Understanding Amazon’s Rise in Warehousing Fees
The Financial Impact of Amazon’s Warehouse Pricing
You may have already felt the pinch in your pocketbook: Amazon has changed its FBA (fulfillment by Amazon) fees. This refers to the price charged to vendors to fulfill and deliver their products. It’s a big deal because Amazon’s warehousing fees impact the final cost of the hundreds of thousands of products Amazon carries, which hits the wallets of both the suppliers and buyers. It’s also notable because this is the most significant fee increase Amazon has rolled out within the last five years.
Understanding these new warehouse fees is somewhat tricky, because the fee structure itself also changed substantially. It’s a case in some instances of comparing apples to oranges. However, the main takeaway is that all size categories are now affected by the rate hikes. This wasn’t the case last year, and hasn’t been the standard in years past. That means every supplier – from those that carry paperbacks to office chairs – will feel the impact. Amazon is also significantly increasing the cost of shipping by dimensional weight (weights estimated by the height, width, and length of packages).
Just exactly how much will shipping costs increase? For those shipping large standard size or small oversize items, it’s about a 14% and 16.5% increase, respectively. For medium standard size and large standard size items, the increase is approximately 8% and 11% respectively. Finally, for any dimensional weighted items, it’s a whopping 22.6% increase on average.
One bright spot? Smaller item shipping fees are only seeing minimal rate hikes.
What about Amazon storage fees, you ask? Those are increasing too. Storage fees refer to the amount Amazon charges sellers to house items in their warehouse facilities. For standard items, storage fees are increasing by 8%, and for oversize items, they’re increasing by 12%.
Amazon is also changing how it calculates long-term storage. Rather than charging on a bi-annual basis (in which case, you could go six months until you were officially a “long-term storage” user), Amazon is now charging on a monthly basis.
Peak/non-peak pricing is also going away. Sellers can take this as a positive or negative; while there won’t be “non-peak” pricing (lower than peak), there will just be a standard, consistent pricing for the entire year. So, if you were seeing some savings during non-peak months, those will disappear.
Since dimensional weighted items are subject to the sharpest rate increases, it’s probably a good first step to identify how much of your inventory falls into that category, and see how the dimensional weight forecasts compare against these products’ actual weight. There may be some stark disparities you will want to adjust. Know that, unpleasant though they may be, Amazon rate hikes will likely continue to roll on next year. So, it may be a good idea to budget ahead for increases as you do your financial forecasting and anticipate those margins.
For more on shipping updates, be sure to check out our Econo-Courier blog!
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