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The Best Way to Handle Amazon FBA Fee Changes

Being the last to know is the worst. Especially when it comes to major news that affects your life as much as Amazon FBA fee changes.

But no need to worry; we're here to keep you informed and help you adapt your strategy for success.

So here's what you need to know:

Effective October 2016, Amazon is changing its Q4 FBA fee structure to combat capacity concerns at its fulfillment centers.

The company broke it down it like this:

“In 2015, FBA volume, growth rates, and inventory levels were high. As a result, our U.S. fulfillment centers were full in November and December 2015.

FBA inventory that did not sell until well into 2016 contributed to this issue. To avoid potential capacity constraints during the 2016 holiday season, we are increasing our fulfillment capacity.

Additionally, we are changing our FBA fee structure to encourage all sellers to send in and store products in November and December that are likely to sell by the end of 2016. To give you time to plan for these changes, they will begin to take effect on October 1, 2016.”

So, put another way, Amazon wants to discourage FBA sellers from shipping hard-to-sell items to its fulfillment centers during the holidays this year.

That way, it won’t have to turn away top-selling FBA products because slow-movers are taking up valuable storage space.

Amazon Q4 2016 fee changes: The details

That brings us to the fee changes.

But, surprise!

The first one isn’t bad at all.

That’s because monthly inventory storage fees will decrease from $0.72 to $0.54 per cubic foot for standard-size items and from $0.57 to $0.43 per cubic foot for oversize items.

That’s a 25 percent plunge for standard-size items’ storage and just under a 25 percent plummet for oversize items’ storage for October.

Wow, that sounds great, you’re thinking.

It sure does.

Too bad the happy feeling isn’t set to last.

That because for the last two months of the year, Amazon is doubling the fee for oversize storage. Worse yet, it's more than tripling its monthly inventory fee for standard-size items.

You're not reading that wrong.

There's going to be a HUGE price hike from $0.57 to $1.15 per cubic foot for oversize items and $0.72 to $2.25 per cubic foot for standard-size items during the busiest months of the year.

Here's a look at how Amazon presented these FBA fee changes:

Amazon FBA fee changes Q4 2016 - monthly inventory storage chart

But there is a silver lining for the Amazon FBA fee changes during the busiest months of the year:

The brutal fee hike in November and December inventory storage fees will be offset by a reduction in weight handling fees between 10 and 25 percent.

Larger items will see greater decreases in weight handling fees, so keep this in mind when planning your holiday product mix.

Here are charts with all the weight handling fee changes, as seen on Amazon:

Amazon FBA fee changes Q4 2016 - reduced weight handling chart

Amazon FBA fee changes Q4 2016 - reduced weight handling oversize chart

An expert's take on the Amazon FBA fee changes

Jeff Coleman, Director of Account Management at CPC Strategy, sums Amazon's holiday FBA fee changes up like this:

“[A]s we’ve seen in recent years, Amazon is getting increasingly sensitive to their own capacity constraints and wants to penalize sellers who take up valuable warehouse space with items that aren’t selling (hence the dramatic increase in storage fees during November & December).

If an item sells quickly, this will make it cheaper to use FBA; if an item doesn’t sell, your per-unit FBA cost will increase significantly.”

Yet another reason to put more time into product research. You want to make sure to only source items that seem likely to fly off the shelves.

Which brings us to...

The best way to handle Amazon FBA fee changes this holiday season.

Now that you’re ready for the holiday fee adjustments on Amazon, the question becomes:

How do you adjust?

The answer is automation.

Nick Sandberg, Marketplace Program Development Manager at CPC Strategy, alluded to this in his reaction to the holiday Amazon FBA fee changes:

"[M]ore changes, more increases for slow-movers (storage fees), and decreases rewarding sales (weight handling) but plenty of time to prepare. Those 3x and 2x fee increases could really add up quickly and eat up a seller’s profits in Q4. 

This presents challenges to most sellers. Strategies for slow inventory and FBA recommendations for all types will be a very important thing for Q3.”

That being said, look into inventory management platforms like ecomdash and Stitch LabsThey can help you automate your sales orders, purchasing, shipping, drop shipping, and listing management.

Any hours of work you can outsource to automation will free up time to pursue high-ROI activities that can't benefit from automation.

Activities like product research and savvy sourcing can push you ahead of the competition during the season when sales matter most.

Perhaps even more crucial is to consider automating your price changes with repricing software

The benefits of using an automated repricer extend far beyond saving you time and helping you max out your profits:

It can also help you clear your inventory to keep you from getting hit with high storage fees.

According to Informed.co user David Rifkin:

“Another favorite feature I have in the tool is the Match Price setting. It helps me rapidly liquidate any of my stagnant inventory by automatically matching the lowest competitor price.”

For truly stubborn SKUs, you can price even more aggressively by beating your lowest competitor’s price, either by a set amount or percentage.

If you’re hoping to dodge crippling financial hits from Amazon FBA fee changes this holiday season, this strategy could be useful.

Preparing for Amazon FBA fee changes with automated repricing

Now that you know about the Q4 FBA fee changes and how they'll affect sellers, plan ahead.

Use this time to come up with a holiday product mix that makes sense within the new fee structure. Then, source those products as fast as you can and ship them off to Amazon.

Afraid you don't have the time to do all that?

Start using an automated repricing tool to free up your time.

Take time to research and experiment with different software as soon as you can by taking advantage of free trials.

And understand upfront that automated repricing tools come in varying levels of power and depth, including a free basic repricer from Amazon and our powerful pricing intelligence platform featuring customizable and algorithmic repricing along with robust data analytics.

The repricing tool you choose will come down to several factors, such as your number of SKUs, the level of power and functionality you desire, and whether you want your software to look as great as it performs.

The right automated repricer will reduce your burden significantly by adjusting your listings to their optimal prices relative to your competition continuously and without you needing to monitor anything after initial setup.

Emotion is removed from the selling equation, and only important factors that affect your bottom line are taken into account when a repricer is setup correctly.

During the holiday season, using a tool like this can be the difference between disappointing sales figures and record-breaking numbers.

Start your free trial with Informed.co