Profit margins fell by 60%, and sellers pointed out that Amazon was "stealing" their products

Amazon FBA fees have been greatly adjusted in 2024. In fact, these adjustments are to transfer more operating costs to third-party sellers. With the entry configuration fee and low inventory fee taking effect, a number of small and medium-sized sellers have been unable to bear the pressure.

Amazon's new fees cause sellers' profits to fall

On May 10, Bloomberg published a report titled "Amazon's new charges will deal a 'fatal blow' to sellers", listing the current situation of many sellers after Amazon's fee adjustment, which resonated with many peers. Among the more than 200 comments that have been seen, heated discussions on this incident continue to ferment.

Duncan Freer, who sells weighted blankets and sleep masks on Amazon, expects his profit margin to drop from 20% to 8% (a 60% decline) due to the new charges. One of the fees was implemented in March of this year, which taxes goods shipped to Amazon's distribution centers. Freer said it cost him more than $800 to ship two pallets of products to Amazon, four times more than it cost in October. Amazon has reduced the cost of fulfilling each customer order, but Freer said that only partially offsets the new fees.

Amazon is taking more and more from sellers , complained one Chicago-based Amazon seller with $500,000 in annual sales, adding that the platform's actions are like a kick in the stomach.

Antonio Bindi, a Brazilian seller who has been selling home storage and kitchen products on Amazon for five years, believes that Amazon's fee structure is becoming more and more complicated. Particularly worrisome is a low-volume inventory fee introduced in April that is charged when sellers are running low on inventory. Previously, storage fees were added when slow-moving inventory sat in Amazon warehouses . It became too much for his team of 20, so he cut his 500 products to 400 to simplify operations.

In his opinion, five years ago Amazon was a platform that facilitated the business operations of sellers , allowing sellers to focus on what they were good at, such as creating great products . Sellers could send the products to Amazon and they would take care of everything. Now , sellers need a whole department to handle this complexity , and the cost is prohibitive !

Neil Ayton, a San Francisco seller, sells golf books, yoga gear, and pickleball equipment. One of his most popular products is a yoga stick that comes in 59 inches, the maximum length to avoid higher charges. Earlier this year, he noticed Amazon lowered its size limits, making his sticks an inch longer . Shipping costs for each product soared from $10 to $26, and Ayton lost $3 on every one he sold. He recalled hundreds of yoga sticks from Amazon warehouses and cut an inch off each, but he did so only to minimize his losses , and now plans to wind down his Amazon business.

"Amazon is a bit like teasing you . When the business is running well , you are full of confidence and ready to do a big job, but you never know what surprises tomorrow will bring. " Eaton said helplessly.

The situation of several sellers also reflects the survival status of domestic Amazon sellers, especially after the warehouse configuration fee came into effect, the profits of a large number of sellers have declined to varying degrees. Seller Li Tian said that this fee has a huge impact on him, and his profit has been reduced by about half. It is not only him, but also other peers. Maybe everyone's situation is different and the degree of impact is different, but it is undeniable that more than 90% of sellers will be affected. Small and medium-sized sellers like him are very worried but have no choice.

Unable to pass on operating costs to consumers

In the comment section of the report, many people expressed their views on the matter. One commentator bluntly said: "Amazon is attacking sellers from all angles, raising fees, causing sellers to make less and less profit. This is obviously an attempt to force sellers to close their businesses so that they can sell products directly."

"What people need to understand is that Amazon is in business to get rich, not to help suppliers or sellers get rich. At some point the bubble will burst and sellers will find another platform to replace Amazon. Amazon provides services, not products!" said a colleague.

The more than 200 comments and replies I have seen so far reflect that the impact of Amazon's new fee changes on sellers cannot be ignored. The decline in profits of some sellers reported is also a microcosm of the entire seller ecosystem.

To boost profits, sellers tried to raise prices, but found that this didn’t work. To make matters worse for some sellers, sales were falling as profits fell.

Adobe released online shopping data for the first four months of 2024 in the United States last Thursday . The data showed that in the first four months of this year, American consumers increasingly chose the cheapest products in almost all categories, making it more difficult for sellers to pass on rising operating costs to consumers.

In response to this matter, an industry insider said that he works directly with Amazon sellers, and from a logistics perspective, the large warehouse placement fees that Amazon has recently charged make sense. In essence , when sellers previously sent inventory to FBA, they only had to pay the shipping costs to the initial warehouse, and then if Amazon saw the need to spread the inventory to multiple warehouses across the country , they would incur these costs. This is basically already included in the fees that sellers have already paid.

What is happening now is that, first, when sellers send inventory , they can choose to send the inventory to a single FBA warehouse and pay a “placement fee” that allows them to spread their inventory across the country. Second, sellers can choose to ship from multiple warehouses and avoid the placement fee .

Therefore, if the seller wants to ship, they must make a choice. Save shipping costs and consolidate all goods into one FBA warehouse and pay the warehousing configuration fee, or pay more shipping costs and ship to multiple warehouses. Maybe this is cruel to sellers, but the fact is inevitable unless sellers do not use FBA.

Amazon is the biggest beneficiary of fee adjustments

Amazon said the new fee is intended to spread the cost of distributing its inventory across the United States so that more items can be delivered within a day, which will help boost sellers' overall sales.

"When we announced the new fee changes in December, we estimated that sellers would see an average increase of $0.15% per unit sold," company spokeswoman Mira Dex said in an emailed statement. "As sellers adjust to these changes, we are seeing the actual impact be smaller and more sellers are seeing the average fees they pay to Amazon decrease."

However, many people disagree with this statement. In the view of one seller, Amazon's sales and profits soared during the epidemic. They invested a lot of money in logistics construction. After the epidemic, Amazon's sales did not actually come true, and it was in a dilemma. Amazon's costs exceeded its profits and needed to be adjusted. They took a series of measures such as cost cutting and layoffs in an effort to make more profits.

Sellers in the industry believe that Amazon is the biggest beneficiary of high fees, and this statement is reflected in the company's profits. As of March 30, Amazon's net sales increased by 13% year-on-year to US$143.3 billion; net profit increased by 328% year-on-year to US$10.4 billion. Amazon's sales service revenue was US$34.6 billion, an increase of 36.5% from two years ago, more than three times the growth rate of realization costs, which were US$22.3 billion.

Amazon Web Services sales rose 17%, while sales at its advertising unit rose 24%. The strong performance at AWS masked growing tensions between Amazon and its sellers. Amazon's marketplace model has helped the company continue to grow as economic growth slows by charging for advertising and logistics.

Amazon's shares rose 17% after the release of its earnings report, which showed the tech giant has entered a "new era" in profits.

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