Amazon's recent adjustments to its Fulfillment by Amazon (FBA) fee structure have drawn significant attention from e-commerce sellers across North America. Following substantial fee increases for Canadian sellers last month, U.S. merchants are now bracing for potential similar hikes that could impact their profit margins.
Canadian FBA Fees See Significant Increases: Up to 31%
According to Amazon.ca's FBA fee page, Canadian sellers faced notable fee increases effective June 30, 2022. The adjustments included higher base fulfillment fees and the introduction of a 5% fuel and inflation surcharge, resulting in substantial overall cost increases.
For example, a standard-size item weighing less than 250 grams previously carried a C$5.50 fulfillment fee. Under the new structure, the base price rose to C$5.64, and with the additional surcharge, the total fulfillment cost reached C$5.92 - an 8% increase.
Larger items saw even more dramatic increases:
- Small oversize items under 500g: 14% increase
- Medium oversize items under 500g: 31% increase
- Large oversize items under 500g: 27% increase
Amazon hasn't specified how long the fuel and inflation surcharge will remain in effect. The company maintains that even after these adjustments, FBA remains about 40% more cost-effective than merchant-fulfilled orders. Nevertheless, some sellers are now seriously considering third-party logistics (3PL) providers as alternative solutions.
NARF Program Costs Also Rise
Amazon also increased fees for its North America Remote Fulfillment (NARF) program, effective the same date. The NARF program allows U.S. sellers to fulfill orders for Canadian and Mexican customers from U.S. warehouses without maintaining inventory in those countries.
The company justified these increases by citing rising fulfillment, transportation, and customer service costs across North America. Amazon noted it has doubled fulfillment capacity while raising average U.S. hourly wages from $15 to $18.
However, these changes make it more expensive for U.S. sellers to compete with local merchants in Canada and Mexico. Adding to seller concerns, Amazon automatically enrolled some merchants in the NARF program between July 1 and September 15, 2022, requiring manual opt-outs for those wishing to avoid participation.
Potential Challenges for U.S. Sellers
With persistent high fuel costs and inflation pressures, retailers and e-commerce businesses face significant challenges. U.S. sellers relying heavily on FBA services may need to prepare for potential fee increases that could squeeze profit margins.
Recommended Strategies
Sellers facing potential FBA fee increases might consider several approaches:
- Cost optimization: Reevaluate pricing strategies and streamline supply chains to offset rising fulfillment costs
- Diversified logistics: Explore third-party logistics options to reduce dependence on FBA
- Inventory management: Implement more precise inventory forecasting to minimize storage costs
- Product differentiation: Enhance product quality and uniqueness to maintain competitiveness
- Policy monitoring: Stay informed about Amazon policy changes to adapt business strategies accordingly
Industry analysts suggest that Amazon's fee adjustments reflect broader economic trends, requiring sellers to shift from price-based competition to value-based differentiation. Some experts recommend that affected sellers carefully evaluate the cost-benefit of programs like NARF while exploring opportunities in other international markets.
Several sellers expressed concerns about shrinking profit margins but indicated they're exploring alternatives including third-party logistics and product portfolio adjustments to navigate the changing landscape.