When Amazon CFO Brian Olsavsky noted how full Amazon’s warehouses were during the fourth quarter, thanks to the growth of Fulfillment By Amazon, it might have been a sign of things to come.
Fulfillment By Amazon is the service that allows marketplace sellers to have Amazon sell and ship their goods for them. And the cost of service is going up, sort of. Fulfillment costs will go down in October before more than doubling up during the holiday rush seasons of December and November.
Merchants officially got word of the coming change via email on Tuesday. The change will go into effect Oct. 1 and only for the U.S. Fulfillment By Amazon network.
“In 2015, FBA volumes, growth rates, and inventory levels were very high. This fullness was driven in part by FBA inventory that did not sell until well into 2016. To avoid potential capacity constraints during the 2016 holiday season, we are accelerating the expansion of our fulfillment capacity. Additionally, we are changing our FBA fee structure to encourage all sellers to send in and store products in November and December that are likely to sell by the end of 2016,” noted a statement released by Amazon to Internet Retailer.
From that point, merchants will pay 54 cents per cubic foot to store standard-size products and 43 cents per cubic foot for oversized products — the same basic rate charged from January through September of this year. Come November and December, the corresponding fee will be $2.25 per cubic foot for standard size products and $1.15 per cubic foot for oversized products. The back of the envelope math there is an increase of 212.5 percent and 101.8 percent, respectively.
The rate change is targeting two goals, according to Amazon. The first is encouraging sellers to ship inventory in October ahead of the holiday rush, when fulfillment centers are less busy. It will also cause merchants to edit what they send to the warehouse; goods unlikely to sell during November and December are less likely to be left there to take up space when the space comes at a premium price.
Amazon operates 77 large-scale fulfillment centers in the United States, with 17 more in the works.
Amazon will reduce some weight handling fees in November and December.
Amazon does not say how many merchants use Fulfillment By Amazon, which has been around since 2006. However, Amazon has confirmed the service has grown substantially in recent years.
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