Amazon is a business like any other, meaning they’re affected by operating costs and greater macroeconomic changes. That means they need to adjust their operating procedures from time to time, which includes costs for sellers. As preperations for 2024, Amazon announced changes to their Fulfillment by Amazon (FBA), Multi-Channel Fulfillment (MCF), and Referral Fee structures for 2024. Let’s review:
The Evolution of Fees
In 2024, Amazon seeks to align fees more closely with underlying costs while offering sellers greater transparency and control over fulfillment expenses. Emphasizing that these adjustments are generally less than those by other fulfillment services, Amazon positions them as a means to encourage efficient use of its network and share cost savings with sellers.
MCF Fee Increases
Sellers may wonder about the reasoning behind MCF fee hikes. With the increase, Amazon will be able to make significant investments in enhancing delivery speed, maintaining high service levels, and expanding integrations. Fortunately for sellers, on average, the MCF fee increase is lower than that of other carriers.
Shifting Costs to Sellers?
To the question of whether these changes merely shift costs to sellers, that is not the case. The modifications empower sellers to choose where Amazon handles fulfillment aspects, creating incentives for efficient network utilization and cost-sharing. Unfortunately, innovation can be costly, especially as operating costs increase.
Despite increases in fees, Amazon still offers major benefits in the form of other services. Their programs and tools promote the strengths of logistics and fulfillment services for a more efficient and cost-effective supply chain.
What’s the Cost?
Amazon anticipates an average increase of $0.15 per unit sold, significantly less than increases by other providers. Fulfillment fees will remain substantially cheaper than alternatives offered by major logistics providers.
While that is the overall increase, there will be a reduction in referral fees for the apparel category, positioning it as an incentive to drive greater selection and competitive prices for customers.
Amazon expanded the returns processing fee, which will only apply to specific categories with the highest return rates. This change is designed to address operational costs and reduce waste.
The 2023 peak fulfillment fee will conclude on January 14, 2024. However, no information is available about a peak fulfillment fee in 2024.
The Low Price FBA fees for products under $10 will continue, promoting reduced rates compared to standard FBA fees.
Inbound Placement Service Fee
Exploring the newly introduced Inbound Placement Service Fee, Amazon believes placing inventory close to customers improves the speed of those orders, driving more sales at lower transportation costs. To enable more efficient use of their network, Amazon will begin charging separately for inbound and outbound activities.
As a result, Amazon will lower outbound fees while creating new inbound fees that you can reduce or avoid entirely based on how you inbound products. The inbound placement service fee for standard and Large Bulky sized products reflects the cost of distributing inventory to fulfillment centers close to customers. Sellers will have the option to pay reduced fees or even no fee based upon whether you send your shipment to a single location or multiple locations. Amazon’s fulfillment fees will continue to remain an average of 70% less expensive than two-day shipping methods offered by other major third-party logistics providers.
Starting March 1, 2024, when you create a shipping plan, you can select one of two inventory inbound placement options.
- Premium service: You can send your inventory to a single Receive Center or Fulfillment Center, and Amazon will spread inventory across their network on your behalf for a fee. The fee may vary by inbound location, with higher fees for shipments sent to locations on the West Coast versus other parts of the country.
- Discounted service: Send your inventory to multiple locations yourself for a reduced fee or no fee. The discount will depend on several factors, such as the number of shipments and locations you send your inventory to.
Amazon’s Returns Processing Fee
The expanded returns processing fee will apply starting June 1, 2024 to categories other than apparel and shoes, and it will only apply to products with the highest return rates relative to other products in their category. This fee will address the operational costs of products with very high returns and reduce waste. We will share the specific return rate threshold for each product category ahead of the June 1, 2024 rollout of this fee.
To prepare for these changes, starting May 1, 2024, you can review your return rate on the FBA Customer Returns Dashboard, updated weekly as returns come in, allowing you to monitor your returns and return rates. The minimum thresholds for each category will also be published on May 1, 2024.
MCF fee changes are effective February 5, 2024 and will apply to all orders shipped through MCF in the US. If a product was ordered before 12 a.m. (PT) on February 5, 2024, but shipped on or after February 5, 2024, the 2024 MCF Fulfillment fees will apply. If products are shipped before 12 a.m. (PT) on February 5, 2024, and after 12 a.m. Pacific Time on January 15, they will be charged the 2023 MCF fulfillment fee. If products are shipped before 12 a.m. Pacific Time on January 15, they will be charged the 2023 MCF holiday peak fulfillment fee. To learn more, go to 2024 Fulfillment fees for Multi-Channel Fulfillment Orders.
Another important note is that MCF fees will increase by approximately 3.5% on average across all delivery speed options, starting February 5, 2024. Visit the help page to understand the rate changes that may impact your business.
An Expert’s Opinion
Knowing how fee changes can shape a brand’s strategy for the entire year, we wanted to provide expert guidance from our Senior Director of Strategy & Insights, Laura Pattison.
“As Amazon fees continue to increase, it is important to recognize, if not focus, on profitability for your brand’s health. Ensure you fully understand the cost of goods sold at the product level and the margin needed to sustain success. From there, you can calculate your efficiency goals and advertising budget.
Don’t let increased fees drive you to an unprofitable place — adjust your strategy, and check out our SmartACoS tool if you need additional profitability-focused support.”
For more information on recent Amazon updates, check out our breakdown of their Live Chat launch.