Keeping up with the incredible variety of rule changes, success tactics, and competitor strategies as an Amazon seller is a full-time job in and of itself. To add to your list of items to keep up on, Amazon has just announced upcoming changes to their fee schedules in three critical areas. These affected areas are the Amazon FBA Fee, referral fee, and long-term storage fee.
Their goal each year is to take a look at the current fee structures and assess if they are an accurate reflection of the ever-changing dynamics within the industry. Amazon has just announced several changes to their referral fees, FBA fulfillment fees, and Long-Term Storage fees which will inevitably impact every seller, the question is how big of an impact will it have on yours!
Amazon Referral Fee: Lower Referral Fees for Specific Categories
Amazon’s referral fee is the amount charged for each item sold on their 3rd party marketplace.
Beginning on February 19th, 2019 Amazon is implementing reductions in the referral fees for several categories. This is likely being done with the intent of expanding the products sellers are offering on the marketplace by creating more opportunity for greater margin.
Let’s highlight some of the most impactful changes in the reduction of fees:
- For items in the furniture category (excluding mattresses), the fee percentage will decrease from 15% to 10% on any portion of your total sales price above $200. Example, for a couch priced at $350, you would be charged a 15% fee for the first $200 and 10% on the remaining $150. That’s a savings of $7.50 per unit. Imagine if you are selling 500 units per month of that product, that’s an extra $3,750 per month in profit with no additional effort!
- Amazon is lowering the per item minimum fees from $1.00 to $.30 across all categories where fees apply. However, the minimum fee for Jewelry and watches have a more significant decrease, from $2.00 down to $.30.
- For products $10 or under in the Baby (except baby apparel), Beauty, and Health & Personal Care categories, the referral fee will be reduced from 15% to 8%. This reduction does not apply to products with a total sales price that exceeds $10.00. We are very interested to see if Amazon is taking into account the listed price, or the purchase price in the $10 threshold. This could give a slight break to those that run external promotions that price their product under the $10 limit.
(Important to note that the total sales price includes the item price PLUS any shipping and gift wrap charges.)
This was new to us, but Amazon is offering potential referral fee reductions:
- Temporary referral fee discounts of up to 70% for lowering your product price.
- 60% referral fee discount when a non-Prime ASIN is added to Seller Fulfilled Prime.
You can get full details on all referral fees here. For the Referral fees with discount opportunities, click here.
Amazon FBA Fee: Annual Increase In Fulfillment Fees
On par with previous years, Amazon has announced increases to their FBA fulfillment fees. If your products fall in the small standard or large standard-size category and are under 10 oz, then you get a free pass on fee increases (enjoy!) . All changes, are highlighted in the image below, including fulfillment cost changes.
You can get full details on all changes to the Amazon FBA fee on Viral Launch’s blog.
Amazon Long-Term Storage Fee Change
One of the biggest changes Amazon has made is with their sneaky long-term storage fees. Effective February 15, 2019, Amazon will no longer charge long-term storage fees for items in storage 181 to 365 days. However, long-term storage fees will still apply for items in storage over a year, at a rate of $6.90 per cubic foot, billed the 15th of every month.
You can get full details on all changes to long-term storage fees here.
If you’ve had a hard time moving inventory or have been using Amazon as an inventory storage option for the last six months, this is a major break! If you’re struggling to rank, we’d be happy to talk through our 2019 ranking strategies. To get notified when we release our brand new 2019 Amazon ranking strategies, text “RANK2019” to 44222! If you’re using Amazon as a storage facility, there are many cheaper alternatives that we’d love to bring to your attention! Shoot us a text with “STORAGE” to 44222 and we will send you more information.
In all, it’s important to stay connected to sources that are keeping you abreast of the changes within the Amazon industry as they come fast and often.
Viral Launch’s Take
If you sell higher end furniture products this could be a game changer for your margin, however, it could also be a quick race to a new bottom now that sellers have more room for margin.
The interest in reducing fees in furniture is also likely a play to steal business away from sites like Wayfair and Walmart which have more traditional businesses in the furniture vertical. It will be interesting to see how this impacts those other retailers. In general this type of competition is great for sellers!
I absolutely expect to see sellers looking to game these new price thresholds by bundling items together to see an aggregated discount on the referral fee (not to mention the savings on shipping).
One trend we continue to see picking up steam among our Amazon customers selling $10m+/year is a move to Seller Fulfilled Prime through the use of 3rd Party Logistics (3PL) providers. This is a topic we will be covering more and more in the new year as we see it as an inevitable next step for many sellers. Seller Fulfilled Prime offers incredible flexibility, opportunity to fulfill to other marketplaces such as Walmart, and in a lot of cases reduced costs while still being able to support same day and two day Prime shipping.
Changes are inevitable and pervasive in the world of selling on Amazon. These fee changes should come as no real surprise as they have become a staple to the start of each new year. Amazon is simply passing along the general fees of operating their massive logistics empire, which makes complete sense. If minor Amazon FBA fee increases are any cause for major concern, then you likely have bigger issues around your unit economics than anything.
Staying up to date on Amazon’s latest changes is imperative to making smart informed business decisions. Make sure to subscribe to our newsletter to make sure we can help you stay ahead of such a dynamic and ever changing market!
Best of luck in your Amazon endeavors!
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