It’s getting a little heated in the Amazon FBA Seller Forums this morning.
In fact, a quick glance at the US Announcements section makes for a rather unpleasant reading.
Starting April 28th, Amazon will add a five per cent ‘fuel and inflation surcharge’ to its existing FBA (per unit) fees, and it’s safe to say that sellers are not happy.
Several objections have been raised. Let’s take a closer look at each one.
Lack of notice
First up, is the notice period, or lack of it.
In total, sellers have just fifteen days from the initial announcement to the implementation of the surcharge.
This, in the words of one seller, is simply “not enough time” to adequately prepare for the rising costs.
Certain ASINs, for example, will no longer turn a profit. If these have recently been sent into FBA, you’re in dire straits.
This leads us to the second objection.
Amazon’s record earnings
Numerous sellers have commented that Amazon (and other US blue-chip companies) use global inflation to justify price increases, yet continue to deliver record earnings.
This, indeed, is a bitter pill to swallow.
Particularly given that cost prices are not, in theory, ever going to drop. A surcharge, in some sellers’ eyes, is nothing more than a stealth price increase that directly adds to Amazon’s bottom line.
Unable to increase retail prices
This is a long-term bugbear of many sellers.
Here’s the deal:
Amazon uses an automatic ‘Pricing Error’ algorithm that essentially prevents sellers from raising their retail prices beyond a certain limit.
By either temporarily delisting the ASIN until the ‘error’ has been fixed or by removing the buy box entirely.
Upon receiving said notification, a seller has no option but to reduce the price back down to below the minimum threshold.
And as discussed above, if costs continue to increase, this pricing threshold could well mean that the numbers no longer stack up.
Or to put that another way, you lose money.
Regardless of what you think of Amazon, it is still an incredibly lucrative channel for your private label brand.
The way I look at it is simple:
Inflation is here, period.
In fact, it was here 12 or even 18 months ago, and all sellers are in the same boat.
Yes, a 5% increase in FBA fees is unwelcome. But if you’re running a tight ship, financially, this can easily be absorbed into your P&L without too much pain.
Remember, Amazon aggregators will only look at businesses with a profit margin of 20%+.
Some aggregators even insist on a minimum of 30%.
If an ASIN is no longer wiping its face, post-April 28th, perhaps it’s time to take a good long look at your brand and decided if a purge of products is required.
Amazon FBA may be more expensive than it was last year, but it’s still infinitely cheaper than Shopify with FBM.
And that, my friend, is a fact.
This website was created by ex-Amazon sellers, Martin Smith and Richard Turnbull.
To learn about our story, our private label FBA brands, and our first-hand experience selling to Amazon aggregators, click here.
You may also wish to check out our 2022 Definitive Guide to Amazon Aggregators.
Written for FBA sellers, this simple, easy to follow document takes less than 5 minutes to read and represents the culmination of over 100 hours of research into the Amazon aggregator space. To access the guide today, click this link.