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Amazon remains the global leader in marketplaces, continuing to invest in technology, infrastructure, transportation, and people to innovate its services. While this innovation allows suppliers (sellers and vendors) to serve larger markets more efficiently, the cost of these investments are not borne by Amazon alone. Rather, these are passed through to suppliers in the form of increased platform fees.
For sellers, these costs include Amazon’s referral fees, which are a percentage of the item’s price, fulfillment costs for storing and shipping products, and variable closing fees for media items. For vendors, these costs include Amazon's vendor fees, marketing investments, and potential chargebacks, all contributing to the costs of doing business within this expansive online marketplace. Additionally, sellers and vendors may incur costs related to advertising, returns processing, and account management.
Understanding the impact of cost changes is crucial for sellers to price their products competitively, and maintain Amazon as a profitable growth channel.
At Threecolts we are building the most comprehensive online marketplace management platform and we believe it’s our responsibility to empower our partners with crucial information to aid their decision making. This report is drawn from over 13,000 unique ASINs and 1.1 million ASIN transactions from records of businesses that use Threecolts to drive profitable growth. For purposes of this report, we analyze referral fees, closing fees (fixed and variable for media items), and fulfillment fees to assess the overall impact of fee changes to sellers.
In this report we look at amazon fee trends for sellers over the past 3 years to wrestle the following questions:
Threecolts' data on FBA transactions for the relevant period - price, costs, and related metrics - is drawn from over 1 million transactions. This provides Threecolts an exceptional vantage point into FBA cost data, offering unparalleled visibility into trends and insights for FBA sellers especially with regards to Amazon FBA fees.
As shown in the chart below, sellers are paying a greater share of their earnings to Amazon. This peaked in October of 2022, when sellers were paying 40% of their unit price on average to Amazon in fees. We see the cost trends persist throughout H1 2023 as Amazon moves away from peak vs non peak fulfillment fees, to a standard structure year round. This puts a lot of pressure on the sellers’ margins and profitability, especially in competitive and low-margin categories.
Investigating sellers’ response to the cost increases, the analysis also shows that the rates of price increases have also increased in recent years, indicating that sellers are using price to try to cope with the rising fees. However, this could have a negative impact on the customer demand and satisfaction, negatively impacting seller’s sales ranking and visibility on Amazon.
Prices and costs on Amazon vary by product price and category. Inexpensive and Budget products ($0-$20) face the highest fee increases, shrinking their margins. Sellers in this bucket have largely countered the fee increases through increased prices. Affordable products ($20-$50) see lower prices and stable fees, reducing their margins. Expensive products ($50-$200) see lower prices and steady fees, reducing their margins. Premium products ($200+) see higher prices and moderate fee increases, strengthening their margins.
Sellers in the Expensive and Premium price bands have largely preserved, if not grown their margins. Amazon sellers should monitor the fees as a percentage of price and balance them with their pricing strategies and customer value propositions in order to drive profitable growth.
Although costs are rising across the board, the fees seem to be increasing at a disproportionate rate for smaller packages. Sellers who sell small and light products have to pay more for each unit they ship. On the other hand, the pricing for heavier items seems to have stayed relatively level over the years, indicating that sellers who sell large and heavy products have a more stable cost structure. The analysis also reveals that for small packages, fees can end up being almost half of the unit price, which could significantly erode the seller’s margins and profitability. It is crucial that sellers monitor dimensional weight fees and optimize their packaging and shipping strategies to reduce their costs and increase their customer satisfaction. Bundling, for example, can help move products up the dimensional weight scale while preserving margins.
In our exploration of the costs of doing business on Amazon, several key trends have emerged.
We observe that fees per unit have generally been on the rise, with a dip in January 2023 that could potentially be attributed to limitations in our data subset and consumer post holiday period hangover. Interestingly, the anticipated spikes in Q4 each year appear to be becoming more intense, reaffirming the impact of Amazon’s changing Q4 fee rates and general Amazon fee increases.
The average unit prices of products across most pricing buckets are increasing. Notably, more expensive products seem to be experiencing a faster rate of price increase compared to lower-priced items. This is an interesting trend, especially given that smaller sized items are getting more expensive to sell via FBA.
The fee share of price has seen a rapid increase in recent years, indicating a squeeze on sellers’ margins. The rate of price increases has also escalated in recent years. Dimensional weight fees appear to be increasing at a disproportionate rate for smaller packages, while pricing for heavier items has remained more steady.
Lastly, for small packages, fees can end up being almost half of the unit price. Fees are pushing higher on average and we are seeing more outliers that have disproportionately higher fees.
The data indicates a more competitive landscape for sellers however they can optimize their product package size to reduce dimensional weight fees and improve margins. Additionally sellers who can offer competitive prices for high end high demand products could reap additional benefits.
These insights underscore the dynamic nature of Amazon’s marketplace and highlight the importance for sellers to stay informed and adapt their strategies accordingly. As we move forward, it will be interesting to monitor these trends and see how they evolve in response to changing market conditions and consumer behaviors. Stay tuned for more insights on navigating the Amazon marketplace!
The data presented above represents an aggregated, anonymized view into the amazon marketplace transactions of a subset of our customers. The data presented in this report is a snapshot of marketplace sellers from 2020 to date. For the purposes of this report, we limited the scope of product participants to products ranked in the top 50 of their respective amazon categories. This resulted in 1,133,639 million transactions across 13,000+ unique ASINs being assessed for the purposes of this analysis.
All revenue figures are represented in USD ($), and any conversions were carried out using annual average exchange rate over the period.
Dimensional weight is computed as the package volume/ 139 (Amazon dimensional weight divisor)
Note: A product can be affiliated with multiple categories and thus could count multiply across categories in some cases.
