At the end of last year, Amazon issued a notice on the update of sales commission and logistics fees. The notice implemented a series of fee changes, not only adjusting the logistics delivery fees and sales commissions for clothing, but also adding multiple charging items such as warehousing configuration service fees and low inventory fees, which once caused an uproar in the industry.Recently, one of the new charging items mentioned in the notice - the warehouse configuration service fee, officially came into effect on March 1.On March 1, US time, many sellers observed that Amazon had added a new "logistics warehousing configuration service" to its backend.According to the "2024 Amazon Logistics Inbound Configuration Service Fee" announced by Amazon, starting from March 1, 2024, Amazon Logistics will charge different levels of fees for different inbound configuration options selected by sellers.The key points of the warehousing configuration service fee are as follows: 1. Service fee for warehouse configuration options: Active warehouse consolidation > Active warehouse splitting > Automatic warehouse splitting(1) Minimum shipment split (usually one) - Active warehouse consolidationIf you choose "Minimum Shipment Split", the seller can send the inventory to the least number of warehouses (usually one) and pay the corresponding warehouse configuration fee based on the size, weight, and warehouse location of the goods.(2) Splitting of some shipments (2-3 warehouses) - Active warehouse divisionIf you choose "Partial Shipment Split", sellers can send inventory to some warehouses (usually 2 or 3). Amazon will reduce the size of the warehouse and charge sellers corresponding warehousing configuration fees based on product size, number of shipments, and number of warehouses.(3) Amazon optimizes shipment splitting (more than 4 warehouses) - automatic warehouse divisionIf the seller's warehousing plan meets the requirements and selects "Amazon Optimized Shipment Split", the inventory can be sent to warehouses recommended by Amazon (usually 4 or more) without paying the warehousing configuration fee.2. Sorting and handling fees at the warehouse entry location: West Coast > Central Coast > East CoastSellers who choose "Minimum Shipment Split" can send inventory to three locations: the US West, US Central, and US East. The sorting and handling fees vary with the warehouse entry location (US West > US Central > US East). The highest US West sorting fee is roughly between 6% and 8% of the FBA delivery fee . It is worth noting that although Amazon mentioned thatif sellers choose "Amazon optimized shipment splitting"and send inventory to more than 4 warehouses, they do not need to pay the warehousing configuration fee, butthe seller's first-leg freight will increase accordingly. Based on the feedback from sellers, regardless of whether they take the initiative to merge warehouses, reduce the scale of warehouse divisions, or automatically divide warehouses according to Amazon's requirements,sellers on Amazon's US site will inevitably face rising logistics costs and further reductions in profits.In addition, some sellers have found that if they fail to meet Amazon's warehouse distribution requirements, their shipments will be forced to be sent to one warehouse and they will be charged a relatively high warehousing configuration fee.Therefore, as soon as the new fee policy came into effect, it caused an uproar in the cross-border circle.As a number of new regulations have been implemented, more and more sellers are finding it difficult to operate on Amazon.It is understood that according to previous relevant announcements, Amazon said it launched a warehousing configuration service fee to help sellersoptimize inventory management and improve operational efficiency.In this regard, some sellers also said that Amazon’s optimized shipment splitting is implemented by “random warehouse distribution across the United States.” From this point of view, this new policy does use warehouse distribution to avoid concentrating sellers’ inventory in popular warehouses, reduce the risk of warehouse explosions, and improve operational efficiency.
But more sellers believe that Amazon’s move is a disguised increase in FBA fees and a “promotion” of its global logistics program (AGL).
A senior seller gave an example of calculation:
If the original monthly shipment is 50 tons and the freight is 4 yuan per kilogram, the freight will be 200,000 yuan.
After the new policy takes effect, if only one warehouse in the East Coast of the United States is sent, the freight rate is 8 yuan per kilogram + 6 yuan for configuration fee, which is 14 yuan, and the total freight is 900,000 yuan; if it is sent to three warehouses in the West Coast of the United States, the freight rate is 4 yuan per kilogram + 3 yuan for configuration fee, which is 7 yuan, and the freight is 350,000 yuan; if it is sent to five warehouses, plus the first-leg freight, the average freight rate is 9 yuan per kilogram, and the freight is 450,000 yuan.
No matter how you calculate it, Amazon's logistics costs will increase significantly after the new policy comes into effect.
Some sellers also said thatthis new policy is a critical blow to products with low value and small quantity.A seller selling light and small products said frankly: the warehouse configuration fee is even higher than the profit of the product, and it is almost losing money to ship the goods. Therefore, after the new policy came into effect, many sellers are looking for ways to reduce or exempt the warehousing configuration fee: some sellers mentioned that they can choose "Amazon Optimize Shipment Splitting" in the background, and then choose ERP to create shipments to waive the configuration fee; some sellers suggest preparing goods in overseas warehouses in advance, and then choose UPS door-to-door pickup service to reduce shipping costs...However, as of press time, the above methods have not been implemented, and it is still unclear whether they are reliable.According to Amazon's announcement, if sellers in the United States want to be exempted from the warehousing configuration service fee, it seems that the only way is to participate in the Amazon Global Logistics Program (AGL) or choose the Amazon Warehouse Distribution Network (AWD).However, it is also observed that most sellers currently have a negative attitude towards AGL:“AGL can waive the warehouse configuration fee and does not separate warehouses, but it has disadvantages such as high freight costs, slow delivery time, and delayed warehouse entry.”"AGL is a fixed price, which actually adds the warehouse consolidation fee to the freight."Therefore, after the new policy came into effect, more sellers tended to call on their peers to raise prices together and escape the dilemma of low-price involution.
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After adding the warehouse configuration fee, are you prepared to raise prices?Single choiceHowever, facing the increasingly fierce competition, the economy has not yet fully recovered, and the low-price impact of emerging platforms such as Temu, the "collective price increase" still faces considerable challenges to be truly implemented. Here we can only remind all sellers to adjust their operating strategies in a timely manner to ensure maximum profits.Do you have any ideas to solve the current puzzle of shrinking profits? Welcome to discuss in the comments section~
