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Amazon Sellers Get Wakeup Call with New FBA Fees

Online sellers who didn’t get the memo about Amazon’s overflowing warehouses got a wakeup call from the FBA team on Tuesday. With an announcement of new storage fees, sellers who use the Fulfillment By Amazon face some tough choices in the coming months. And that’s significant given the fact that nearly a quarter of all Amazon units sold are fulfilled through FBA.

The message, which came in the form of new fees, was basically this: clear out slow-movers, and make sure you have popular items in Amazon warehouses in the last two months of the year. That’s because storage fees are increasing for the months of November and December (standard rates will resume in January).

But inventory management is a tricky business, and not wanting to stop the flow of products coming to its warehouses, Amazon is actually lowering storage fees for the month of October and is lowering outbound fees for November and December.

One seller said if merchants understood how to buy inventory, Amazon would not have had to make this change – “now we all have to pay,” the seller said.

The problem as Amazon spokesperson Tom Cook explained it to EcommerceBytes: there were items such as 2011 calendars filling up space in Amazon warehouses – items that were unlikely to sell at all. He said the goal is to make sure the inventory that’s in Amazon FCs in the fourth quarter will sell during the holidays.

EcommerceBytes has been reporting on Amazon’s capacity problem since January – and as we noted in Newsflash in late April, Amazon’s Chief Financial Officer called demand from FBA sellers for space in Amazon warehouses “a high class problem to have” and he signaled at the time the company’s intention to work with sellers on inventory stocking and timing.

FBA helps add selection to the marketplace and fuel Amazon Prime, a key advantage and a high priority for the company. Close to 50% of Amazon’s total paid units come from third-party merchants – and nearly 50 percent of total third-party units on Amazon are now fulfilled through Fulfillment by Amazon. Another factoid: Fulfillment by Amazon shipped over one billion units on behalf of sellers in 2015.

The new fee structure during the holiday months are designed to give sellers an incentive to use FBA wisely. Amazon also ran a recent promotion in which it allowed sellers to remove inventory from warehouses at no cost – for the entire month of April, FBA waived fees for any removal order for return or disposal of inventory stored in US fulfillment centers.

Amazon’s Cook called it a “spring cleaning” and said it went really well – “Sellers took advantage of it.”

Sellers also have to deal with new requirements when sending in inventory to FBA, and some were not pleased that the requirements were going into effect during the busy fourth quarter. “To ensure that shipments to Amazon are received quickly and accurately, effective November 1, 2016, you must provide box content information for each box sent to a fulfillment center.”

But those who can’t or don’t want to comply can pay fees to Amazon instead – something one seller called “fair.”

Regarding Amazon’s fulfillment center capacity issues, one seller made the following prediction: “Should the combination of higher LTS (Long Term Storage) fees and the soon-to-be implemented monthly inventory storage fees for the holidays not be sufficient to deter sellers from tying up a lot of warehouse space with slow-selling products, we will see something else come down in the future that will be even worse.”

Should sellers be worried Amazon doesn’t have enough inventory space? “We do have space, so there’s definitely not a lack of space right now,” Cook said.

“Last year we were really full. This year, we’re trying to get ahead of it and help sellers plan accordingly so we don’t have any space constraints,” he said.

You can find the letter Amazon emailed to sellers on Tuesday on the EcommerceBytes Blog along with more information showing the new rates and requirements.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.