Navigating Amazon Fees: Why Seller Fulfilled Prime May Be Best

by Matt Snyder

DALLAS – Attention all Amazon sellers, ongoing fee changes are set to impact profitability and add significant logistic complexity. In his recent shareholder letter, Amazon CEO Andy Jassy emphasized Amazon’s focus on reducing operating costs, specifically logistics.

While Amazon did announce lowered fulfillment fees, by an average of $0.20 for standard-size products and $0.61 for large bulky items, there has also been an introduction of new fees related to fuel inflation, size tiers, inbound placement, and low inventory fees. Collectively, these changes will add significant cost to sellers along with added complexity.

Steps Sellers Should Take to Manage Fees Product Size Tiers: Size really does matter, especially when it comes to product packaging. With the introduction of new sizing tier fees, sellers have an opportunity to improve profits by optimizing package size and weights. For example, a client at my agency (Brands Excel) cut their fees 60% by reducing their package size from ‘large bulky’ to ‘small standard’. This was accomplished by changing the product design, allowing for significant reduction in packaging length.

Sellers should perform regular audits and check for optimizations to reduce package size and weights, even a quarter inch adjustment could provide savings. A tool our agency has found beneficial for auditing product sizing and fees is Sifted marketplace intelligence. This service allows us to verify the product dimensions and size tier and submit reimbursement for incorrect charges.

Sustainable Packaging: Ships in Product Packaging To improve sustainability efforts, Amazon announced a new model—“Ships in Product Packaging” (SIPP) initiative. The program aims to reduce packaging waste by offering sellers reduced fees between $0.04 and $1.32 per ASIN. Adjustments to packaging may be needed and sellers should properly test for compliance before enrolling in this program (see link for program qualifications).

Inbound Placement & Low Inventory Fee The convenience of sending inventory to a single Amazon warehouse and letting Amazon take care of the rest is no longer viable. The added inbound placement fee, $0.27 per unit for standard and $1.58 per unit for large-bulky adds significant cost to sellers. This fee can be avoided by sending shipments to multiple fulfillment centers, which also increase logistics costs. Sellers who opt to use Amazon Warehousing & Distribution (AWD) will pay no inbound fee, which adds increased value to the inventory storage service.

Additionally, for sellers Amazon has added a low-inventory fee, charged to sellers who fail to maintain on-hand inventory to meet 28 historical days (learn more here, at this link). This fee is another attempt to reduce fulfillment fees when sellers carry low inventory which inhibits Amazon’s ability to distribute products across the FBA network. This change emphasizes the importance for sellers to maintain accurate inventory planning to avoid this fee. Sellers that are enrolled in auto-replenished by AWD will not be charged this fee.

Storage Utilization & Long Term Sellers aiming to avoid low inventory fees by increasing inventory must also consider new storage utilization surcharges. This new granular storage utilization ratio attempts to prevent sellers from overstock inventory compared to recent sell-through rates. Combined with low storage, Sellers must be more accurate than ever with their inventory planning and forecasting. We have found the inventory forecasting tool from Kapoq (pictured here at Prosper Show 2024) to be beneficial.

Combined, these fee changes create a more complex environment for sellers, where navigating without the proper planning or tools could lead to significant loss in profits.

Control Cost With Seller Fulfilled Prime Seller Fulfilled Prime (SFP), relaunched in October 2023, and enables sellers to ship Prime orders directly from their own facilities—offering enhanced control over inventory and costs. This is particularly beneficial for sellers with multiple sales channels or those experiencing seasonal sales spikes during the holiday season. To ensure full control over warehouse operations and meet performance eligibility metrics, it’s crucial for sellers to conduct a thorough audit of the SFP program to evaluate costs and operational demands before enrolling.

Initial Steps 1) Evaluate Your Logistics: Effective management of SFP requires maintaining multiple warehouse locations. For many, partnering with a third-party logistics provider (3PL) is a cost-effective strategy that offers scalability. We recommend speaking with the teams at Davinci Micro Fulfillment & Ware2Go. 2) Cost-Benefit Analysis: Compare potential SFP expenses—including warehouse, software, carrier, and personnel costs—against traditional Fulfillment by Amazon (FBA) fees. 3) Trial Run: Begin with a small selection of products to assess the impact on your costs and operations.

Eligibility: To participate in SFP, sellers must meet certain prerequisites, such as a solid track record of fulfillment and low cancellation rates. Successful completion of a 30-day trial, achieving specific delivery metrics, is necessary to continue with SFP.

To start the trial, you must meet all of the following pre-qualification criteria:

• have a domestic US address as your default shipping address;
• have an Amazon Professional selling account; and
• meet the following criteria over the past 90 days: – Self-fulfilled at least 100 packages – Cancellation rate less than 2.5% – Valid tracking rate greater than 95% – Late shipment rate less than 4%

Pass the Seller Fulfilled Prime trial Once the trial has started, you must meet the following requirements to pass the trial and become an enrolled SFP seller:

• participate for 30 days;
• ship 100 or more packages from Prime trial orders;
• an on-time delivery rate of at least 93.5%;
• a valid tracking rate of at least 99%; and
• a seller-initiated cancellation rate of less than 0.5%.

Delivery speeds per size tier as viewed by Prime customers of:

As Amazon aims to continue increasing delivery speed for customers, sellers will be accountable for these expenses. Sellers will need to be committed to monitoring and optimizing their operations and logistics to maintain profitability.

Matt Snyder is founder and CEO of Brands Excel, a full service Amazon agency. Prior to founding Brands Excel, Snyder was vice president of Online Retail for Vari, where he operated Seller Fulfilled Prime for 7 years. Snyder consults with various sellers to evaluate and launch SFP services.