FBA prices will rise across the board! Amazon delivery costs soared by 60%+!

Recently, an overseas data agency released a cost survey on Amazon last year. At first glance, it seems incredible. Last year, the annual FBA logistics costs soared by more than 57%, and the highest increase in Q2 was even close to 70%!

According to statistical data, in Q2 and Q3 of 2020, transportation costs increased by 68% and 57% year-on-year respectively. Q4 data will be announced in early February. However, Q4 is a period when Black Friday and Member Day are concentrated, and transportation costs will definitely skyrocket.

This surge even exceeded the sales growth of online stores. The upper half of the table shows that the average increase of Amazon's online stores was about 38%, the offline stores increased by 10%, and the third-party sellers had the highest sales growth of 53%.

The extremely high growth in logistics is mainly attributed to Amazon's investment in logistics networks and infrastructure. In fact, it can be seen from last year's data that Amazon's logistics costs have been rising continuously, and this year's epidemic has only increased this rate. Because Amazon set a one-day delivery upgrade goal in 2019, it has to invest a lot of money. When the Q3 financial report of 2019 was announced, the high logistics costs (burned 9.6 billion US dollars) caused the profit to plummet , and even the stock price fell.

The increase in logistics costs in 2020 is even more terrifying, but this level of surge has not caused media discussion or stock price fluctuations. The reason is that apart from the surge in logistics costs, Amazon's performance in 2020 is dazzling, with third-party support business revenue increasing by nearly 30% year-on-year, and advertising business growth exceeding 40%! It is precisely because the online mall has made a lot of money that this pit is filled.

This is not only worrying, but also makes people worry. This huge logistics investment will definitely continue for some time. If the revenue from third-party business and advertising decreases, will Amazon increase the logistics investment costs and pass them on to us sellers?

The answer is yes. In 2019 and 2020, when Amazon began to increase its logistics investment, Amazon would increase FBA fees at the beginning of each year. Although there has been no movement this year, our fees will definitely increase eventually.

The report also revealed that the advertising business is becoming a strong growth driver for Amazon. It has broken the duopoly of Google and Facebook in the digital advertising market. Amazon's advertising business is growing faster than Google or Facebook. At the current rate, Amazon's advertising business will reach revenue of around $50 billion in 2022. This terrifying data is entirely driven by third-party sellers.

Moreover, Amazon's membership system - Prime membership performed very strongly in 2020, reaching an all-time high in renewal rate. Its stickiness and loyalty are very terrifying. This group can achieve such results when the number of membership in the United States is already very saturated. In the future, the consumption they can bring will reach a terrifying number.

At the same time, the big investment in logistics is used to fully upgrade Amazon's logistics system. In the long run, it will be very beneficial for Amazon to further expand its share and traffic in the e-commerce industry. Moreover, the huge investment is only caused by the initial establishment of the logistics system infrastructure. After the establishment is completed, the cost will also fall due to the investment in automation and robotics technology. It is also good for sellers. After all, the bigger the cake we can share, the bigger it will be if Amazon continues to grow.

During the period when Amazon is upgrading its logistics system, we have to improve the cost investment in logistics and the overall profit margin of our products so that we can enjoy the relaxed operating environment after the upgrade.