On November 17, Amazon quietly announced that third-party sellers that use the FBA fulfillment service will see significant increases to store their products in its warehouses in the beginning of January. Since nearly 60 percent of the items sold on the marketplace come from third-party sellers, this increase is going to impact many different businesses.
An Increase of Storage & Removal Fees
All sellers pay referral fees (a percentage of the total price, shipping cost, and any gift-wrapping charges) — those will not change when the new fees hit on January 17, 2023.
But, sellers who use Amazon’s FBA fulfillment service will see some significant increases in the new year. This includes:
- FBA outbound fee rates will increase by $0.22 on average.
- Peak monthly storage fees will rise by $0.20 per cubic foot for its non-sortable network.
Off-peak storage will rise by between three-to-four cents per cubic foot.
- A new storage utilization surcharge will apply to sellers who store a high cube of inventory relative to the cube of their recent weekly sales, effective April 1, 2023.
- Amazon will increase to surcharges applied to inventory stored between 271-365 days, effective April 15, 2023.
- Amazon will introduce aged inventory surcharges on inventory stored between 180-270 days, excluding products in the following categories: Apparel, Shoes, Bags, Jewelry, and Watches, effective April 15, 2023.
It is not just storing merchandise that will cost more — Amazon also announced it will nearly double the cost of removing items from Amazon fulfillment centers.
For example, to remove a two-pound standard-sized item from Amazon’s fulfillment center, it currently costs $1.14. — In January, it will cost $2.20 to remove or dispose of the product.
The Impact on Third-Party Sellers
“With the increased fees, we will have to restructure our company infrastructure a bit, along with the products we carry. We will raise the price of all our products. Depending on the product, it will vary pretty widely, but the minimum will likely be about 30-40%,” Gav Kwok, an ecommerce seller primarily through Fulfillment By Amazon (FBA) wholesale, said.
“The other option is we will have to reevaluate which products are bringing in the most profit and remove the ones that are not as profitable. This solution will only work if all the sellers keep their prices about the same or a little bit more. We will have to see what happens and come up with a better strategy then.”
Kwok believes that Amazon’s fee increases will make it incredibly difficult, if not impossible, for smaller third-party sellers to compete with larger sellers since the small businesses are already operating on thin margins. They cannot afford to drop their margins more unless they raise their prices, which means they would then have to rely on the other big sellers to raise their prices by an equal amount.
The Impact on Ecommerce Shoppers
“I believe that this will largely affect the consumer side even more so than the seller side,” Kwok said. “A lot of consumers will see a significant price increase on all of their favorite products or every item that they buy and might chose to go to a store to buy them, instead.”
Right now, many shoppers think of Amazon as the place to go for some of the lowest prices, but when they see these increases due to the FBA fees, they might turn to in-store shopping to pay less. This could mean a large shift of lower-middle-class families going back to retail stores. Amazon may also receive backlash or lower traffic in the next five-to-six months after implementing this policy.
While the news of fee increases does not bode well for third-party sellers on the marketplace, it also means we could see an uptick with in-store purchases in 2023. With inflation continuing to raise the prices of merchandise across the board, shoppers are increasingly turning toward cheaper options. They may find both the price and the item they are looking for at brick-and-mortar stores.