On a recent episode of the eCommerce Braintrust Podcast, host and Acadia’s Head of Retail Marketing Place Services, Julie Spear spoke with Armin Alispahic, operations team lead for the retail team at Acadia about the new changes to Amazon’s FBA fees. They discuss the four new Amazon Seller Logistics Programs; what they are, who they are for, and the benefits for brands using them.
You can read highlights from the episodes and the key questions Julie asked Armin about what brands need to know about the new Amazon FBA Fees and the seller logistics programs below.
We’ve created an exclusive guide that breaks down the four new programs in Amazon’s Seller Logistics Programs for 2024. Complete the form below to access the guide.
Q: Are Amazon’s new FBA fees just a way to get more money from their sellers?
A: Amazon has become more creative in finding ways to get more money from sellers this year. That's different. But that creativity has also made things more complex. This year, for example, we have the rollout phases, like half of this year will be having these phases of which fees go in effect when and then some fees are going up, some fees are going down. Overall, it's just much harder to do your math and see what the actual results are. And we still have a few fees that need to kick in. The full picture is not there yet.
Q: How are brands processing and understanding the new Amazon FBA fees?
A: So we're yet to see, as I said, the full effect of those two notorious fees that need to kick in. So April 1st, the bold day, we have the low level inventory fee, which is basically going to charge you if you're below a threshold of inventory that Amazon deems necessary. And then June 1st we also have the returns processing fee that goes into effect. This is a fee for any returns where you go above a threshold that Amazon determines as the category threshold for your product. I think brands are currently in the midst of playing with the inbound placement fee changes. So this one's pretty big and you can actually play with it a bit because depending on how you create a shipment, the fees are different. So I think brands are currently working on these, just trying to find the optimal way of what type of shipment they need to send and how to avoid some of the fees.
I think Amazon sellers roll their eyes when Amazon finds new ways to charge them more. And they see this as part of doing business. At the end of the day, Amazon, when they make these announcements, there's no real way back from this. Like the decision is final. And then for brands that work with us, we've really made a comprehensive guide that walks them through each of the changes and puts things on paper so they see the actual numbers. This enables us to look at product level profitability. We can determine next steps accordingly based on this. And then we also have tools at our disposal to track profitability over time.
As all these fees are out of the gate, we'll be able to see how they affect our accounts overall. And another thing we've always cared about a lot is inventory forecasting. With changes coming to the low level inventory fee, we've further optimized the process so our clients can always have optimal levels of inventory without risking additional fees. But then, on the other hand, stockouts as well, which are even more severe.
Q: What are the four new Amazon Logistics Programs?
A: Many brands are still trying to navigate what the new Amazon Seller Logistics Programs will mean for them, let me break each down. The first is SIPP which enables brands to get an incentive if Amazon doesn't have to put a product in their own box to ship to customers. The other program is FBA, new selection. It's been around for a while, but it has some new spins to it. This one waives different fees for new product launches. And then we have two big ones. So one is Amazon Global Logistics, which is basically an end to end solution that allows you to ship ocean cargo from China directly to Amazon. And the other one is Amazon warehouse and distribution, or AWD, which is essentially an Amazon owned three PL solution, which is pretty competitive in the space.
Q: What is Amazon's SIPP?
A: SIPP is the planet saver program. It's the program that saves the planet. It's part of Amazon's lower carbon footprint mission. The program existed before, so vendors had it and still have it. It's called SCIOC. Ships in their own container. So basically SCIOC or sieve products that are those that don't require Amazon to use their own packaging, which in turn results in saving on Amazon fees because they can ship in their own packaging. And the reason I call it the planet Saver program is because at the end of the day, even if you don't save much on this one, you're saving the planet.
I think most brands should honestly do their math on this one and see, does it make sense to invest in their product packaging to just meet the requirements and become eligible for SIPP? I would also say 100% brands that already have packaging that meets the criteria. There are brands that can already ship in their own packaging, so they would just need to go through the certification process. When I look at brands, some find it easier to change their packaging and some say, oh my God, that's impossible. Those who are in the first group and feel like, yes, we can do this easily and we know the cost implications of this should definitely pursue this venture. And then lastly, I would say high volume products. So brands that have high volume products that sell a lot units per month are ideal for this just because of the fact that this is a per unit shipped fee reduction. The more you ship, the more you save. Kind of goes hand in hand with this one.
Q: What are the key benefits of enrolling in SIPP?
A: So obviously, as we said, it saves the planet and then in terms of monetary rewards. Brands can save anywhere from four cents to $1.32 per unit shipped, depending on which size tier you're in and what the weight of the product is. There's a branding aspect to this as well, because when you receive a box that actually doesn't have the Amazon logos and Amazon box, you get to experience the brand a bit more than Amazon as a marketplace.
Q: Do you see any challenges or concerns for SIPP that wouldn't make it a fit for certain brands?
A: I'm always worried about what Amazon packages go through from the moment they leave the brand's warehouse. The additional packaging from Amazon can really just help prevent the damage and return for SIP products. Brands really need to ensure the packaging is sturdy enough and also monitor, like when you enroll in product selling and it's active, you need to monitor the returns, monitor the damaged packages that come back, and also there's a section on seller central where you can monitor the customer feedback, the product. Typically you'll have returns and return reasons here as well. So that's very important. And then I'm especially concerned about products that are typically in high return categories and also anything that's fragile, anything that can easily be broken or damaged in transit. Either you really make a great, great packaging or you just do it like double your packaging.
Q: What is Amazon's FBA New Selection?
A: I call this one the bread-crumbing program. And I call it this way because Amazon kind of feeds brands with crumbs, small fee waivers in order to get more product selection on theirs, just their way of saying, hey, launch more products and we'll give you some money back. An actual instance of fees being returned to brands.
Q: Who is the FBA New Selection program designed for?
A: All brand registered sellers are eligible for the program. And honestly, it's a fairly low effort to just enroll. So I would say any brand launching new products should just have this in mind. And even though it's not a huge money saver, it doesn't cost you a lot. So everyone should do it.
Q: What are the key benefits to enrolling in FBA New Selection?
A: Amazon offers 10% rebate on average. It can be 12%, sometimes 8% depending on category or whatever they see fit there. But 10% rebate on average for sales. On these ASINs, you also get monthly storage waived and also free liquidations. So, for example, you launch a product, it doesn't sell well, and you have 5000 units left and you just want to remove it. Amazon would not charge you and typically they charge for those removals. What's kind of a caveat here is that you're limited by time and by number of units. So it can be 50 or 100 units depending on
Q: How would you describe Amazon Global Logistics?
A: I call it the wild card program just because it's so unpredictable. This program is part of the supply chain by Amazon and the idea behind it is to provide the service of shipping inventory directly from China to Amazon, all while promising reduced costs and competitive rates by Amazon as well.
Q: What are the benefits of Amazon Global Logistics?
A: Almost anyone who's manufacturing their products in China, especially less experienced or new companies, because Amazon offers services for each step of the supply chain journey. So pickup, paperwork, customs to delivery, they all do that for you. I would also encourage established brands just to look into this and compare Amazon rates to their current providers. There definitely is something very compelling about just having one end-to-end solution provider. There has to be some efficiency in shipping that way. Versus ship from China ship to a warehouse, from the warehouse, ship to Amazon, raking the shipment all the time. Definitely more cost involved with that one. It offers a lot of simplicity, much more efficiency, I would imagine.
Q: What are the challenges for brands using Amazon Global Logistics?
A: I would say shipping directly from China to Amazon. This means you never get to see or touch your inventory, which can be very dangerous in some circumstances. You have way less control over the whole process and it can just overall be pretty challenging, especially if you're selling some of the sensitive product categories that require additional quality control. Imagine you're selling a baby product and you never see it. And it ships from China to Amazon and customers start receiving like hundreds of units and most of it is broken or has a defect or whatever. Quality control here and ownership of your product, your brand, at any point, I would think that that is a massive vulnerability in a program like this.
Q: What is Amazon Warehousing and Distribution (AWD)?
A: It allows you to ship to multiple sales channels. You also have the option to automatically replenish your FBA and multi channel flow man inventory. It's a logistical dream. We don't have a lot of feedback from other brands or other customers, other users of this program to know that it actually works.
Q: Who is Amazon Warehousing and Distribution designed for?
A: If we go to the previous group of people who actually use Amazon global logistics, it makes all the sense in the world to couple this with Amazon Warehousing and Distribution, because it's kind of a perfect pairing. But I would also say brands struggling with profitability and also brands who are just open to testing new logistics solutions because there's still a lack of proof this program works. I'd recommend slow rollout with a selection of products. So test, learn and go from there instead of going, okay, let's just onboard everything we have to this tool or this program.
Q: Who is Amazon Warehousing and Distribution designed for?
A: If you couple this program with other Amazon programs, you already see the direction of this. For example, if you couple this with Amazon partner Carrier or Amazon Global Logistics, you can actually save 25% on the storage through AWD and then also 15% on processing and transportation only. From there, use Amazon services plus AWd. This is how much you save. And then on top of that, all of the new fees that Amazon has introduced, you get a waiver on many of these. So storage, you get like storage utilization surcharges waived, low inventory level costs are waived.
You don't get storage overage costs because Amazon is kind of manipulating the inventory there. You don't have the FBA inbound placement costs when you send these AWD shipments. And also, and I think this one is a big one as well, for the storage itself, you can save 38% compared to regular FBA storage fees like during the non holiday season. And then Q four, this is a number made by Amazon, 80% savings during the holiday season on storage fees. And we see a surge in fees happen in Q four because everybody wants to send a lot of inventory to kind of meet the demand and allow for growth. And then what this results in is like a huge spike in fees for the storage. So reducing that by 80% during the holiday season can make your year so much better.
Q: Put yourself in the shoes of a brand selling on Amazon. How do you view all of these changes in terms of the relationship between Amazon, the brand, and ultimately the shared end customer receiving the brand's product?
A: If I've learned anything about Amazon in the last eight years, it is that it evolves all the time and brands just need to keep up with this space. So just from a logistics standpoint, what we've discussed now brands now have so many choices compared to when I started my Amazon journey. If you're a brand selling on Amazon and you're doing the same things you were doing ten years ago, it's really time for some deep thinking and analysis. And brands just need to explore their options and see what works best, what's actually moving the needle instead of defaulting to what works. Years ago, Amazon made solutions that may not fit everyone, but I often feel there's this resistance to even trying just because Amazon is seen as this bad guy that's taking over the world. So you just don't do it because of that which has its merits and its own story for sure. Also, if we look at the new services Amazon provides now, we see there's a lot more diversity.
Read more about Acadia’s approach to Amazon.
For more on Amazon and how Acadia is helping brands navigate the complexities of the seller journey visit our Amazon service page.