Amazon’s New Holiday Surcharge Takes Another Bite Out of Seller Profits
🚨 Fulfillment costs continue to climb as Amazon has just announced a new holiday surcharge that will be applied to core FBA, apparel, and dangerous goods from October 15, 2022 to January 14, 2023.
Sellers will now pay an average of $0.35 per unit sold via US and Canada FBA on top of all other applicable charges plus peak holiday storage surcharge of $2.40 per cubic foot. 😩
This is the first time the eComm giant has raised fulfillment fees for Q4 in order to deal with soaring inflation. Though on January 15, 2023, the fees will revert back to current levels according to Amazon. 🤞
The Mounting Amazon Fee Stack
We’ve recently been “lovingly” referring to Amazon’s extensive fee increases as the Amazon Fee Stack. What we’re referring to is the series of seemingly small fee hikes that yet are leading to significant increases when all added up. Also known as “death by papercuts”.
Unfortunately, when costs are greater than your total sales, your profit can turn negative, so it’s crucial to learn how much you’re actually paying in fees in order to protect your margins.
According to Marketplace Pulse, Amazon has raised their fulfillment fees by more than 30% since 2020.
It is true that the past two years have seriously challenged the eComm giant, rirst with supply chain disruptions, followed by record-breaking inflation rates. The company also sunk a lot of money into its warehouse expansion efforts to keep up with the surge in eCommerce demand.
“At a certain point, you can’t keep absorbing all those costs and run a business that’s economic,” Amazon CEO Andy Jassy told CNBC in an interview in April.
Dealing with these macroeconomic factors, however, has led Amazon to apply:
- An average of 4.4% fulfillment fee increase for all standard size items and around 28% removal fee hike across all categories in June 2021.
- Approximately 7.5% increase for small standard and 2%-12% increase for all standard and oversize categories in January 2022. Amazon has also started using dimensional weight to calculate the billable weight for large standard-size and oversize items, which contributed to these fee increases.
- 44% to 61% removal fee increase in January 2022.
- 5% fuel and inflation surcharge in April 2022.
- Aging inventory surcharge in May 2022.
- FBA Canada and Mexico remote fulfillment price adjustments in June 2022.
- Holiday peak fulfillment fee, which would increase FBA costs temporarily by more than 30 cents.
Below is a table showing the historical increases for standard size and oversize items. You can easily see how the various fee changes over the years (2019 – 2022) impact your margins.
Standard Size
| Small 6 oz or under | Small 12 oz | Large 1lb | Large 3lbs | Large 3lbs to 20lbs | |
|---|---|---|---|---|---|
| 2019 | $2.41 | $2.48 | $3.28 | $5.26 | $5.26 + $0.38 above the first 3lbs |
| 2020 | $2.50 | $2.63 | $3.48 | $5.42 | $5.42 + $0.38 above the first 3lbs |
| 2021 | $2.70 | $2.84 | $4.25 | $5.68 | $5.68 + $0.30 above the first 3lbs |
| 2022 | $2.92 | $3.07 | $4.52 | $5.79 | $6.13 + $0.30/lb above first 3 lb |
| April 2022 (base rate + 5%Fuel and Inflation surcharge) | $3.07 | $3.22 | $4.75 | $6.08 | $6.44 + $0.32/lb above first 3 lb |
| 2022 Holiday Peak, including fuel and inflation surcharge | $3.28 | $3.43 | $5.06 | $6.60 | $6.96 + $0.32/lb above first 3 lb |
Oversize
| Small | Medium | Large | |
|---|---|---|---|
| 2019 | $8.26 + $0.38/lb above the first 2 lbs | $9.79 + $0.39/lb above the first 2 lbs | $75.78 + $0.79lb above the first 90lbs |
| 2020 | $8.26 + $0.38/lb above the first 2 lbs | $11.37 + $0.39/lb above the first 2 lbs | $75.78 + $0.79lb above the first 90lbs |
| 2021 | $8.66 + $0.38/lb above the first 2 lbs | $12.20 + $0.39/lb above the first 2 lbs | $76.57 + $0.79lb above the first 90lbs |
| 2022 | $8.94 + $0.38/lb above the first 2 lbs | $12.73 + $0.44/lb above first lb | $82.58 + $0.79/lb above first 90 lb |
| April 2022 (base rate + 5%Fuel and Inflation surcharge) | $9.39 + $0.40/lb above first lb | $13.37 + $0.46/lb above first lb | $86.71 + $0.83/lb above first 90 lb |
| 2022 Holiday Peak, including fuel and inflation surcharge | $10.44 + $0.40/lb above first lb | $15.99 + $0.46/lb above first lb | $89.33 + $0.83/lb above first 90 lb |
Clearly, there has been a steady increase in Amazon fulfillment fees since 2019. The pandemic and its aftermath have presented certain economic conditions that induce the online retail giant to introduce multiple surcharges in 2022, making fulfillment cost per item significantly more expensive in August than in January.
While inflation and holiday surcharges are only temporary, the latter, we are predicting, is most likely going to be a yearly fee similar to what major carriers have been doing. In fact, the US Postal Service has already requested a temporary price hike for Q4 to help cover additional handling costs, while the UPS and FedEx are expected to follow suit shortly.
Like the online retail giant, you can’t keep absorbing these increasing fees. Therefore, at some point, you might also have to raise your prices to stay profitable. Or even better, learn some strategies for recovering more of your profit to stay resilient throughout the rest of the year and beyond.
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Chelsea Cohen is an Amazon seller, speaker & consultant. An Amazon expert, her regular clients include 7 & 8-figure sellers. She has been featured on AM/PM Podcast, 7-Figure Sellers Summit, and the Prosper Show & Amazing Summit stages, among others.