As FBA fee increases prompt Amazon sellers to explore alternative sales channels, we look at what the future holds for Amazon sellers...

Amazon has significantly raised its fulfillment fees over the past three years, causing sellers to consider alternative sales channels. Data from ecommerce intelligence company Marketplace Pulse shows that the company has increased fulfillment fees by more than 30% since 2020. For instance, Amazon announced in August that it would charge $5.06 to fulfill items weighing one pound between October 15, 2022 and January 14, 2023, compared to a cost of $3.48 in 2020. The findings of Capterra’s 2022 Amazon Seller Survey suggest that 99% of respondents who sell exclusively on Amazon plan to diversify their sales in 2023.

In 2023, Amazon fees will increase further

  • In November 2022, FBA announced fee increases for warehouse storage that will take effect in January and April 2023.
  • These increases include a 20 cent per cubic foot increase for peak monthly storage fees for non-sortable items (such as bulky or oversized items).
  • Off-peak storage fees will also increase by 3 to 4 cents per cubic foot.
  • Sellers who have a high volume of inventory relative to their recent weekly sales will be subject to a new storage utilization surcharge starting on April 1, 2023.
  • Amazon will increase surcharges for inventory stored for 271 to 365 days, effective April 15, 2023.
  • On the same date, Amazon will also introduce aged inventory surcharges for items stored for 180 to 270 days, with the exception of certain categories (apparel, shoes, bags, jewelry, and watches).
  • The cost of removing or disposing of items from Amazon fulfillment centers will nearly double.

What is the impact of Amazon fee increase?

  • 36% of FBA sellers believe it is harder for them to succeed on Amazon now than when they first started using the platform.
  • 48% of small FBA sellers say the holiday peak fulfillment fee will make them less profitable, with sellers earning an average of $25,000 per month from Amazon being more likely to feel the impact than those earning more.
  • Over half of FBA sellers with less than two years of experience on Amazon believe the fee will make them less profitable, compared to 41% of sellers with five or more years of experience.
  • In response to the fee hike, 54% of FBA sellers raised their holiday prices.
  • While 31% of current FBA merchants sell on other ecommerce marketplaces, nearly all of them said they would consider other options in 2023, such as Google Shopping, Facebook Marketplace, and Walmart Marketplace.
  • Senior retail analyst Molly Burke from Capterra commented in a blog post that “by making it more expensive for sellers and consumers to participate in its marketplace, Amazon is opening the door to rivals such as Walmart, which offers similarly convenient shopping and selling experiences at a lower cost.”

How to deal with the Amazon fee increase?

To mitigate the impact of the fee increases, some FBA sellers are switching to or adding “Fulfillment by Merchant,” in which they handle fulfillment themselves. However, many FBM sellers find it difficult to maintain “Seller Fulfilled Prime” status, which guarantees one or two-day delivery, without the help of a third-party logistics service. This can be costly and may negate any savings from using FBM. As a result, some sellers are choosing to sell their products on other platforms.

Consultants such as Gartner recommend that merchants be transparent with shoppers about price increases and explain the reasons behind them. While Amazon will likely continue to be a major player in ecommerce, it is important for sellers not to rely solely on the platform for their sales. Some sellers may opt to sell their businesses to aggregators, large companies that are less affected by the fee increases than smaller businesses. However, aggregators have been struggling to raise funds for acquisitions in recent years.