Amazon recently announced that 2022 will see an increase in their FBA fees. As an Amazon FBA seller, this might be cause for concern as you’re probably already paying a considerable margin of your profits to keep your Amazon FBA brand afloat.
Before you worry or consider an FBA exit, let’s determine why Amazon is increasing its FBA fees and the extent to which this will affect your business.
Amazon’s FBA seller fee changes every year, and 2022 is no exception. However, the announcement was made several months later than usual, leaving sellers with little time to understand the implications and make business decisions.
As usual, Amazon attributes the increase to “reflect greater levels of service and additional investments required for larger fulfillment volumes.” And while we applaud Amazon for making things a tad bit easier for sellers and buyers, the question remains, how will this change affect sales?
Amazon assures its FBA sellers that their sales would remain largely unaffected. After all, the cost is still 30% lower than orders fulfilled outside of Amazon FBA.
Despite this, many sellers are still raising concerns over the continued increase in fees. Even though Amazon states that their fee increase is necessary to lessen the time and effort it takes to fulfill orders, the proposed change is still a hefty hike.
Considering FBA seller fee increases annually, it may sound like Amazon FBA is becoming more and more expensive for sellers. However, the fact remains that Amazon FBA deals with many financial issues on a seller’s behalf, such as staffing, warehousing, and fulfillment costs.
Yes, these fees cover the seller’s end of the deal. So yes, the fee increase is necessary to keep Amazon profitable and ensure that they continue to provide customers and sellers with promised services.
Amazon representatives continue to stress that the 2-3% on average price increase shouldn’t affect Amazon FBA brand owners exponentially. In fact, the platform continues to be one of the most affordable when it comes to providing logistics to Amazon sellers.
Furthermore, there’s also the benefit of having a business that is not only more visible on Amazon but more attractive to a potential Amazon aggregator or Amazon roll-up firm.
The changes mostly affect larger and heavier items. Not sure if your business falls into this category, and if it does, what can you do to offset some of these costs? Let’s take a look.
One of the fastest ways to lose money on Amazon FBA is by listing a product with the wrong dimensions. This is crucial now, as the new fee varies according to the size and weight of your product. If Amazon thinks your product is larger or heavier than it really is, then you’re paying more fees than you need to.
To avoid this, take the time to measure and re-measure your products and correct any irregularities in product specifications on Amazon. This way, you know that you haven’t made a mistake and your products are added to the right category. While you’re doing this, target the medium overweight products. Why? Simple: It’s the category with the steepest hike.
Take a closer look at the Amazon FBA fee tiers, and you’ll see very minute differences between each of the categories. You can leverage this to your benefit by changing your packaging.
Not sure what this means? Let us explain.
While physical stores can opt for bigger, more utilitarian bags and boxes, the same cannot be said of Amazon FBA products. Instead, you’ll want packaging that is as small and lightweight as possible.
Furthermore, if you can do away with any heavy fillers, stuffers, and cards, then do so. These minor changes could affect your product’s overall bulk and weight, which can help place your product in a lighter category, thus attracting lower Amazon FBA fees.
If possible, consider dismantling your product before dispatching it—this size reduction should help you save on the FBA fees. Don’t forget to send your customers assembly instructions, though!
Every Amazon FBA seller knows that the fulfillment center charges fees for products that must be prepared before shipping. To cut back on these costs, you’ll want to pre-package and prepare everything, so it’s ready to head out of the facility the moment it’s ordered.
Just make sure you have the right labels in place. Otherwise, your products might be rejected, or they may not be sorted properly. One way to reduce the risk of error is by hiring an Amazon FBA prep company.
These businesses specialize in prepping Amazon FBA products while charging a small fee. And yes, more often than not, they’re more affordable compared to Amazon FBA’s in-house services.
Take stock of what you already have at the Amazon FBA warehouse and see if you have products that are classified as “unfulfillable.”
Unfamiliar with this term? Products that aren’t in good enough condition to be sold are classified as unfulfillable. These can be damaged or defective products or products that are returned in less than ideal conditions. If you leave them in the Amazon warehouse, they will only take up space and cost you money. Either find a way to sell them elsewhere or dispose of them per the manufacturer’s suggestions.
Another way you can address unfulfillable items is by contacting the manufacturer. If these defects come from the shipment, then you may be able to file for a refund. Worst case? You can return the products to the manufacturer and get a partial refund.
Amazon isn’t perfect. Sometimes, they overlook charges or make changes that aren’t exactly right. If you want to ensure every cent you’re paying is accounted for, keep a close eye on your invoices.
Track your sales and relative fees yourself. Should you notice any discrepancies, file a claim. It may seem like a tedious process, but trust us, it’s a necessary one.
Wondering why? Simple: It may look like you’re losing a few dollars right now, but in the long run, you might end up paying over thousands of dollars in fees that you don’t even have to pay.
The great thing about filing claims is that Amazon is usually reasonable. You won’t have to worry about resolving these claims unless you don’t have enough evidence.
Amazon encourages its sellers to keep their inventory trimmed to the necessities to maximize its storage space. We recommend the same strategy if you want to cut back on your Amazon FBA fees.
One thing you can do to make sure you’re not paying too much to store inventory is to look at your products and see if any are taking up too much space and not moving along quickly enough. That’s not to say that you should remove a slow-moving product if it is a major contributor to your profit margins.
If you find a product that’s been occupying your shelves for far too long, then it may be time to pull them out. If you decide to take this route, don’t leave product disposal to Amazon. Considering how strict Amazon is about optimizing inventory management, there is a charge for this service as well.
As a last resort, you may want to consider raising your prices to account for the increased fees. But before you do, make sure you take stock of your competition and your target audience. You should also consider switching suppliers—that way, you can accommodate the FBA fees without offloading them onto your customer.
Ask yourself questions like:
Ultimately, it all depends on how well you handle the situation and whether or not you’re able to find that sweet spot that allows you to maintain a good profit margin without losing your customers.
The Amazon FBA fee increase in 2022 may sound like it’ll take a huge toll on your business. To be honest, if handled incorrectly, it definitely will. That’s why it’s important to make smart choices to ensure that you don’t lose a lot of profit when the Amazon FBA bill arrives.
We hope this article has helped you understand the changes coming in 2022 and how you can overcome them as an Amazon FBA seller. If you have any questions, suggestions, or concerns, don’t hesitate to reach out to us by leaving a comment below.
On the other side, if handling Amazon has become too stressful consider preparing for an Amazon exit. The first step in exiting your Amazon FBA is finding out its true value and how much you can get at the end of the sale.
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