Fulfillment by Amazon (FBA) a whole new fee structure in 2024. This guide contains everything you need to know about FBA fee increases so far in 2024 and the latest trends.
Fulfillment by Amazon (FBA) a whole new fee structure in 2024. This guide contains everything you need to know about FBA fee increases so far in 2024 and the latest trends.
Since launching in 2006, Amazon’s Fulfillment by Amazon (FBA) program has expanded its ability to broker eCommerce, warehouse goods, pick and pack, and complete last-mile delivery to customers. Many emerging brands turn to Amazon as a must-have marketplace and leader in logistics. However, as FBA has expanded – and its services become more essential – FBA costs and fees have increased.
In fact, since shifting to a regional fulfillment model to improve Prime delivery speeds, FBA has become more complicated and in some cases, more expensive for third-party sellers. Beginning February 5, 2024, Amazon FBA will roll out major changes to their rate structure.
If you’re wondering how FBA rate changes will affect your Amazon fulfillment costs, this article is for you.
We’ll answer all of your questions about the cost of using FBA for Amazon fulfillment and whether you should consider changing your current fulfillment model.
How to calculate Amazon FBA Fees?
Does Amazon Fulfillment Include Shipping Costs?
Fulfillment By Amazon (FBA) vs. Other Amazon Fulfillment Options
What Amazon FBA Fees Increased in 2024?
Beyond Amazon FBA: Multichannel Sales Strategies
Additional Guidance On Amazon FBA & Shipping Options
To understand the full impact of FBA fees, it’s important to look at all the costs associated with selling on Amazon. They fall into three main categories.
First and foremost, Amazon views itself as a broker between merchants and customers. For facilitating sales, Amazon charges a ‘referral fee’. In other words, Amazon is ‘referring’ business to brands who choose to sell online. When an Amazon customer purchases an item, the seller pays Amazon a percentage of the item’s total sales price. These percentages vary dramatically and are primarily determined by product category. See Amazon’s full list of referral fees here.
Monthly storage fees with FBA vary depending on the size and type of product being warehoused in an Amazon fulfillment center. They also vary according to the time of year and can increase based on inventory performance. When calculating FBA storage fees, take the following factors into consideration:
Similar to warehousing costs, Amazon’s fulfillment fee is largely based on size and weight. Of note, fulfillment fees take dimensional (DIM) weight into account when calculating shipping fees. Depending on the size and weight of the package, the cost will be calculated based on whichever is greater: the actual weight of the package or its DIM weight (which is determined by multiplying the length, width, and height of the package). Using DIM weight is a standard practice across the shipping industry: adjusting for the cargo space required per unit of larger, lighter weight inventory even if it has the same actual weight of smaller inventory.
Of note, Amazon has added a new inventory placement fee in addition to its standard fees. Sellers can avoid this fee by inbounding products to multiple locations, but managing these inbounds becomes cumbersome with unpredictable pricing based on the LTL spot market.
We’ll cover more about inventory placement fees when we talk about Amazon FBA fee changes in 2024.
In short, the answer to if FBA includes shipping is yes. However, it is important to understand a little more about how Amazon fulfillment works.
With FBA, merchants ship products to Amazon warehouses, where Amazon then takes on the responsibility of fulfilling orders- all under Amazon’s guarantee of 1- to 2-day shipping. Once inventory arrives at an Amazon fulfillment center, Amazon handles the entire fulfillment process from packaging, labeling, pick and pack, and delivery.
So, as an Amazon seller, merchants do not pay for shipping alone. Rather, all of Amazon’s services are wrapped in one ‘fulfillment fee’. These fulfillment fees are broken down by size tiers, taking DIM weight into account.
While Fulfillment by Amazon (FBA) may be the first stop for many Amazon sellers, there are options:
Let’s take a closer look at how these programs work, along with important details for making the right decision:
Fulfillment By Amazon (FBA) pricing is usually more competitive for small, lightweight products or for merchants who only sell on Amazon. However, if any of the following factors are important to your brand growth, you may want to consider an FBA alternative:
Once again, Amazon FBA is changing its fee structure in 2024, and this newest set of fees may be the most complicated yet. Amazon is rolling out the changes in multiple phases.
Understanding the bottom-line impact of these changes will be challenging at best, and with a phased roll-out, it could take the better part of the year to fully understand the impact on margin at a SKU-level. Now more than ever, it’s clear that there is no one size fits all Amazon fulfillment solution for any Amazon seller. The key to protecting margins and customer experience is choosing the right fulfillment model on a SKU-by-SKU basis.
Not sure which Amazon fulfillment strategy best suits your business? Book a free consultation with an Amazon fulfillment expert today.
Merchants can sell on Amazon without FBA– but is it really a good idea?
While Amazon FBA gives merchants peace of mind across their logistics, the fees – along with less control – may be more costly in the long run. However, mid-sized brands can still tap into a Fulfillment By Merchant option, which can then qualify as a Seller-Fulfilled Prime and earn the Amazon Prime badge.
With or without a Prime badge, merchants are seeing the benefits of outsourcing their warehousing and fulfillment to tech-driven 3PLs (also known as 4PLs). This gives fast-growing businesses more autonomy, while still maintaining key benefits such as:
With the right 3PL, merchants can unify their entire eCommerce program to create a multichannel sales strategy. It is now possible for merchants to have a 360 degree view of their entire eCommerce business on multiple marketplaces like Amazon, Google Shopping, Facebook Marketplace, and Walmart Marketplace. This multichannel sales approach is becoming standard, with 99% of small businesses reporting they sell on one or more other online marketplace besides Amazon.