might discover new ways of banking more profits. Let’s crunch some numbers to show how this works in action. We’ll go back to the silicone baking mat we looked at earlier:

As we can see above, the fact that all other Amazon fees remain fixed and the referral fee rises with the rise in price, the margins increase as well. The same is true if you wish to do a discount via a coupon or otherwise.  If you reduce your price by 60% you will pay 60% of the original referral fee, meaning that the strategy might not be as costly as you originally thought. Try split testing prices, or an Amazon repricing tool. Finding the balance between profits, fees and sales volume is a critical skill for an Amazon seller.

Bonus Fee Hack! The (Sort of) Secret Amazon Fee You Might Not Even Know About

Just now, we looked at increasing profits while keeping fees in check. If you’re selling on a foreign market, your earnings go through Amazon’s currency converter. That’s where you’re probably losing more money then you thought.  Sellers usually just accept that Amazon will convert their earning into the appropriate currency without giving it a second thought. What you don’t know is that Amazon is one of the higher conversion rates out there. Their rates go as high as 3.5-4.5% by some estimates. The percentage gets deducted from your earnings after all the fees have been charged. That means whatever your profit, Amazon will take an estimated 3.5-4.5% on top of that when you sell cross-border.

How to Avoid Paying High Exchange Fees?

The best way for an online seller to avoid Amazon’s FX fees is to arrange to have Amazon deposit your funds in the currency of the marketplace – without converting through the Amazon platform. You can do this through a global currency account for online sellers such as the one PingPong provides.  Using a global currency account would allow you to save up to 2-3% on average. You also have more power to control which currencies you hold, instead of being forced to convert your foreign payouts into US dollars by Amazon. This is especially useful when paying European VATs and Canadian GSTs. Using a global currency account, you can make VAT payments without additional fees – while completely avoiding the dreaded double currency exchange that usually takes place before paying foreign taxes like VATs and GSTs.  Online sellers can also run into currency exchange fees when paying international suppliers. If you’re negotiating prices in your supplier’s local currency, which is often recommended, you’ll then have to find a way to safely pay your supplier and convert the payment into local currency. Going to your regular bank to make international wire payments gets expensive because banks aren’t known for giving the best rates.  A global currency account like the one from PingPong can also help you with supplier payments. Once you set up your account, you’ll be able to hold multiple foreign currencies. When you do need to convert currency, you can do it at a great low rate.

Curious to see how the rate you’re paying compares? Learn more about global currency accounts for online sellers.