FBA Fee Increases in 2023 – FAQ & Solutions

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 this article you will find answers to these FAQs about FBA and FBA percentage fees:

• What Percentage Does Amazon FBA Take?
• Does Amazon Fulfillment Include Shipping Costs?
• Fulfillment By Amazon (FBA) vs. Other Amazon Fulfillment Options
• What Amazon FBA Fees Increased in 2023?
• What Are The New Amazon Low-Price FBA Rates?
• Beyond Amazon FBA: Multichannel Sales Strategies
• Additional Guidance On Amazon FBA & Shipping Options

What Percentage Does Amazon FBA Take?

Amazon FBA fees are calculated based on a percentage or a sliding scale flat rate depending on the type of fee. These fees occur at three key points during the eCommerce process: point of sale, warehousing, and fulfillment.

Below are common fees for Amazon sellers and how the percentage that Amazon FBA takes is calculated.

Referral Fee

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 Fulfillment by Amazon a percentage of the item’s total sales price. This percentage can range from 8-20% based on the product category with a minimum of $0.30 per unit for most product categories. 

Monthly Storage Fee

Monthly storage fees with FBA vary depending on the size and type of product being warehoused in an Amazon fulfillment center:

• For standard-size items, the fee is generally $0.69 per cubic foot for the first month, and for each subsequent month, $0.48 per cubic foot. 
• Products that are large but extremely light, such as pillows, carry a lower price tag of only $0.25/cu. ft./month. 
• Oversize items (larger than 18 inches x 14 inches x 8 inches) are $1.20/cu.ft. for the first month, then become slightly cheaper at $0.90/cu.ft./month.
•  Items that are considered hazardous materials or require additional handling have more expensive fees (anywhere between $2.40 and $5.00/cu.ft./month). 

Along with monthly storage, Amazon has made several fee increases in 2023.

Fulfillment Fee

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.

Note: Amazon recently made changes fulfillment fee called Low-Price FBA which may affect Amazon sellers previously in their Small and Light program.

Does Amazon Fulfillment Include Shipping Costs?

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.

FBA Shipping Costs vs. Other Amazon Fulfillment Options

Fulfillment By Amazon is not the only way that merchants can partner with the world’s largest eCommerce marketplace. In fact, there are three ways- FBA just being one of them- that fast-growing businesses can sell through Amazon:

• Fulfillment By Amazon (FBA): The most “full service” option from Amazon, with Amazon handling each step of fulfillment and managing customer service.
• Fulfillment By Merchant (FBM): With FBM, sellers are in charge of storing their own inventory in Amazon’s fulfillment centers. When orders come in, Amazon handles the processing and shipping to customers. However, those who choose FBM drop the Amazon Prime badge.
• Seller Fulfilled Prime (SFP): This fulfillment solution requires that merchants pass Amazon’s evaluation process and meet stringent requirements, including shipping accuracy and 1- to 2-day shipping in order to qualify for the program. Once deemed a qualified seller, SFP merchants maintain an Amazon Prime badge.

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, you may choose an alternative to FBA if any of the following are true:

• More control over brand packaging
• A more direct customer management program
• Deal in products deemed “oversized” by Amazon (typically larger than a shoebox)
• Are interested in multi-channel selling (using multiple eCommerce marketplaces)

There are ways to scale growing brands both with and without an Amazon Prime badge. Merchants who are interested in Amazon alternatives to FBA and multi-channel selling should find a 3PL partner that facilitates an automated warehouse network.

What Amazon FBA Fees Increased in 2023?

In November 2022, Amazon announced several Fulfillment By Amazon price hikes which went into effect in January and April of 2023:

• Peak monthly storage expenses jumped 20 cents per cubic foot for oversized or bulky objects. 
• Warehouse storage fees outside of peak season for all inventory were increased by 3 to 4 cents per cubic foot. 
• Increased rates for products warehoused for 180-270 days (deemed ‘aged inventory’) with exceptions for some apparel and luxury accessories.
• Amazon introduced even higher fees for products warehoused for 271 to 365 days.
• Amazon nearly doubled the price of disposing product from its warehouses.
• Following in their footsteps of 2022, Amazon continues to pass along costs of inflation to merchants- and ultimately, customers.

Reading into these incentives, Amazon’s message is clear: merchants are being asked to optimize their inventory with hyper-accuracy: from SKU count to inventory turn rates. Meanwhile, Amazon is also capitalizing on its dominance as a go-to eCommerce marketplace by charging 2-3x storage rates during peak season.

What Are The New Amazon Low-Price FBA Rates?

The latest Amazon fee changes were announced on June 29 and will take effect August 29, 2023. The fee changes affect merchants who were selling under Amazon’s Small and Light program—items sold for less than $12. However, Amazon has now ended the Small and Light program, which will be replaced with Low-Price FBA Rates.

The former Small and Light program came with a trade-off between merchants and Amazon: items sold for less than $12 had reduced fulfillment fees. These reduced FBA fees helped merchants avoid razor-thin margins or even selling at a loss. However, the cost to merchants was deprioritization of their inventory with slower shipping times. 

Here are the basics every growing business should know about the New Amazon Low-Price FBA Rates:

• Change in price point. Low-Price FBA will be applied to items priced below $10 (previously $12).
• More expensive shipping. Brands will pay approximately $0.30 more to ship each item priced under $10 than they had previously. However, this will still be below the standard FBA fee. 
• Faster, more reliable shipping. Items under Amazon’s Low-Price FBA rates will have the same priority as other items with regular, faster FBA fulfillment. 
• No more enrollment process. Cutting out some procedural redtape, merchants no longer need to enroll in a program- items will automatically qualify for Low-Price FBA based on their sell price.

For emerging mid-sized businesses who sell on Amazon, there are pros and cons to these changes- especially for those who sell items between $10-12. Those brands will now face full FBA fee rates as opposed to the Small and Light program with the threshold at $12. Regardless, reading between the lines, it’s clear: shipping time is king.

Beyond Amazon FBA: Multichannel Sales Strategies

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:

• Fast and free 1- to 2-day shipping for customers
• Brand control
• Inventory control
• Streamlined fulfillment

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.

Additional Guidance On Amazon FBA & Shipping Options

Want to learn more about Fulfillment By Amazon (FBA), Amazon shipping alternatives, or what an automated warehouse network looks like with a 3PL? Speak with a Ware2Go expert today who can talk you through the process, step-by-step.