Thursday, May 19, 2016

Musings on Amazon Q4 Storage Fee Increases

Yesterday, Amazon emailed their sellers regarding changes to FBA storage fees during Quarter 4.  First of all, Kudos to Amazon for giving us plenty of time to adjust to this change.

You can see a summary of those changes and their thoughts at Tagging Miles and Miles to Memories.

If you missed the email, here is a link to the full changes

As you can see, the fee increases are actually quite significant, some by more than 3x the normal storage fees.

As a carrot, they are lowering the fees associated with actually fulfilling orders during quarter 4.

The sum total of these fees are a big incentive to sell things fast.  Cheaper to sell and more expensive to store.  Amazon's warehouses are getting fuller and they want stuff out and I think this is a great way to do it.  If it affects their profitability, sellers will likely start lowering prices more quickly to avoid fees.


These new rules really affect large and inexpensive items the most.  These fees are based on size and have nothing to do with the price point.  A $2 fee on an iPad is annoying.  A $2.50 fee on a $14 toy (if it is larger than an iPad) can be catastrophic.

Sellers will be lowering their prices to avoid these fees.  This is great for customers. Customers go to Amazon for convenience and price.  Anything that enhances the veneer of always great prices is a plus in my book since it will continue to drive customers to Amazon.  It may mean less profitability per item, but it might mean more volume of sales and fewer price comparisons.

My Plans

Quarter 4 is an amazing time to be a seller.  Even if you don't anything the rest of the year, you can sell during quarter 4 and make a boatload.  It's not uncommon for people to do 1/2 to 2/3 of all their sales during quarter 4.  Every time you walk into a toy store, you will be able to find tons of items that are selling for more on Amazon.

I don't plan on having these fees affect me too much for more expensive items ($30+).  The cheaper the item is, the faster it will sell on Amazon since it is a relatively good price to other store.  If you have to pay an extra $2 on a $100 item, but you can sell it for extra $20 more as it is closer to Christmas, that's worth it in my eyes.

We may see wild price increases as sellers struggle to keep things in stock.  This already happens during quarter 4 but it may be accelerated this year.  I may be totally wrong about this.

This will affect my plans for larger, inexpensive items.  I want those out fast!

In addition, and this should always be your goal, I want almost no seasonal inventory left at the end of the quarter so the vast majority of your items will come in during November/December and be sold in December before the storage fees can kick in.  It will really affect the items you send in October to have ready for December or have just been hanging around for a while waiting for prices to increase in Q4.

Box Level Contents

Amazon is also making it mandatory to provide box level information November 1st, 2016 or you will begin to pay a $0.15 per unit fee in November/December and $.10 per unit during other months.  

While annoying, it isn't a major headache and if it means Amazon will be more efficient in receiving my inventory I am more than happy to comply.  I've heard horror stories of people's inventory waiting for more than 10-15 days and missing the holiday season.  That's a big deal and hopefully this decreases some of that.