Amazon made a big show of the robots powering its warehouses on Monday, with major media coverage. But on Wednesday, it became clear to sellers who use Amazon’s fulfillment service that investing in technology ain’t free: Amazon is raising the fees merchants pay for its FBA service.
Pick & Pack and Weight Handling fees are rising, and Monthly Storage fees are rising for standard size goods, but it’s a new Long Term Storage fee that may be painful for many FBA merchants. And while many sellers may not realize it yet, a change in dimensional weight pricing could have a major impact on certain products as well.
Amazon currently considers long term storage to be 12 months, but it’s shortening the definition to mean 6 months. That means sellers will pay more for inventory that sits around on shelves taking up valuable space. Longtail items may take longer to sell, but tend to have higher margins. Commodity items that have lots of variations could be more problematic, as they have slimmer margins but require lots of selection.
Ironically what makes the new fee particularly painful for sellers is the growth in the number of fulfillment centers. In past years, sellers might choose to send small quantities to FBA. Now, if they send less than a pallet or a case, Amazon often instructs them to break up the shipment.
So sellers hoping to send smaller quantities of a product and restock as needed to try to avoid long term storage fees may find Amazon directing them to break up the shipment to send to multiple warehouses, which results in higher shipping costs (and more packing time and hassle).
Amazon instituted the annual Long-Term Storage Fee in 2011 for units stored in an Amazon fulfillment center for one year or longer. Soon merchants will pay $11.25 per cubic foot for inventory that has been in Amazon FCs for 6 – 12 months; the Long-Term Storage Fee for 12 months or more remains at $22.50 per cubic foot.
Pick & Pack and Weight Handling Fees will increase across all product sizes and weights. The pending fee changes vary per product. However, Amazon said the significant portion of the products Amazon fulfills are Large Standard-Size products weighing 1 lb. or less – the total Fulfillment Fee increase for such products will be 10 cents.
But that’s only part of the story, as the company noted: “Fulfillment Fees do not include fees for monthly storage or other services.” Monthly storage costs are also changing.
Shipping carriers are also to blame for one of the fee changes – UPS and FedEx are moving to dimensional weight fees for ground shipments. Amazon is changing the Dimensional Weight Threshold “to align with announced changes to industry standards”:
For Large Standard-Size Non-Media units weighing more than 1 lb. and all Small, Medium, and Large Oversize units, we will use Dimensional Weight to determine both Fulfillment Fees and fees for the optional Inventory Placement Service if the Dimensional Weight is greater than the unit weight.
For many products, this won’t have a great impact. But look at Amazon’s example of a set of glass jars with a dimension of 16.6″ x 13.3″ x 7.7″ and a weight of 6.6 lbs. It has a Dimensional Weight of 10.2 lbs, rounded up to 11 lb. The fulfillment fees and monthly inventory storage fees for one month would cost $5.78 under the current fee structure, but would result in fees of $7.64 effective February 18, 2015 – $1.86 more in fees to Amazon – a 32% increase.
Amazon said fees for Order Handling, Zero-Fee Fulfillment, Multi-Channel Fulfillment, and FBA Prep Services were not affected by the changes.