Higher FBA Fees & How To Stay Profitable

This week, Amazon announced an increase in their FBA Fees. This could affect your profits if you don’t have a plan to manage the change - so what should sellers do? Our expert weighed in with advice on how best to pivot and keep business profitable during this time of transition.

FBA Fee Changes - the TL;DR

Amazon is increasing FBA fees due to fuel prices and inflationary pressure. The new fees took effect on January 17th, 2023, replacing the Fuel & Inflation Surcharge Amazon put in place late last year to account for inflation. In short, FBA outbound fee rates increased by an average of $0.22 (which is coincidentally lower than the fee increases announced by other fulfillment and logistics providers).

More fees changes are on the way! Mark your calendars for the following dates:

1. Effective February 1, 2023, the off-peak monthly storage fees for standard-size products will increase.
2. Beginning April 15, 2023, Amazon will make changes to the aged inventory surcharge for inventory stored between 271 to 365 days, increasing the previous charges.

(You can read the full breakdown in fee changes here.)

Where should sellers start?

It’s important to get a clear view of how these fees will impact each product’s profitability. Amazon’s FBA Calculator is a great tool for this. It does the heavy lifting for you – saving you valuable time. (Some products might benefit from the new FBA tiering system thanks to the adjusted weight tiering, so incorporate that in your analysis if it applies.)

So, what should sellers do if their margins are significantly lower, or worse... unprofitable?

Luckily, there are a lot of ways to turn things around! These are the actions I’m taking with each of my products to reduce costs and improve my bottom line:

• Evaluate new suppliers when it’s time to re-order products. This can be a lengthy process, so it’s important to start well before your inventory is depleted
• Revisit where you are storing your inventory as it may make sense to shift products that are currently FBA to FBM. If you do decide to shift some products to FBM, decide the amount of inventory you want to keep in FBA and ensure you don’t go above that to stay efficient.
• Reduce ad spend or re-allocate where you’re spending. Driving customers that are shopping off Amazon (I.e., on Google) to your Amazon product listings improves organic rank, so consider investing in Meta and TikTok ads (where CPCs can often be lower than Google) to fuel the Amazon flywheel!
• Test various pricing strategies to understand what customers are willing to pay for your products.
• Study the competition. If your bottom line is affected, so are your competitors’. Keep an eye on how they react and adjust accordingly.
• Get the basics right. It’s easy to get caught up in data and financials, but don’t forget the essentials: update your content, review keywords, improve your images and video content.

Comment below with any ideas or tactics that have worked for you and follow us to stay in the loop on more tips!

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