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Amazon's fulfillment fee increases

Amazon Seller Topics
Amazon fulfillment fees have been increasing over the last 4 years.
YEAR Ratio (NET PAY over SALES)
2013 65.6% (i.e. for every $100.00 sales, you get $65.65 from Amazon)
2014 63.7%
2015 61.9%
2016 57.0%

2016 sees the most dramatic increase in fulfillment fee. Even though sales increase, one may still see decrease in net pay.

Will the ratio have an lower bound? Do you see a possibility some day that the ratio drops under 50% or 40%?


What can we do other than working harder,if we want to survive to sell on Amazon?


Do what every retail seller in the world has to do - work smarter. Lower costs, increase efficiency, get rid of poorly selling merchandise, expand into new markets, and make customers happy.


Daniel's House wrote:
Amazon fulfillment fees have been increasing over the last 4 years.
YEAR Ratio (NET PAY over SALES)
2013 65.6% (i.e. for every $100.00 sales, you get $65.65 from Amazon)
2014 63.7%
2015 61.9%
2016 57.0%

2016 sees the most dramatic increase in fulfillment fee. Even though sales increase, one may still see decrease in net pay.

Will the ratio have an lower bound? Do you see a possibility some day that the ratio drops under 50% or 40%?



What I am saying is Amazon Fulfillment Fee occupies a larger and larger portion in the revenue of sales. I think there should be no doubt about it, and the reason: the FBA fees increase by a larger percentage than do your product prices.

Edited by: Daniel's House on May 30, 2016 5:58 PM


When you are selling very low-cost items, Amazon's fees eat up profit. The Pick&Pack fee on a $10 is exactly the same as on a $100 item. But it is 10% of the $10 item and only 1% of the $100 item.

For a $100 item
Cost: $100
Amazon Referral Fee:$15
Variable Closing Fee: 0

Order Handling: $1
Pick & Pack: $1.06
Weight Handling: $0.96
Monthly Storage: $0.02
Inbound Shipping:

Total amazon Cost: $18.04
Revenue: $81.96
Amazon's cut: 18.04%

For a $10 item
Cost: $10
Amazon Referral Fee:$1.50
Variable Closing Fee: 0

Order Handling: $1
Pick & Pack: $1.06
Weight Handling: $0.96
Monthly Storage: $0.02
Inbound Shipping:

Total amazon Cost: $4.54
Revenue: $5.46
Amazon's cut: 45.4%

As was said before - work smarter. Eliminate non-profitable products and find ones that are profitable. If you want to increase the percentage of your selling price you get to keep, sell higher-priced products. Otherwise those per-item handling fees (P&P, handling, and weight handling) are going to eat your profits alive.


Daniel's House wrote:
What I am saying is Amazon Fulfillment Fee occupies a larger and larger portion in the revenue of sales. I think there should be no doubt about it, and the reason: the FBA fees increase by a larger percentage than do your product prices.


Even then, prices should go up.

2014 - Amazon FBA Fees - $4.01 (2 lb item + $1.00 referral)
2014 - Product Cost - $3.00
2014 - Selling Price - $10.00
2014 - Profit - $2.99

2015 - Amazon FBA Fees - $5.01 (2 lb item + $1.00 referral)
2015 - Product Cost - $3.50 (increased)
2015 - Selling Price - $12.00
2015 - Profit - $3.49

There is really no rational reason why someone's net earnings should decrease.

If the market does not like the items at that price, you pick different items. You might also be able to negotiate product cost discounts with the supplier.

Dave


They decrease because your competition would be happy to make $1 profit on the item instead of $3.49.


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