It’s about to get more expensive to use Amazon’s fulfillment services, especially for merchants who sell apparel, and it looks like FBA rate increases are now an annual event. The company explained the latest Fulfillment By Amazon fee hike on the rising costs of storage, fulfillment, transportation, and customer service. The fee hikes take effect on February 18, 2014.
In addition, Amazon FBA will introduce an apparel service in May 2014 to reflect the added requirements for handling, storing, and packing apparel products. The FBA rate card for the Apparel Handling Service will be available in February.
Currently merchants must seek pre-approval in order to sell Clothing, Accessories and Luggage on the marketplace. Amazon also requires all Clothing, Accessories and Luggage products to be new with tags; it specifically prohibits the sale of irregular, seconds, or used products. Sellers who are approved to sell apparel can use FBA.
Do new FBA rates for apparel indicate Amazon will be opening up the category to more sellers? Amazon spokesperson Erik Fairleigh said he could not speculate on that, but he said nothing has changed about the restrictions for selling in the clothing category.
Not all fees are increasing, and Fairleigh confirmed there are no fee decreases in the new rates.
Fulfillment fees, which do not include fees for storage and optional services, are made up of three components: the Order Handling Fee, the Pick & Pack Fee, and the Weight Handling Fee. In addition to publishing charts with the new fees, Amazon explains how merchants can evaluate what the FBA fees are for individual products in a FAQs section on its announcement page (available only to sellers who are logged in to the site).
Amazon provided some examples of how the fulfillment-only fees would impact various products.
- A Small Standard-Size Media (CD) would go from $1.42 to $1.48 (4.23% increase).
- A Large Standard-Size Media (book) would go from $1.46 to $1.57 (7.53% increase).
- A Large Standard-Size Non-Media (headphones that weigh 1.8 lb with an outbound shipping weight of 3 lbs) would go from $3.37 to $3.75 (11.28% increase).
On top of that, monthly storage fees will increase almost 7%, from 45 cents per cubic foot from January – September to 48 cents, and from 60 cents from October – December to 64 cents per cubic foot.
Amazon chose to inform sellers of the new fees two days after Cyber Monday at the peak of the holiday shopping season, and it appears sellers are too busy to spend much time figuring out how the changes will impact them.
When it announced fee hikes the same time last year, Amazon included a laundry list of improvements it had made over the past year, and cited Amazon Lockers and same-day shipping in select cities as product innovations.
This week, the news has been full of reports about Amazon’s research into airborne delivery drones – the reality of drones is years away and was not included in this year’s list of improvements to FBA, which did include the following three developments:
- More Prime members: More Prime members means higher sales for FBA sellers. Millions of customers have joined Amazon Prime and now enjoy unlimited Free Two-Day Shipping on FBA products; Amazon now ships more than twice as many items with Prime than with Free Shipping (formerly known as Super Saver Shipping). With expanded delivery options such as Sunday delivery in select locations, more customers can receive their orders sooner.
- New features and programs: With the introduction of the Partnered Less-Than-Truckload/Full-Truckload carrier program, you can access discounted inbound shipping rates. New reports and tools make it easy to preview your FBA fees by product and to see your inventory movements. The new Shipment Creation Workflow was launched to make preparing and shipping your products a simpler process, and new Selling Coach recommendations help you identify sales opportunities.
- Global selling opportunities: FBA is available if you want to list your products in Canada, the U.K., and our other marketplaces. As a U.S. seller, you can use FBA around the globe to provide locally fulfilled, Prime-eligible offers as well as local-language customer service.
Rate hikes for fulfillment services can mean a desire to be more efficient about the use of warehouse space, as when Amazon instituted storage fees for inventory that was sitting too long in its fulfillment centers in May 2011, one of the most disruptive changes to fees with which sellers have had to cope.
Amazon.com is known for its operational efficiencies, and with nearly 100 warehouses worldwide, it has to make them efficient. In its filings with the SEC under Risk Factors, Amazon states, “If We Do Not Successfully Optimize and Operate Our Fulfillment Centers, Our Business Could Be Harmed.” In the filing, it outlines concerns about optimizing fufillment centers to avoid excess or insufficient inventory or fulfillment capacity. Also, “A failure to optimize inventory will increase our net shipping cost by requiring long-zone or partial shipments.”
“As we continue to add fulfillment and warehouse capability or add new businesses with different fulfillment requirements, our fulfillment network becomes increasingly complex and operating it becomes more challenging. If the other businesses on whose behalf we perform inventory fulfillment services deliver product to our fulfillment centers in excess of forecasts, we may be unable to secure sufficient storage space and may be unable to optimize our fulfillment centers. There can be no assurance that we will be able to operate our network effectively.”
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Update 12/5/13: Article was updated to include Amazon’s list of improvements to FBA in 2013.