Amazon’s New Seller Fulfillment Fees Draw FTC Attention, Report Says
Amazon’s antitrust battle with the Federal Trade Commission (FTC) may have another spanner in the works.
According to a report from Fortune, the FTC is opening up a separate probe into multiple fees that the e-commerce giant recently introduced to its seller community. Sellers impacted by these fees already pay to use the Fulfillment by Amazon (FBA) service, which enables these merchants to store their products in Amazon warehouses, where company employees can pick, pack and ship the goods.
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One new inbound placement fee, effective March 1, requires sellers to pay and use the Amazon Warehousing and Distribution (AWD) bulk storage service. AWD is a pay-as-you-go service designed to offer sellers long-term storage, so that their inventory can be stored in their warehouses as they await to be delivered to fulfillment centers. Merchants can avoid the fee when using the inbound placement service, but only if they opt to ship goods to at least four different warehouses, using their own resources.
These fees, first announced in December, will average 27 cents per unit for standard-sized products and $1.58 per unit for large bulky-sized products.
The second fee in question, a low-inventory-level fee, now applies for sellers who carry “consistently low” levels of inventory relative to unit sales. Sellers can avoid this fee by maintaining more than four weeks of inventory relative to sales, Amazon says. These fees will apply starting April 1.
The merchants can also skirt the low-inventory fees by using the AWD service for long-term inventory storage. But one major criticism comes from the fact that Amazon also charges for inventory levels that are too high, forcing merchants to “thread the needle,” one Amazon seller told Fortune.
The seller fees are big business for Amazon. The tech titan’s third-party sellers accounted for more than 60 percent of items sold on the company’s shopping sites during the holiday quarter, with the company generating $140 billion in revenue from seller fees alone in 2023.
Amazon argues that the fee changes allow sellers to choose where they want to have Amazon take on different aspects of fulfillment and where they want to do the work themselves.
“On average, the 2024 fee changes are significantly less than those announced by other major fulfillment services, and many sellers will see a decrease in the average fees paid to Amazon per unit sold,” an Amazon spokesperson said.
The Fortune report claims that the FTC began reaching out to Amazon sellers to learn more about the impact of the fees after an initial report from the publication on March 1, which brought attention to the fees. That report said that “a half dozen” top Amazon sellers referred to the fees as “overly complex and expensive,” with concerns that the fees would force them to pass higher prices to consumers or ceded more control of the supply chain.
The FTC declined to comment.
When the fees were first announced in December, Amazon said they were designed to improve shipping speeds for its customers, while reducing the costs of such initiatives. In a post on Amazon’s Seller Central forum, the company said that with the fees in place, it expects merchants will see an average increase of 15 cents in fees per unit sold. In the post, Amazon’s selling partner services team said the fulfillment fees would be an average of 70 percent less expensive than two-day shipping methods offered by other major third-party logistics (3PL) providers.
The first post in response called the low-inventory fee “insane,” while another called the fees “hidden and convoluted.” Another response said “Amazon is making it way too complicated for the average seller,” while asking “Why can’t Amazon keep the fees simple?”
Seller fees have been a subject of criticism for Amazon in the past, with the company recently deciding to renege on a 2 percent fee it wanted to initially impose in October. That fee would have been slapped on third-party sellers who were using the e-commerce giant’s recently relaunched Seller Fulfilled Prime (SFP) delivery program. At the time, the move appeared to be a way to generate more revenue from sellers who shipped Prime-eligible products out of their own warehouses instead of Amazon’s.
Regardless of the controversy they may bring, the fees are being put in place as Amazon continues to bolster the efficiency of its fulfillment and delivery network as part of its wider regionalization initiative.
In the fourth quarter, Amazon CEO Andy Jassy touted the company’s fastest delivery speeds ever, with the firm increasing the number of items delivered either same-day or overnight by more than 65 percent year-over-year.
And the tech titan is making it happen for cheaper too. In 2023, Amazon reduced the cost to get a product to a customer for the first time since 2018, Jassy said.
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