Why Amazon’s Increased Fees Have a Silver Lining for Sellers!

Amazon's increased fees

At first glance, it looks like it isn’t going to be the easiest year for Amazon sellers. Not only will they be paying more in Amazon seller fees, but they’ll also have to adjust to new limitations on inventory storage in FBA (Fulfillment by Amazon) warehouses.

Even so, Amazon’s increased fees isn’t the whole story; some sellers see this as an opportunity, as well as a challenge. 

An opportunity for what, you ask? To make bolder business decisions, optimize profit margins, and improve your perspective on what it takes to run a successful Amazon store.

Yes, you’ll still be paying more to Amazon than you were before with Amazon’s increased fees, but you also have options when it comes to raising your margins. In order to do that, though, you’ll need to have the right data, and put it to work for you.

Using a profit calculator like Shopkeeper will give you key insights into the performance of each item in your store, which can help you strategize how to raise your business’ bottom line. 

Why you could benefit from examining Amazon’s perspective

There are two sides to every story, as they say, and this story is no exception. If you’re a seller, the news isn’t great; after all, who wants to pay more money for essentially the same value? Plus, having to comply with inventory limitations could result in occasional interruptions as sellers figure out how to prioritize the way they order and stock their products. 

For Amazon, however, the increased seller fees and inventory limitations are a win. Sellers will have to either pay the fees or leave the platform, and the vast majority of sellers are going to stay. As far as inventory policies are concerned, Amazon has just ensured that their existing FBAs will now have room for future growth, due to the fact that current sellers will be scaling back the number of items they can store in the warehouses. 

Before Amazon implemented inventory limits, sellers could basically store as much of their products as they wanted in FBAs. Provided they paid the fees (storage, removal and disposal, aged inventory surcharges, etc.), sellers could take up space on a first-come, first-served basis.

Unfortunately, the rate at which sellers have been joining Amazon means the FBAs were getting overcrowded; the options were to restrict current sellers, or build a ton of new FBA centers. It’s pretty clear which option Amazon went with, and although it isn’t popular with their sellers, you have to admit that it’s the most efficient choice. 

Understanding the logic behind Amazon’s decisions is one thing; actually implementing them to benefit your own business is another. But is that actually realistic for the average Amazon seller?

What sellers can learn from Amazon’s policies

If you’re just looking at the surface, it might seem like the main lesson is that Amazon loves making money. As it happens, that’s true – and sellers should love it too! If you’re in business to get brownie points for being a nice person, you’re missing the point of doing business.

Amazon’s latest changes all result in optimizing their profits, one way or another. Increased fees result directly in more money going to Amazon, while the inventory limits pave the way for future growth that isn’t hampered by overcrowded storage facilities – meaning they’ll still be making more money.

But what can sellers do to make similar improvements in their own strategies? It’s all about working with relevant data to make quick decisions that’ll put you ahead of your competitors. 

Say you have a couple of $40 items in your store that are among your best-sellers. All of your competitors carry them too; they’re very popular products. Then Amazon’s inventory limits kick in, and the sellers who aren’t carefully tracking their inventory needs (which is most of them) cut back too far on the number of these items that they’re storing in FBAs.

If you consulted Shopkeeper, though, you would have seen just how many of these products you sold each month compared to the rest of your offerings, and made sure that you had plenty to spare. Pretty soon you’re one of the few people carrying these items; it’s time to take advantage of the opportunity you’ve created through accurately tracking sales and inventory trends with Shopkeeper.

You can now raise your prices, and even if you double them, you’ll probably still be able to sell as many units as you have on hand. After all, you’re one of the few people who has them – if customers really want one of those items, they’ll pretty much have to pay whatever you decide!

If you can use a combination of acting on relevant data, as well as adjusting to new circumstances before your competitors, there’s no telling how many opportunities will come your way. 

Profits should be your priority

At the end of the day, both you and Amazon have similar goals – optimize your strategy in order to improve the bottom line. While Amazon already seems to have a firm grasp on how to raise their margins with Amazon’s increased fees, a seller’s first step should be looking at what the data says. It’s technically possible to get the information you need from seller reports on Amazon, but that’s a lot of work – and it’s way too easy to miss something. 

A better alternative is to use Shopkeeper, since it’ll calculate your profits based on COGS, Amazon’s many seller fees, refunds, and more – everything that goes into an accurate profit margin. Plus, every time a referral fee changes or FBA storage costs go up, that’ll immediately be reflected in your Shopkeeper dashboard. Since all of your products are displayed side-by-side (and you can even view different marketplaces separately), you’ll be able to drill down into profit and loss drivers in order to make growth-oriented decisions.

Making money as a seller on Amazon is getting tougher by the year, but with the right information, solid strategies, and the ability to adapt, you can roll with the punches and keep going no matter what happens. If Shopkeeper sounds like something that could benefit your business, check out their extended 30-day free trial! 

Amazon’s increased fees article and permission to publish here provided by Justin Davis. Originally written for Supply Chain Game Changer and published on February 16, 2022.