Amazon FBA Fees Will Increase. Should You Be Worried?

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dimeThis coming February, Amazon will raise their FBA fees.  I could create an entire post on the details of these fee changes, but all of the information you need is available right HERE.  Instead, I decided to create a post about the effects this may have on your business.  I also want to talk about my feelings on Amazon, Ebay, fees, and the e-commerce market in general.

SHOULD YOU BE WORRIED?

The short answer to “should you be worried” is no.  Rising fees often trigger fear and panic among sellers- particularly individual and small sellers who struggle with finding profitable products and have very little margin to work with.  If you click the link above to Amazon’s page on this, you’ll see that the average increase of fees for most standard sized items is less than 10 cents (a bit more for heavier items).  Still, whenever fees increase whether on Amazon, Ebay or elsewhere, you’ll find no shortage of sellers participating in forums and blogs acting as if the world has finally come to an end.  As someone who has lived through these fee increases several times now, I wanted to share my perspective which may help put your mind at ease.

10 CENTS OR HUNDREDS OR THOUSANDS OF DOLLARS?

First, please understand, I am not minimizing the fact that a 5-10 cent per product increase has real ramifications for your business and mine.  Consider this: from January 1st to this moment (about 10:00 AM December 4th) I’ve sold 14,903 products on Amazon alone.  If my fees increase by 10 cents per products, that is an extra $1,490 that I will be paying out in fees (even more by the end of the year!)  This is no small amount of money! (I can certainly think of some better uses of $1,500!)  A fee increase like this can certainly have a big affect on the the money you keep in your pocket from your sales, but this isn’t the only factor to consider…

THE NUMBER ONE REASON IT’S NOT AS BAD AS YOU THINK

The first time fees were raised on me, I freaked out too!  At the time I was selling a lot of media (and I still do!) which only profited between $.05 and $2.00 per title.  Obviously if I’m only making 5 to 10 cents on a particular title, I thought a fee increase like this would essentially kill the profit for these products.  It turned out, this was simply not the case.  Why?  Because every seller gets hit with these fees. This means there are countless other sellers in your same situation.  No smart seller is simply going to take an extra $100, $500, $1000 or $5000 (etc) hit for the year because of a fee increase!  Smart sellers will adjust their business accordingly!  For those who choose to continue selling low margin products like media (as I did), this means slightly raising their prices to compensate!  When the fees increase, you’ll see prices increase.  Thankfully since we’re only talking about 5 to 10 cents per item (for most standard sized items), the price increases will not even be noticed in most cases by consumers!  The result is this:  very little effect on sales and very little effect on profit.  Other sellers will change their product lines (which I’ll talk about more below) or modify and adapt their current product lines to stay competitive and profitable.  Still other sellers will drop out of the game completely due to fear or frustration.  This is all good news for you!  In short, when fees change, everything changes.  When we hear about fees increasing, many sellers get this idea in their heads that the fees are going to increase, but everybody will just continue what they are doing with the same products and prices and this will ultimately force them to be squeezed out.  I can tell you from experience that this kind of thinking is just not true.

YOUR OPTIONS: FIGHT OR FLIGHT

I’ve covered why we shouldn’t be worried about these fee changes and how everything will change as a result which will ultimately be good for us, but this doesn’t mean you should sit back and do nothing!  The fact is, these fees are likely to increase every year-  this is just one small part of economics and inflation (remember candy bars don’t cost 5 cents anymore and the price of gas is in the U.S. has seen an almost 300% increase in a 10 year period!).  It’s important not to react in fear, but to be prepared.  Here are two great options to deal with these fee increases

FIGHT: HOW TO ALLOW THE CHANGES TO MOTIVATE YOU!

Try to see fee increases (and other policies that Amazon implements- like DVD restrictions for instance) as a challenge or a problem to be solved rather than a deathblow to your business!  Realize that there are things you can’t control (like the fee changes) and things you can control (like how you respond to it).  Here are a couple of simple ideas to keep you going:

1. Increase your prices slightly.  Come February, you’re likely to see numerous small increases in price on items from third party sellers.  Increase yours as well.  Just stay competitive.  As I’ve mentioned before, it is not essential to be the lowest price so long as you’re in a competitive range (if the lowest seller is $10 and the 5th seller down is $15.00, try $10.99 or $11.99)

2. Look into selling new products.  If you’re in the arbitrage or media stage, now may be a good time to think about venturing into wholesale and eventually private label products.  Particularly if you’re relying on a lot of low profit products, now is the time to diversify and find products that will bring in some serious cash!  If you plan to stick with arbitrage, it may be a matter of simply saying “no” to more items (tighten your criteria for maximum profit and “reasonable” sales rank- this has been a big part of my strategy lately!)

The point is to see this as an opportunity to try out new things and expand and build your business rather than feeling buried by fees!

FLIGHT: HOW TO “GET OUT” WITHOUT “GIVING UP.”

Amazon fees aren’t going away and they are not likely going to suddenly decrease.  This is a reality you’ll need to face if you’re going to sell on Amazon.  You can either deal with it (see above) or you can seek out other options.  If you’re just starting out and finding success with Amazon, I certainly wouldn’t recommend “throwing in the towel” but I would recommend diversifying your options.  Do you also sell on Ebay?  Now may be a good time to start!  Did you know that countless other sites are now catching on to the trend of allowing 3rd party merchants to sell on their sites?  Most are not as accessible as Amazon yet, but keep watch- there are numerous companies that are becoming eager to grab a lititle slice of the pie that Amazon has created!  Other options already exist like Bonanza and Etsy and Rakuten and many more! Keep in mind, however, that all of these marketplaces have fees as well and can increase them at any time!  The fact is, when you sell on a marketplace, you’re largely bound by their fees and their policies.  It is a great place to start, to generate income, and to ultimately build a business, but when you’re exclusively on a marketplace, your business is ultimately controlled by that marketplace!  This is a main reason that one of my goals beginning in 2015 will be to build up my own websites and my own off-Amazon business (though I will continue selling on Amazon as it has so many benefits!)

SELL ON YOUR OWN SITE TOO!

If you plan to build your own website, you can run a complete ecommerce store for next to nothing (there are several high quality carts that are completely free- you’ll only pay hosting, domain and credit card processing fees).  The fees can come out to a lot less than what you’re spending with Amazon- the key, however, is to get traffic and sales- something that has become quite easy on Amazon and increasingly difficult on your own site.  With that said, as I continue to work on this, I’ll update you all on what’s working and what’s not!  I see value in continuing to sell on Amazon, but also build a website (or several) on the side!

I hope you can see that while disappointing, a fee increase is not the end of the world and will likely not destroy your business- as long as you take some action!  I hope you found this helpful.  Feel free to comment below and share your thoughts!

If you’ve not downloaded my ebook, you can do so below.  This resource shares my step by step process of building a business!  Best of luck with business going forward!

16 thoughts on “Amazon FBA Fees Will Increase. Should You Be Worried?

  1. Thanks for your response

    I purchased a board game from the thrift store. The board game lowest price is $80 from non FBA sellers. The board game I purchased is missing 1 piece which is a rolling dice. I can’t find anyone selling the dice piece online. The dice piece has a custom design so I can’t just replace it with any dice.

    What should I do? Can I sell it with the missing piece and listing in the conditions that it’s missing a piece?

    Thanks for your help.

    1. Hi Zacharie,
      If it were me, I would never ship out an item with missing parts (though as I mentioned, other sellers do this all the time and disclose it- you’ll need to figure out what you’re comfortable with and check with Amazon about the rules). Have you checked on Ebay for the piece? That is where I usually find missing parts and pieces of things I want to sell. Even if you have to pay $10-$20 for it, you’ll likely still come out ahead (I’d imagine the game was cheap at a thrift store). If you’ve already checked Ebay, try the manufacturer. You may be able to get the piece directly from them. Hope this helps!

  2. Thanks for keeping me informed about the fees increase.

    I have an off topic question about selling used electronics through Amazon FBA. I recently purchased used blue ray DVD players and a wireless router for relatively cheap at the local thrift store. The only problem is that they don’t come with original packaging and only came with the power cord.

    I was wondering, how do I package the DVD player and router if its missing original package? Would it be an issue if I sell the items with only the power cord included?

    Also, is there a way readers can contact you with questions via email?

    1. Hi Zacharie,
      It’s great to hear that you’re taking action and pursuing selling this stuff on Amazon. I can tell you that sellers on Amazon do this all the time, but I can’t tell you if it’s within Amazon’s policies. Amazon does allow you to upload a picture of the exact item you have. I purchased a Nintendo Wii this way. See THESE listings. You’ll see that there are many listed without controllers, without accessories, no box etc. Again, this is a common practice, but I’m not entirely sure if it is within Amazon’s policies. The other problem you could run into is buyers not reading the condition notes and then leaving negative feedback or opening an A-Z case as a result. To me, this isn’t worth it, but obviously some sellers have a lot of success with these types of listings. Take my limited knowledge for what it’s worth, but to avoid jeopardizing your account, I would suggest getting in touch with seller support as well. I hope this helps!

      Oh- and I can be reached at daniel(at)alittlesliceofthepie(dot)com

  3. The only thing I hate is that now some of my longer-tail items will cost quite a bit more (or i’ll have to cycle them out and back in). For example, I’ll pick up some new in box goods in may at a yard sale, send them in, and they may not sell until december. Paying an extra 11.50 per cubic foot would hurt.

    1. Hi Steven,
      That definitely makes sense. Fee increases are always a pain and causes us all to reevaluate buying decisions- possibly focusing on items that move quickly could be a strategy. Some of my inventory will be affected also. For me, this is a big reason for diversifying to make sure I have plenty to “fill in the gaps”- items that are very profitable to make up for the few that are losing. Thanks for sharing your thoughts!

  4. Hi Daniel,

    I am glad to be back here. Q4 is GREAT!. My first Q4 and:
    I was not ready.
    I had an injury (Achilles Tendonitis) on my right leg.
    That injury limited my walking and FBA work production.

    Today My Amazon deposit is $7,000.00 and the previous one was $5,200.00 It is not bad for a part time business. With that injury out of the equation, I projected that I could have received about 3 times that amount.

    Now the big question, after Q4 how do I maintain and what categories should I concentrate in?
    Thanks again,

    Ed

    1. Hi Ed,
      Sorry to hear about the injury! I’m excited to hear that the business kept going even with your limitations, however! That’s great! Yes, I usually plan for about 3 X the regular sales in December. To keep it going in January is tough. The bad news is, Christmas is over, so you’re simply not going to see the level of buying that you do throughout the holidays. The good news is, people are still somewhat in “buying mode”. People will be buying for Christmas parties that take place after the holidays, for themselves, for friends and family that they did not get to spend the holidays with etc! I find January bring a lot of returns, but I’m always surprised at how steady sales stay (not nearly the level of the Christmas season, but still pretty steady!)

      As far as what to buy. The best deals are going to be found on Christmas/holiday items and toys- particularly the weeks immediately following Christmas. Surprisingly, people will buy Christmas decor all year round (and if not, if you’re willing to wait, you may be able to get top dollar out of it next year!) A couple other discounted items are bedding and anything outdoor related- though the outdoor stuff tends to be discounted much easier (October or November). If you do find anything though, it will likely be deeply discounted! Hope this helps! Keep up the great work!

  5. Hi Daniel ;-) excellent post about spreading your eggs!

    Selling through own site allows ROI of 100 to 400%+ easily provided you have strong USP such as 90 Day money back guarantee!

    UK based etc!

    Traffic can be generated Instantly through your existing Ebay customer list using awber/mail chimp just ensure you pre-warm subscribes with “Who you are” & “why choose to buy From your shop!” To reduce ” spam” complaints as people forgot they brought from you 3 days ago!

    As busy life’s etc

    In addition ensuring 1 email daily short & special “loyalty” offer to create consistent & trust…spam emails are 1-2 hit wonders!

    Ensure your USP are stated in each email at footer

    Use ready made website providers like http://www.ekmpowershop.com UK or shoplify.com don’t try to save pennies as you don’t make money as if you can’t list quickly & easily you WILL give up as frustrated!!

    So

    1- use ready made commerce sites
    2-import & create 1 email in mail chimp/awber
    3-schedule for next day & send every day for at least 2 weeks – just 1 product day is fine
    4-ensure your USP is clearly stated I’m Each email

    I hope this helps anyone reading and do ask questions as I like helping like Daniel ;-)

    Keep up Daniel as I love your honest style!

    Regards Atif Khan
    UK London

    1. Hi Atif,
      Thanks for the great help! I’m in the process of learning as much as I possibly can about expanding the business off-Amazon. There are some great ideas in your comment!

      One question: you mention using mail chimp/aweber (or getresponse which is what I use), do you simply add people to your list who bought from you (using their address that you acquire through Ebay/Paypal) or do you have some kind of after-order opt in form where they sign up to the list? I have not utilized my ebay customers e-mail addresses (even though I technically have them) due to concerns about spam as you mentioned. Is there an easy way to create an opt in page with check out? If you know more about this, I’d love to know! Thanks for the help!

      1. Hi Daniel !

        I am happy you found my comments useful ;-)

        You should do following in my experience -

        1- amend your terms & conditions in your website to clearly state in effect ” We may use your details to connect with with through electronic means about your order and/promotion/special offer. Please note you can unsubscribe from any of our emails by using the unsubscribe button at the bottom of our emails”

        2- create sign up pop box on your website that gives visitor to enter email such ” join our us today to recurve exclusive deals direct to email without any stress” or similar reason for visitors to opt in

        3- you should create soft email – welcome introduceing them to your company No hard sell on 1st email as objective is to keep spam complaints low to your ebay/PayPal list

        Important after varies testing I am happy to share script we have found very useful in keeping spam rate very low…just email directly if you wish…as happy to share just email me Daniel!!!

        Here’s why worth it!?

        Little work for massive profits and we easily sell SAME ebay & amazon for 200% to 400% to SAME ebay / PayPal customers Every email!?

        How?
        In USA you have Walmart ..low budget but at same time there are higher price shops the SAME customers use to buy more expensive like jeans / computer games…perfumes..EVEN same items found on eBay …you just have to position yourself/company offering great products at excellent value …as people pay for convenience & time too…can’t be bothered or not enough time to save $5/$10 dollars ok items…

        Fact – Groupon deals were never cheapest!!
        How? As I have worked with companies with Groupon in UK aus Canada and know through our research!

        Going slightly deep into topic however you can increase your profits hugely through simple strategy above If you follow steps

        Drop me an email or ask away as ahoy to help Daniel ;-)

        As found your blog honest and refreshing!

        Regards Atif
        UK london

  6. i believe in the “do not put all your eggs in one basket” philosphy.I’d love to hear how to start my own website selling physical products so I don’t have to rely completely on Amazon.
    I have about 10-15 years ahead of me before retirement so I’m looking to make a part-time income long term. I think selling on platforms outside of Amazon as well as Amazon makes good sense.
    Maybe I can depend on Amazon over the next 10 years but I wouldn’t bet on it.

    1. Hi Bob,
      I completely agree! It’s always best to think ahead and plan for the future. Unfortunately, I’m not an expert on building and selling on websites (at least not yet!) but this is a major goal that I will be focusing on in 2015 (coming up quick!) I do have a few websites that I sell products on, but sales have been slim (I’ve also put very little effort into it up to this point.) I’m currently using wordpress for these sites with ecommerce plugins, but I am considering moving over to something a little more serious like Shopify. I’ll keep you updated as things progress with this!

      When I started selling items on a website years ago (this was back in the “hobby” days), I put up a simple “wysiwyg” website through freewebs.com (now called “webs.com”) which used to be a free hosting company (these still exist- check out http://www.000webhost.com/ for instance). I paid $10.00 per year for a domain name, created simple pages using the graphical editor and created paypal “buy” buttons (this is a feature offered in Paypal- it is free to set up an account). I would drive traffic using Ebay (also for free). All this to say, the total cost of this was $10.00 per year plus the 2.9% per transaction Paypal fee! This works well if you’re just starting out or want to sell on the side (or if you just don’t have any money to invest!) There are a number of ways to go about it, but I’m learning that the key is to create nice product pages that convert to sales and to get people looking at those pages! I’ll spend a small section of the revised ebook talking about this, but since I’m not an expert, I can only talk about what I actually know. In the future (as I continue to learn) I’ll continue to share more!

  7. Great article Daniel. Keep up the great work!
    I too was not that concerned about the the fee increases this time they where rather small compared to last year which kind of freaked me out a little. FBA is a amazing
    selling machine so I look at it as cost of doing business with Amazon which is a huge selling machine.

    1. Exactly Tom! The fees are bigger than selling on your own site, but the instant traffic and sales you get are worth the cost!

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