Insights

Amazon Fee Changes: The Good, the Bad, and the Ugly

MicrosoftTeams-image (4)

Back in December, Amazon announced that they would be delaying annual fee adjustments as a gesture towards businesses affected by the pandemic. That delay has come and gone, and the retailer has set a date of June 1 for the rollout of fresh referral and FBA fee changes.

Here’s a high-level overview of what you should know:

  • Changes will impact categories and size tiers differently
  • Heavier, bulky products will be significantly impacted by removal and disposal fees, which means having a liquidation strategy is more important than ever
  • Amazon will reduce the returns processing fee for apparel/shoes and eliminate returns and processing fees for watches, jewelry, luggage, handbags, and sunglasses
  • A properly organized catalog and optimized e-commerce packaging will be the key to minimizing negative financial impacts

 

What’s with the fee changes?

Fees have always been a part of doing business on Amazon, and annual fee changes have become typical over the last several years. In 2020, the retailer raised its fulfillment fees by 2.9% to 6.1% depending on the product size, and this year’s changes look about the same.

In an online statement, Amazon prefaced fee changes with a reminder that 2020 was an expensive year. To keep up with surging consumer demand brought on by the pandemic, the company expanded its square footage and absorbed COVID-related costs.

“While many other companies passed along costs through surcharges and fee changes in 2020, we [Amazon] absorbed over $5 billion in COVID-related costs on your [referring to independent sellers] behalf, and are absorbing billions more in the first half of 2021,” Amazon said in an online statement about 2021 fee changes.

Despite the challenges of 2020, the company says its fee increases are modest and in line with or below industry averages.

 

Where will fee changes have the most impact?

Fulfillment and removals will be impacted for almost everyone. Bulky, heavy products will see the largest cost increase in removal and disposal fees. Those costs can be minimized through the optimization of liquidation and rerack strategies but will still have an impact.

Proper catalog management will be an essential part of reducing costs. Because Amazon treats categories differently, it’s important to ensure that each product is being properly categorized and associated with the correct fees. These details can sometimes go overlooked during listing creation and end up costing brands in the long run. Categories can also change over time depending on listing performance and should be routinely checked to keep a clean catalog.

 

Getting creative with packaging can lead to huge savings

In 2018, Netrush worked with Enzymedica — a leading digestive supplement brand — on downsizing their packaging to be more efficient while still providing a positive customer experience.

Initially, a small supplements bottle was being shipped in a full-size box, which was costly, inefficient, and didn’t help with sustainability.

Netrush helped Enzymedica downsize their packaging through the innovation of using a pouch instead of a bottle.

Results:

  • 57% reduction in weight
  • 47% less materials used
  • 63% reduction in transport

 

Getting comfortable with change

Amazon is a dynamic sales channel that requires a unique approach and constant management. Fee changes aren’t new and have been updated annually for the last several years. This year’s fee changes will take effect June 1, which means brands have two months to react and modify their strategies accordingly. Then, something else will change. It’s all a part of selling on Amazon, and while it can be difficult to manage, the opportunity it presents makes it well worth it.