Fulfillment by Amazon, or Amazon FBA, is a service offered to third-party sellers through the platform. Charged per month, the service removes many of the biggest challenges of selling online, with Amazon handling many practical elements such as:
- Product storage
- Packing items
- Shipping orders
- Managing buyer inquiries
- Handling returns
Towards the end of 2022, an announcement was made confirming that Amazon fulfillment fees would be increasing during 2023 for sellers based in the United States.
Are you using Amazon FBA to manage your on-Amazon sales in the USA? If so, here’s everything you need to know about the latest changes to the FBA fee structure for 2023.
Historical Fee Increases
The announcement of the increases to FBA fees came as little surprise. The reason for that is the cost to use Amazon fulfillment has already increased steadily over the past few years. Since 2020, fulfillment costs have risen by 30% on average in response to rising prices globally.
Over Christmas 2022, US sellers were paying Amazon $5.06 per item to manage orders for a product weighing 1lb. The previous Christmas, the cost was just $3.48. Now, prices are rising yet again. However, it’s not all bad news for Amazon sellers.
Which Fees are Changing in 2023?
There are a number of changes to FBA fees scheduled for this year, with new charges being rolled out between January and November. While some costs are increasing, others are decreasing.
So, what exactly can you expect during 2023?
FBA Outbound Fee Rates
Amazon will charge $0.22 more, on average, for order fulfillment through the FBA program. The exact amount that fees will grow by will be determined by the weight of the product. Amazon is also changing how it categorizes weight, shifting to a 0.25lb and 0.5lb scale to calculate more accurate shipping costs with its logistics arm.
Peak Monthly Storage Fees
Fees for product storage during peak season (October to December), will rise by $0.20 per cubic foot for items in non-sortable fulfillment centers. This includes items that cannot fit into a standard size box. In addition, off-peak storage will increase for standard and oversized products by $0.04/ft³ and $0.03/ft³ respectively.
Storage Utilization Surcharge
For the first time, Amazon will charge sellers that are utilizing more space in fulfillment centers than is required to meet weekly sales demand. The exact amount charged will be calculated based on the amount of space that each seller is using. It’s estimated that this new Amazon FBA fee will affect approximately 7.5% of sellers.
Aged Inventory Surcharges
The cost of storing products long term will also be rising this year. For the first time, sellers will need to pay to store items for longer than 180 days (not including apparel and accessories). The fee to store any item for longer than 271 days will increase. It is advised that sellers create a removal order with Amazon to avoid these charges.
Removal and Disposal Fees
Originally, Amazon charged sellers $0.45 per item to dispose of any unsold inventory. In 2023, this cost will increase, with the price for removal and disposal starting at $0.97 per item. However, this price is determined by the size of the item. For larger items, there will be a base rate of just over $13 per unit, plus an additional fee based on weight.
Fees for Apparel Sellers
Some sellers offering clothing and other types of apparel may notice that their FBA fees rise this year. That’s because Amazon is changing how it calculates the shipping weight for these items, using either unit weight or dimensional weight, whichever is greater. However, the cost of processing returns will drop to an average $0.02.
US FBA New Selection Program
The FBA New Selection Program allows sellers with new products to benefit from free storage, removals, and returns processing, along with a rebate on ASIN sales price. The good news is that Amazon is lowering its fee for participation while increasing the rebate from 5% to 10% and extending the period of eligibility.
Small and Light Program Expansion
The Small and Light Program is designed to support sellers of small, lightweight products with reduced shipping and logistics prices, including free shipping for Prime customers. This year, the fees for participation in this scheme will be reduced, and more sellers will be eligible, with the maximum sales price rising from $10 to $12.
Collection Fee Category Removal
From 2023 onwards, Amazon will be removing many of its ‘collectables’ FBA product categories, including coins, entertainment, sports, and cards. This means that collectables sellers will need to recategorize their products into the most suitable remaining category. Some sellers will see their fulfillment fee change due to this.
Reasons for Changes
Amazon themselves, in their November 2022 announcement, acknowledged that they’d made a mistake. It appears that Amazon had started 2022 with an overly optimistic outlook, anticipating a much stronger year as the world returned to normal following the COVID-19 pandemic. However, 2022 didn’t quite go as planned, with gas prices skyrocketing, and economic uncertainty prevailing.
There were some additional surprises in store, too. For example, Amazon notes that some sellers were using ‘more of our storage than we expected’, which prevented the company from accepting inventory from other sellers. This is believed to be partially driven by the remote working revolution, with homeowners choosing to transform their own product storage spaces into home offices and meeting rooms.
The combination of these factors means Amazon has decided to increase its costs for some sellers. However, using Amazon FBA is still expected to work out as being one of the most cost-effective options for shipping. Amazon’s calculations show that, even with the price rises, FBA is still 30% cheaper on average than other available shipping methods.
Fees That Won’t be Changing
An important thing to remember is that not all FBA fees are expected to change this year. For example, liquidation fees will remain unchanged for the time being, along with peak (October to December) storage fees for products in sortable fulfillment centers. This includes products that can fit into a standard sized shipping box.
Some FBA fees are even being removed altogether. Most notably, the fuel and inflation surcharge. This was a relatively recent addition to Amazon’s FBA fees, introduced at the start of 2022 in response to soaring gas prices. However, with the prices having stabilized sooner than anticipated, this fee is now being discontinued.
Is Amazon Still Worth it?
In a nutshell, yes.
Despite the general increase in selling fees resulting from the FBA charge increases, we still believe that selling on Amazon is the smartest move any online retailer can make today. Amazon’s third-party sellers not only have access to a ready-made pool of buyers but to a massive amount of highly valuable first-party data that can help sellers to optimize their listings and ad campaigns to drive improved results.
At ClearAds, our mission is to help third-party sellers get the most from the Amazon platform. If you’re wondering whether Amazon FBA is the right order management scheme for your business, get in touch with our team for more information.