Another major change, many fees for sellers will increase!

It's the end of the year again, and Amazon has recently updated its new policies such as logistics costs and sales commissions for 2024. The updated policies will take effect in January 2024.

At first glance, the policy update seems to be a concession from Amazon to sellers, but overall, sellers' costs are still rising. If there is too much inventory, long-term storage fees will be charged, and if there is too little inventory, low-volume inventory fees will be charged. In addition, in the QA section of each surcharge page, there is a sentence "If you use awd, you will not be charged these two surcharges." I'm afraid that Amazon's calculations are heard by sellers as far away as Temu.

What Amazon talks about so much is only the surface, but for items such as warehouse utilization surcharges and pre-processing service fees, although Amazon did not elaborate, they are also raising prices. I'm afraid the sellers are already sweating profusely at this moment.

In order to cope with the impact of prices on other platforms, Amazon tried to fight back through repeated policy changes. However, policy changes made N times a year did not bring about a surge in orders for most sellers, but instead continued to clear sellers out of the table.

This time, Amazon may want to take back the market by relying on the clothing category. Reducing the commission of the clothing category is a good thing for some sellers, but the overall commission reduction will inevitably increase the possibility of Amazon sellers engaging in price wars to grab orders. It may be more difficult for sellers who want to achieve their performance, and sellers who want to stay at the table will inevitably increase their stakes.

Title 1: Amazon policy update, these fees are going to increase again

In the early morning of December 6, Amazon updated its logistics fee and sales commission policies in the United States. Overall, sellers may have to pay two additional fees in some cases. At the same time, Amazon did not elaborate on the storage utilization surcharges and other fees. Although some fees have been reduced, it seems that there is not much discount, and the degree of reduction is no different from no reduction.

Two new surcharges have been added , and the warehouse utilization surcharge is also increasing.

1. Warehouse configuration service fee (newly added)

If the seller cannot fully follow the system's recommendations for warehousing, that is, if the inventory is insufficient or the warehouse location cannot meet Amazon's distribution requirements, Amazon will transfer the seller's inventory and charge relevant fees: an average of $0.27 per item for standard-sized items and an average of $1.58 per item for large-sized items. (Effective March 1, 2024, U.S. time)

This is the first time Amazon has mentioned this fee. Amazon introduced this policy to make money, or perhaps it is trying to change the current situation of frequent warehouse overflows and uneven warehouse utilization in the western United States.

As we all know, the western United States is close to China, with short shipping time and low freight rates. Many sellers choose to ship goods to warehouses in the western United States. In addition, some bad freight forwarders, in order to make a profit, send goods from remote areas to nearby warehouses in the western United States, resulting in frequent warehouse overflows in the western United States, especially during peak seasons.

According to this policy, if sellers accept Amazon's recommended warehouses, i.e., warehouses in the east and central US, Amazon will charge less or even no fees. But if sellers still want to ship to some popular warehouses, i.e., the west coast, they must pay corresponding surcharges. Of course, sellers can also choose Amazon's distribution network or global logistics to avoid this fee.

2. Low inventory fee (new)

This fee is charged for standard-sized items and applies to items whose inventory levels are too low for a long time compared to their sales. Sellers can avoid paying this fee as long as they maintain inventory for more than four weeks based on the sales of the product. ( Effective April 1, 2024, US time)

If the product sells well but the inventory is small, you will be charged a low-volume inventory fee; if there is too much inventory and it cannot be sold, you will be charged a long-term storage fee or even a redundancy fee; if the product sells well but there are many returns, you will still be charged a fee. No matter how much inventory there is, you will be charged the same fee. No one can escape, and one can only sigh that Cheng knows how to play games.

As for the low inventory fees, if the product sells well or even out of stock, it also means less expenses on commissions and advertising, which is a good thing for sellers. But for Amazon, the revenue in this area may be reduced, so the low inventory fees policy came into being.

"If I don't restock my products after they're sold out, will I still be charged an additional fee?" one seller questioned whether there will be a standard for out-of-stock charges in the future. A small seller in the toy category said frankly that he was afraid of redundancy during the peak season and generally did not have much stock. Once this policy came out, it had a great impact on his cash flow.

In comparison, the sellers of seasonal products suffer the most. They have to restock and restock every year, and they also have to pay overdue storage fees, which undoubtedly tests the sellers' inventory management level. Some industry insiders have suggested that seasonal product sellers can increase the number of historical supply days if they have sufficient inventory in the early stage and the average inventory of the past 30/90 is large.

However, some sellers believe that there is no need for everyone to be pessimistic, because there are not many SKUs that meet this condition, the product inventory turnover days are less than 28 days (average daily inventory divided by average daily sales), and this level has been maintained for the past 90 days and the past 30 days. It is necessary to be cautious when launching products and sell them quickly.

Of course, Amazon’s tricks haven’t stopped yet. In the QA section below the two surcharge pages, there is a sentence “If you use awd, you won’t be charged these two surcharges.” This is a blatant promotion to get sellers to use its a** and a**.

3. Warehouse utilization surcharge, etc. (increase)

Some of the policies mentioned above are just what Amazon elaborated on in this policy, but items including warehouse utilization surcharges, pre-processing fees, and incoming defect service fees have also released annual updates.

Among them, the warehouse utilization surcharge was changed from 26 weeks to 22 weeks, and higher fees were charged for different levels; the overage surcharge for 270-365 increased from 3.8/4.2 to 5.45/5.9, an increase of about 1.7.

Except for companies with good inventory control, most companies have over-age inventory. This year, many sellers were charged high fees for over-age inventory and excessive storage weeks. It can be said that Amazon's actions directly hit the pain points of sellers.

In addition, return processing fees for products with high return rates and costs related to redundant inventory will also be updated annually and are also on the rise. I wonder if current sellers are already sweating profusely.

Some costs have been reduced, but it is impossible for Amazon to make concessions

"They raise prices aggressively but lower prices very frugally" is the most appropriate way to describe Amazon at this moment.

1. Logistics and distribution costs

Amazon mentioned in its announcement that sellers will enjoy lower delivery costs, that is, Amazon logistics delivery fees have been reduced, among which standard-sized items will be reduced by an average of $0.20 per piece; large-sized items will be reduced by an average of $ 0.61 per piece . However, according to previous data, the fee increased by $0.3 during the peak season.

2. Goods are shipped in original packaging

Products that meet the requirements can be delivered directly in their own packaging. Amazon will provide a delivery fee discount of $0.04 to $1.32 (depending on the size and weight of the product) through the original packaging delivery plan . A seller revealed that a customer previously complained that they received a transparent bag, but Amazon did not provide outer packaging. After checking the order, there was no delivery fee reduction. Sellers need to pay attention to this.

3. Monthly storage fee

From January to September, the monthly storage fee for standard-sized products during the off-peak period has dropped from an average of $0.87 per cubic foot to an average of $0.78 per cubic foot, a decrease of $0.09 per cubic foot. Here, sellers need to note that this only applies to standard-sized products during the off-peak season. When the price increases during the peak season, it increases by a few cents, but now the fee reduction is a few cents. When converted into RMB, it seems that it has not decreased.

In addition to the above, there is another less obvious point, that is, products priced below $10 will automatically receive low-price FBA rates, and the delivery speed is the same as standard FBA. At the same time, products priced below $10 can continue to enjoy an additional commission discount of $0.77 per item. It can be seen that Amazon is still competing for the low-unit-price market.

Overall, although some of Amazon's policies have lowered related fees, the reduction after implementing these changes is not enough to offset the increase. It is expected that the average fee for each item sold by sellers will increase by $0.15. It can be said that the cost saved by the price reduction is added elsewhere, and the overall shipping cost of sellers will still increase next year, and they will also face multiple challenges such as inventory management.

In addition, Amazon also mentioned in the announcement policies such as Amazon logistics rates for low-priced goods and preferential plans for new product warehouses , which seem to confirm the fact that Amazon is screening and reshuffling sellers through a series of adjustments , accelerating the elimination of the weak while fighting against competing platforms .

Title 2: To compete with platforms like Temu, Amazon will place its hopes on clothing sellers?

Looking at the current US e-commerce market, it has changed from a monopoly of Amazon to a situation where multiple companies are competing for supremacy. This can be seen from the fierce attacks launched by Temu, TikTok, and SHEIN as soon as they entered the market. Especially during this year's Black Friday, they shared most of the orders in the US market, and frequently reported the good news of explosive orders, while Amazon sellers could only sigh at the declining order volume.

To break this situation, Amazon may also be pinning its hopes on clothing sellers.

In this adjustment, Amazon has reduced the commission for clothing products. Specifically, for clothing products priced below $15, the sales commission will be reduced from 17% to 5%; for clothing products priced between $15 and $20, the sales commission will be reduced from 17% to 10%. The sales commission for other product categories will remain unchanged. (Effective on January 15, 2024, US time)

As soon as the news came out, many clothing sellers were delighted ↓

It's rare to see it, but better than nothing.

It is not such a loss to clear the goods at a low price.

After so many years of price increases, has Amazon finally found its conscience?

Reducing the commission for clothing is indeed a good thing for clothing sellers. However, some sellers hold a different view: "If everyone's commission is reduced, it is equivalent to no reduction. It is hard to say whether the number of orders will increase or not. It is true that sales will most likely decrease."

The reduction in commission ratio means that the profit margin of sellers will increase, but for clothing, which is a bloody category, the commission ratio will still be high, or even higher. In order to grab more orders, sellers may continue to cut prices, and it is predicted that the price of products in this category will be lower next year. The overall decline in the price of clothing under $20 on the Amazon platform will not only impact small and medium-sized sellers, but may also have an impact on the clothing category of platforms such as Temu.

It can be said that Amazon’s reduction in commissions for clothing products is not for the sake of sellers, but to fight against the platform.

Especially in recent times, Temu's stock price has soared, which has had a severe impact on Amazon. Clothing is the main battlefield of platforms such as Temu and SHEIN, and most of the products are priced only one-third of Amazon's. Amazon wants to grab traffic and pry its foundation, so it has to fight with price. Industry insiders speculate that it is not ruled out that Amazon will increase the "commission reduction amount" to US$25 or even US$30 in the future.

But Amazon also has disadvantages, that is, the shipping cost of FBA is higher than that of centralized air transportation from China to the United States, and the time limit is also longer. Especially for new products, the goods sent by Temu may have been received by American consumers, but Amazon’s warehouse may still be full or in internal transfer, so that sellers cannot start selling them for a long time.

This also results in Amazon launching new products slower than Tmeu and other platforms. In the clothing category with a short window period, Amazon may seem a bit outdated.

Sellers do not agree with Amazon's low-price strategy, and instead believe that Amazon cannot shake the foundation of platforms such as Temu. Assuming that Temu continues to implement a strategic subsidy policy for losses in the next few years, Amazon's price cuts and logistics improvements may not help.

However, Amazon's move to reduce commissions may benefit some sellers, namely those with products priced at $14.99 and $19.99. Previously, many sellers were stuck with the low-price delivery fee of $12. After Amazon changed the low-price delivery fee, many merchants either chose to charge $9.99 or raised their prices. Currently, the price of $9.99 is in full bloom. It can only be said that in the end, sellers will still choose to lower prices, and Amazon will still make the profit.

"It costs $3 more to return a product now than before," a clothing seller said helplessly. It is understood that the sales commission for returns in this category was 20% before, but now it is charged according to the size, which is a lot higher than before.

On the other hand, Amazon may also be accelerating the pace of screening sellers through this move. By reducing commissions, adjusting fees up and down, and other measures, sellers will once again start a price war. In this war, a wave of sellers will be eliminated, and the platform will match more resources to the powerful sellers who remain.

In the third quarter of this year , Amazon posted a net profit of $9.9 billion, which can be described as an explosion. But who is the biggest contributor to this profit? It is the sellers' advertising fees, shipping fees, and storage fees. Only when these fees of sellers are off the charts can Amazon be profitable.

"Amazon's current profits are not as good as other platforms," ​​a seller said frankly, and he is considering whether to shut down. In fact, the seller's words also reflect the current situation of sellers on the Amazon platform. Most big sellers' profits are still the same as in previous years, or even dropped a lot. The profits of small and medium-sized sellers can be imagined.

Although the commission of the clothing category has been reduced, other fees are rising, especially under the high advertising fees and refund rates, which is undoubtedly a stab in the back for sellers. If this continues, sellers are likely to enter an era of meager profits or even spend more than they earn.

Title 3: With intensified competition and disappearing profits, how can sellers break through in 2024?

It is less than a month until the end of 2023. Have you achieved the performance goals you set at the beginning of the year? I believe that most Amazon sellers will give a negative answer. This is indeed the case. Relevant data shows that in the first half of this year, more than 60% of sellers’ revenue and profits were both lower than expected.

Since the beginning of this year, more voices heard in the industry are declining profits and orders. Even in the peak season every year, many sellers feel more directly that orders are plummeting, so much so that many sellers lament that this year is the most difficult year since they started working.

"In the past, I could earn at least 50 yuan per order, but now I can only earn about 20 yuan," this is the current situation of many sellers. Sellers are the most direct victims of profit decline. Sales may have increased, but profits have not increased; sales decline, and profits fall off a cliff.

It seems that it has become a consensus in the industry that prices are being cut in many categories. Not only are the top sellers slashing prices to boost sales, but many small sellers are also forced to sell at half price to survive. It is undeniable that low-priced products have great advantages, but this advantage is not absolute. The consequence of selling at low prices is loss of profits.

Weak overseas demand , competitors' attacks from both sides, and rising logistics costs, sales commissions and advertising expenses have made it difficult for many sellers to survive, leaving them with little profit at the end of the year.

In such a harsh ecological environment, sellers cannot change the status quo and can only adapt themselves. As the saying goes, "survival of the fittest", this wise saying applies not only to nature, but also to Amazon sellers.

Do not launch products blindly, and optimize your product portfolio. If you want to consolidate your fortress in the cross-border e-commerce track, products are always the core, and good products can reduce many unnecessary troubles for sellers. Of course, in 2024, when the overall environment is not clear, sellers should not launch products blindly, and focus product research and development on products with guaranteed profits and added value. They can also focus on categories with reduced commissions.

Maintain a reasonable inventory level and flexibly adjust logistics strategies. Amazon's new low-volume inventory fee is undoubtedly a test of sellers' inventory management capabilities. Good control can naturally reduce a considerable amount of expenses, while poor control is a charity contribution to Amazon. Adjust inventory according to sales dynamics to avoid additional costs, and use the flexibility of warehousing configuration service fees to reduce logistics costs.

Operate flexibly and take advantage of existing new policies. Being familiar with the ever-changing platform policies and being able to flexibly adjust according to the changes is one of the essential skills for operations. Amazon has launched new product warehouse discount plans and Vine plans, and operations can also actively participate in them based on actual conditions to increase brand exposure and product reviews.

Policies are constantly changing, and sellers must respond flexibly if they want to survive.

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