How to Eliminate Amazon's New FBA Inbound Placement Fee in 2024

The community of Amazon sellers are buzzing now that the new Amazon FBA spring 2024 fees are starting to hit in Seller Central. It’s no secret that we see Amazon’s FBA fees rise every year, making it harder and harder for sellers to maintain margins on the products they offer. With the current theme in E-commerce focused on improving profitability, these new fees do make it harder to grow profitability of your Amazon offers.

I would encourage everyone to remember that Amazon is a publicly traded company, which means their mission at the end of the day, is to drive shareholder returns and the stock price up. Improved Amazon profits is one way to drive that stock price up! Many of the choices Amazon makes that negatively impact sellers can be explained by this fact, that Amazon has a lot of levers they can pull to improve their profits at the expense of sellers that rely on the Amazon platform and this new fee is a great example of that.

Many brands are hedging their Amazon bets right now, expanding to Walmart, TikTok Shop, Temu, Shein, the list goes on. I encourage brands to do this, having a diversified business is always better than the eggs in one basket approach and when these smaller marketplaces gain momentum it does force Amazon to take a hard look in the mirror and think deeply about how far is too far when pulling these profit levers. But the reality is that Amazon is the most visited marketplace in the world by a long shot with an average of 4.79 Billion visits/month, with Ebay in the #2 seat trailing by a wide margin at 1.21 Billion visits/month and all the others much further behind in views and revenue*. Which means these other platforms may help soften the blow but as product marketers we need to know how to best navigate Amazon, running away from it is not the answer.

*Source: Pool, Jake. “The World’s Top Online Marketplaces 2023.” Webretailer, https://www.webretailer.com/marketplaces-worldwide/online-marketplaces. Accessed 15 March 2024.

What is the FBA Inbound Placement Fee?

Effective March 1, 2024 Amazon will begin charging a per unit fee for every unit shipped into FBA to send your shipment to 1 - 3 FBA warehouses, this fee is additional on top of the cost of the carrier shipment charges. Amazon first announced the Inbound Placement Service fee to the seller community in an announcement on December 5, 2023 where they detailed all of the upcoming fee changes planned for March and April 2024. The inbound placement service fee will be charged at an “average of $0.27 per unit for standard size products and $1.58 per unit for large bulky-sized products” as shared by Amazon in the original announcement. Sellers will have the options of shipping to 1 Amazon location called “Minimal Split”, a “Partial Split” option where your total ship quantity will be sent to 2 - 3 Amazon locations or what they are calling “Amazon Optimized Shipment Split” where your shipment will go to 4+ Amazon locations and avoid the Inbound Placement Service Fee altogether. I will link to Amazon original announcement at the bottom of this post, heads up, you will need to have an active seller central account to view it.

Why is this fee any different from the other fees we are used to seeing?

The big difference with the Inbound Placement Service Fee is that Amazon is charging this fee per unit at the time you are creating your inbound shipment to the FBA warehouse network and sellers will incur this cost on top of the inbound shipping charges when these shipments are created in the Send To Amazon tool in Seller Central. You pay this fee BEFORE you sell anything and create new revenue. FBA fulfillment and referral fees are charged at the time a sale occurs, so this new fee does extend the amount of time your cash is tied up in Amazon’s hands before your profits are paid back out to you in disbursements. It impacts all units you ship to FBA, even the ones that are ultimately destined for Multi-Channel fulfillment (MCF) orders from your shopify store or other marketplace channels. A negative blow to sellers cash flow and net margins.

The Experiment - testing shipment configurations in Seller Central to understand how the fee impacts inbound shipments.

We were working with one of our coaching clients on optimizing their multi-channel fulfillment setup for their Etsy and Shopify storefront and are in the process of moving all of their fulfillment to FBA and MCF and we conducted the exercise of understanding how the Send To Amazon tool would determine whether or not a shipment was eligible for the Amazon Optimized Shipment Split to ultimately avoid the placement fee. They are selling thousands of units per month but we have recently been running into issues with inventory delays and smaller than normal inbound shipment quantities. Here is what we found…

With a case pack of 140 pcs/case, this seller is limited to shipping in 560 units or more to avoid increasing his total inbound cost 130% to 300%!!! The cost range is a result of the options that Amazon gives you for partial splits or minimal splits and then regional options for east, west, or central regions of their FBA warehouse network. We didn’t stop there as it seemed to be the trigger mechanism was at 4 or more cases to enable the Amazon Optimized Shipment Split and avoid the fee. We went on to create another Case Pack configuration with 50% less units per case to test the theory and see if we could avoid the fees at an even lower total shipment QTY.

And Voila!!! The Send To Amazon tool is triggering the option for optimized splits at 4 or more cases, and the savings is significant even with the increased costs to ship cross country. This particular client has inventory based in Florida and the optimized shipments were going out to all 3 regions across the country.

70 units per case is an abnormally high count, this particular hero product is small and priced at $24.99 so it is the perfect type of item to move through Amazon’s system efficiently. When we dropped the case pack count to 12 units which would be a more common count for brands that offer their products across multiple sales channels including physical stores, we see cost per unit climb considerably at these low volumes. Ultimately the cost of shipping per case is low but there is just not enough retail value in those small case packs to offset the additional cost of multiple shipments going to 4 - 5 different warehouse all over the country. In this 12 unit/case configuration we saw total inbound cost/unit climb to $0.50+ per unit, and it was still cheaper than opting into the minimal split or partial split price where total inbound cost went to $0.70+ per unit.

So How Can My Business Avoid This Fee?

Now how to avoid the fee really depends on a few factors:

1. How much stock are you currently sitting on its current case pack configuration? Get your plan together now on the optimal case configuration before it’s time to re-order from your supplier.

2. What is the sales velocity of your product? It needs to be selling enough units to allow you to increase your inbound quantity and not have excess sitting in the warehouse racking up storage charges.

3. MOST IMPORTANT You need to be willing to do the work. You need to get familiar with Amazon’s case pack requirements and get more sophisticated with how you are configuring your stock. If you are an Amazon only brand, then optimize your inventory for the platform you live on. If you are an omni-channel brand with some scale on Amazon consider making a master case that you can ship to Amazon with inner case packs that could be shipped to other channels that require smaller case pack quantities.

I can simplify the optimal setup to minimize your inbound freight costs to Amazon down to this.

Fit the max number of units you can into a case pack, case pack must be 150 pcs or less and weigh less than 50 lbs, always ship more than 4 cases at a time, avoid shipping 1 case at a time at all costs.

Bonus Tip Build sales velocity to where you can eventually be building minimum shipments that are 4 Full pallets that can ship LTL. This will be the absolute cheapest way to inbound your stock to FBA.

This is ideal. Not always an option, but what you should be striving for.

If you need help, say no more family… Let’s get in touch and we can sort this out fast.

The Hard Truth And Lesson Here

It is likely that you will see your inbound freight costs climb this year, whether you are dodging the placement fee or not. Amazon has the operational awareness to know that the old way they were optimizing inventory in the FBA network was costing them profit, so they have now decided to correct this loss and kick the cost down the road to the sellers. Take it as a learning lesson, have the operational awareness in your own business to know your unit economics and your overall business P&L and cash flow reality, start pulling your own levers. I guarantee that you can find a way to deal with this fee increase and likely come out ahead by making your own products and operations more efficient in the process.

If you are looking for an Amazon partner that can help you navigate the Amazon platform like the big brands do, we would love to talk to you. Get in touch!

Adaptive Group has been growing brands on Amazon for over 15 years. We have worked with hundreds of businesses from startups to multi-national household names. We are obsessed with the details, build best sellers and are ready to help you simplify and streamline your path to growth on Amazon!

Link To Amazon’s Original Fee Announcement from December 5, 2023

Reminder, it will require you to sign into your Seller Central Account.

Happy selling out there!

-Frank