For Fulfillment by Amazon (FBA) sellers, the introduction of new fees and constant changes to the existing fee structure are common occurrences. The implementation of inbound placement service fees on April 15, 2024, has sparked considerable outrage since sellers feel the new fees adversely hurt their profitability.
However, the e-commerce giant has a contradictory viewpoint. According to Amazon, the inbound placement fee will help “provide customers with faster delivery experience” and offer sellers a “financial incentive” to ship products to multiple locations in its fulfillment network.
In this blog, we explain everything you need to know about Amazon's inbound placement service fee, including how to calculate it and tips to lower the fees. Keep reading to learn more.
What is the inbound placement service fee?
Previously, Amazon offered FBA sellers the convenience of shipping all their products to a single Amazon fulfillment center, and Amazon distributed these items across its network as needed for a small fee. For many sellers, this centralized approach was far simpler than managing inventory across multiple warehouses independently.
However, this service by Amazon now comes with an expensive price tag – the inbound placement service fee. This means sellers now must spend more money for their inventory to be distributed across Amazon’s fulfillment network.
According to Amazon, sellers can pay reduced or no fees based on whether they send their shipment to a single location or multiple locations. The fee will be levied on standard and large bulky-sized products 45 days after Amazon receives them.
An average placement fee of $0.27 per unit will be charged for standard-sized products. Similarly, on average, the fees for large, bulky-sized products are $1.58 per unit.
Inbound Placement Service Options
While creating a shipping plan in Amazon Seller Central, you will now have two options for inbound placement for your inventory. During the process, you will see a cost estimate for each available inbound placement option, allowing you to choose the most cost-effective choice for your inventory.
Minimal shipment splits
By selecting the minimal shipment split option, you send your inventory to a few fulfillment (usually one) centers you have chosen, and Amazon distributes it within their network for an additional per-item fee.
Partial or Amazon-optimized fulfillment splits
In this option, you can reduce or avoid the fees by sending your inventory to several fulfillment centers. Let’s explain this further: By splitting and sending your inventory to two to three Amazon-suggested fulfillment centers, you stand to pay a reduced fee.
Similarly, you can completely avoid per-item fees by sending your inventory to four or more fulfillment centers, as suggested by Amazon.
Note: This fee varies by location, and according to Amazon, shipments destined for the Western United States are charged higher.
However, there are many instances where sellers have complained about the options being unavailable. Here’s a user’s complaint on Seller Central Forum:
Here’s a screenshot of a seller’s dashboard that shows only minimal shipment options being available:
According to Amazon, inbound placement options will be provided only when your shipments qualify Amazon's benchmark.
Here are the factors that affect shipment qualification and the number of inbound placement options as provided by Amazon:
- Whether your shipment includes a mix of standard-size items, non-standard-size items, or special handling categories
- Whether each box contains the same mix and quantities of SKUs
- Quantities and number of boxes for each item
- Geographical demand
Detailed Inbound placement service fee
The fee varies based on size, weight, number of location tiers (partial or minimal), and the location (region) of the fulfillment center. Below is the table that outlines the per-unit FBA inbound placement service fees:
Here’s a mock calculation of the inbound placement service fee:
Let’s consider you are selecting the minimal shipment split option with one inbound location in the West region. You are shipping 100 units of large standard-sized products weighing 12 oz. Here’s a breakdown of the inbound placement service fee:
100 units x $ 0.34 (Minimal shipment splits rate per unit as per Amazon) = $34
To calculate the exact inbound placement service fees for your business, we recommend using the Amazon Revenue Calculator.
Sellers’ reactions and business impact of inbound placement service fee
Let’s accept it: FBA prepping and packing are cumbersome tasks, and add to this the new complexities and cost of the inbound placement fee. Most FBA sellers are irked by this move and have shared their discontent on multiple FBA-related seller discussion forums. This move can be viewed as a strategic decision by Amazon to shift the cost of placing inventory across fulfillment centers and delivering orders swiftly (read Prime) to sellers.
In fact, some sellers are forced to pay inventory placement fees that are 2x or 3x of their shipping costs. Here’s a user’s experience on Reddit:
The impact might be felt more acutely by smaller sellers with lower profit margins who will be unable to absorb the fees or adjust their operations compared to larger businesses.
Similarly, sellers with high sales volumes will witness an exponential increase in their expenses in the form of both shipping expenses and inbound placement service fees.
The next set of sellers who could feel the wrath of such hefty fees are vendors who normally import directly from China and ship to a fulfillment center. Now, they have to split those shipments into smaller batches. This involves paying for storage and operations or an FBA prep service, thus ending up with a reduced profit margin.
Furthermore, introducing such fees (low storage and fulfillment fees and increased inbound placement fees) shows Amazon’s strategy of getting established sellers to start using other Amazon services, such as AWD, and slowly letting Amazon take control of their supply chain.
Tips to minimize inbound placement service fees
Here are some of the best practices that will help you lower the inbound placement fees:
Use Amazon-optimized shipment splits
By choosing this option and sending your inventory to 4 or more fulfillment centers, you can potentially avoid the per-item inbound placement fee. To lower the fee, select the partial split shipment option.
Strategically select location
Evaluate the fees associated with different geographic areas and consider opting out of regions that may not yield financial advantages or are cost-sensitive. For example, sending your shipment to the western region of the U.S. will increase your inbound placement fee.
Smart inventory planning
Plan your shipments strategically to avoid sending in small quantities that might not qualify for Amazon-optimized splits (fee-free option).
Aim for larger shipments with a good mix of standard-sized items to maximize your chances of avoiding per-item fees. Similarly, focus on creating separate shipments for standard-size items, non-standard-size items, and each special handling category.
Finally, increase the number of boxes and ensure the item mix and item quantities are equal across all boxes.
Optimize size and weight
The fees are determined based on the size and weight of items, which are categorized as small standard, large standard, or large bulky. Combine smaller items into bigger packages to pay a lower fee. Additionally, work on ways to make product packaging smaller or lighter.
Stay vigilant and adapt
Monitor your fees regularly and tweak your strategies as necessary to ensure cost-effectiveness and maximize the efficiency of your Amazon FBA operations.
