As with any ecommerce platform, on Amazon, fees are an unavoidable fact of life. And if you don’t have a strategy around how to minimize or possibly even eliminate some of these fees, they can easily swallow up any profits you may have otherwise enjoyed.
One of the more obvious areas to use caution where fees are concerned is with packaging. As you probably already know, your product’s packaging should be no bigger than absolutely necessary. Just one millimeter too large on any side, and you’re bumped up to the next size (and fee) class. (Link to packaging requirements blog) There’s a dozen more areas just like this to keep an eye on.
To be successful on Amazon it’s crucial to be aware of the tools and programs, and understand how they work. Many times, the more granular the level of understanding the better. Amazon fees, and their periodic structure changes, may be an annoying fact of life. But they’re also an invitation to streamline, optimize, run a tighter ship, and generally think like the well-organized business that Amazon expects its successful sellers to be.
If you’re an FBA seller, it’s a great idea to periodically review your shipping settings. This way you ensure they’re as efficient and optimized as possible, for the landscape as it stands now. For example in early 2024, Amazon made some key changes to its FBA fee structure. This included a per-unit “Inbound Placement Fee” for each unit shipped to FBA warehouses network-wide. This fee is in addition to whatever shipment charges you pay directly to your carrier. But there are options to be aware of that can help minimize and even eliminate some fees.
What Is The FBA Inbound Placement Fee?
The fee change comes with some potential good news. From the Seller Central page: “Starting April 15, 2024, on average, we will decrease FBA fulfillment fees for standard-size products by $0.20 per unit and for Large Bulky-size products by $0.61 per unit. This is the same date that the first inbound placement services fees will begin to be charged.”
While it’s fantastic to see decreased fees in one area, it’s important to know what the FBA Inbound Placement Fee will do to your profits going forward. Perhaps even more important is determining if you can avoid this fee altogether by streamlining your settings and shipment process.
More from the Seller Central page:
“When you create a shipping plan, you can select one of the following inventory inbound placement options:
Minimal shipment splits
You can send your inventory to the minimal number of inbound locations, generally to a single location, for a fee, and we will decide on your behalf how to place the inventory across our network. The fee may vary by inbound location—for example, there may be higher fees for shipments sent to locations in the West versus other parts of the country.
Partial or Amazon-optimized shipment splits
Send your inventory to multiple inbound locations yourself for a reduced or no fee. The reduced fees will depend on the number of shipments and inbound locations that you send your inventory to. For instance, if your shipping plan qualifies, you can select the inbound placement option to send your inventory to the optimal number of inbound locations recommended by Amazon, generally four or more locations, and pay no fee. If you select the placement option in which you send your inventory to a partial number of inbound locations, generally two or three, you will pay a reduced fee.”
Avoiding Amazon’s Inbound Placement Service Fee
The trick to avoiding Inbound Placement Fees is a shipping plan that qualifies for Amazon-optimized shipment splits.
This often means a high number of units moving to and through Amazon warehouses, and may mean reconfiguring how your products are packaged by the supplier. For obvious reasons, this approach may not align with every business’s needs.
More from Seller Central: The table below outlines the per-unit FBA inbound placement service fees. When you create your shipping plans, you’ll see a fee estimate for each available inbound placement option. The fee may be adjusted periodically within the ranges listed on Table 1 and Table 2, and will vary based on the following:
- Item size: Whether the item is small standard, large standard, or large bulky.
- Weight: Unit weight for small standard. The greater of dimensional weight or unit weight for large standard and large bulky.
- Number of locations tier: Minimal, Partial, or Amazon-optimized shipment splits.
- Inbound location: The fee range will vary by inbound location (that is, the location of the fulfillment center). For instance, there may be higher fees for shipments sent to inbound locations in the West versus other parts of the country.
Consider the following three areas to help guide your inventory management optimization strategy:
Current Case Configuration
Assess how your products are currently configured into cases. If it doesn’t currently meet Amazon’s requirements, you’ll want to plan ahead for the optimal case configuration before reordering from your supplier.
Sales Velocity
The product should be selling at a rate that justifies increasing your inbound quantity without accumulating excess inventory that incurs storage charges.
Meeting Amazon’s Requirements
To qualify for zero-fee Amazon-optimized shipment splits, the requirements are different for every brand and product. Within the shipping plan tool, you’ll want to manipulate the case quantity and shipment (units) quantity to dial in your shipping strategy, then work with your suppliers to pack your inventory in case sizes that reduce or eliminate Inbound Placement Fees.
How is the Inbound Placement Fee different from other FBA fees?
The Inbound Placement Service Fee is applied when you create your inbound shipment to the FBA warehouse network. This is before you’ve made any revenue. Other FBA fulfillment and referral fees are charged at the time of sale.
This means a portion of your cash is tied up, and this fee affects all units shipped to FBA, including those designated for Multi-Channel Fulfillment (MCF) orders from platforms like Shopify or other marketplaces.
The impact can be significant, as it negatively affects your cash flow right out of the gate. So it’s crucial that brands take the time to understand the implications and plan for this fee.
Mastering Amazon’s Fee Structure
Navigating Amazon’s fees, particularly with the constant changes, requires a strategic approach to maintain profitability. By understanding the nuances of these fees and proactively optimizing your packaging, shipping plans, and inventory management, you can mitigate the impact on your bottom line.
Regularly reviewing and adjusting your strategies to align with Amazon’s evolving requirements will not only help you avoid unnecessary costs but also position your business for sustained success in a competitive marketplace.
Effective planning and an in-depth understanding of Amazon’s systems are key to thriving on the platform. This is where we excel at Troveres. With decades of collective experience on Amazon and off, strategy is our specialty thanks to our intricate understanding of the entire ecosystem. How can we help you? Contact us.
Learn from the best in the business – FREE!
Amazon Marketplace is essentially a large network of programs all running at once. As a seller or brand, the challenge in succeeding on Marketplace is knowing which programs to focus on, to target the KPIs that make sense for your growth. The Amazon Channel Manager Handbook helps you create a Marketplace road map for your unique business, with program details that matter to the goals you’re trying to achieve. Click here to download your free copy.
