- Lena R. Liberman
- On August 1, 2017
- 0 Comments
In February, Amazon adjusted its Fulfillment by Amazon (FBA) fees in the U.S. “to reflect the changing costs of storage, fulfillment, transportation, and customer service.” In its statement on Seller Central, Amazon outlined the changes taking place on February 22 (consolidation of fulfillment fees, higher fees for media products, and the elimination of the Zero-Fee Fulfillment discount). In the same statement, Amazon touched upon upcoming changes slated for March (monthly inventory storage fees), July (inventory placement service fees), and October (alignment of Q4 fulfillment fees and alignment of Q4 monthly inventory storage fees).
At the time of the statement, there were no mentions of changes to Multi-Channel Fulfillment fees (MCF is the service where Amazon fills orders from your other sales channels using the same logistical technology that powers Amazon Prime and your FBA business; it is available only to professional-program sellers). However, there are indeed changes now and we want to make sure that you are aware of those before they take effect on August 30, 2017.
Need to Know for Sellers: Multi-Channel Fulfillment Changes
According to Amazon, “Multi-Channel Fulfillment (MCF) fees in the U.S. will be adjusted to reflect the changing costs of fulfillment and to better align with Fulfillment by Amazon’s fee structure.” Below are the points addressed by the August 2017 MCF fee changes according to a recent Amazon update (note that the changes are also included in Chinese Simplified text) as well as our preliminary quick takes on what the changes might mean for sellers.
Consolidation of Fulfillment Fees
“The Order Handling, Pick & Pack, and Weight Handling fees will be consolidated into a single, per-unit Fulfillment Fee.”
- This will simplify things by rolling multiple charges into a single charge. However, such consolidation means that sellers won’t see the actual line-item service-cost breakdowns of what is covered within that single charge. Does it make things easier and cleaner? Yes. Does it make costs less transparent? Also yes. Bottom line: Consolidation is helpful and tidy but it makes it more difficult to isolate the real costs of putting together a package and whether or not you might be better doing it outside of Amazon.
New Product Size Tiers
“The current product size tiers will be segmented into the following tiers: Small Standard-Size, Large Standard-Size, Small Oversize, Medium Oversize, Large Oversize, and Special Oversize.”
- This is another simplification and one that will be familiar to sellers as “Effective August 30, 2017, MCF will use the same product size tiers as FBA.” This is a good change that will help sellers who are using MCF as it standardizes packing and shipping and makes it FBA consistent. In short, a box is a box regardless of whether it’s going to an Amazon shopper or to someone else buying from you.
Discounted Fees for Multi-Unit Orders
“We will offer discounted, per-unit fulfillment fees based on the number of units in a customer order for the following product size tiers: Small Standard-Size, Large Standard-Size, and Small Oversize.”
- Volume discounts are great incentives to make the most of the single orders (for you as a seller and for Amazon as a shipper), but how they affect individual sellers and buyers depend on where the volume breaks are and how much the rates change at those break points. As well, the nature of some products (consumables such as snack foods and wearables such as socks) is single-order multi-unit, which is great for volume discounts; the nature of other products (media, tools, electronics) is single-order single-unit, which isn’t the same kind of volume game. Thus, this change will affect sellers of various types very differently and sellers would be wise to think about how to maximize units-per-order by way of quantity-discount promotions. Bottom line: Again we see that Amazon is all about pumping up (and pumping out) the volume in its quest to dominate the entire supply chain and be the largest purveyor of the most products.
Changes to Unit and Dimensional Weight
“We will change the way we calculate unit weight and dimensional weight to match the calculations used by Fulfillment by Amazon (FBA) for orders placed on Amazon.com. Unit weight will be calculated by adding individual unit weight to a standard packaging weight and then rounding up to the nearest pound. Dimensional weight will be calculated by taking the unit volume and dividing by 166.”
- This is another overlap that eliminates existing differences between MCF and FBA. As Amazon accrues experience in fulfillment to its own customers and to others, it becomes better at understanding and managing logistics associated with calculating and packaging and sending. Theoretically, this should lead to streamlining and operational efficiencies that should expedite processes and cut costs. As for how Amazon arrived at the calculation, well, that’s some existing UPS math. For more about the UPS relationship with Amazon (both as a collaboration and a competition) and where that may be headed, read “How Amazon is Helping UPS in its Business,” “Why UPS Need Not Fear Amazon,” and “UPS Could Be Pushing Shoppers to Amazon.”
Why An Elephant in the Garden is the Elephant in the Room
Perhaps the biggest change with regard to the new Multi-Channel Fulfillment fees is that Amazon is no longer treating Media as a separate pricing case, which will really hurt sellers who deal in books, CDs, and DVDs. Consider this simple example:
|MCF Fulfillment Fees Before August 30, 2017||MCF Fulfillment Fees After August 30, 2017||Change in Cost|
|MEDIA: Children’s Book An Elephant in the Garden (standard size, under 1 lb.)||$2.95||$5.85||+$2.90|
|NON-MEDIA: Tablet Case (standard size, under 1 lb.)||$5.95||$5.85||-$0.10|
You can see here how media no longer being treated as a separate class harms media sellers but benefits (however slightly) sellers of non-media similarly-weighted items. The August 30 MCF fee changes are going to be a big shift for media sellers who will enter a whole new world of calculations and, upon doing so, may choose to pull back some inventory and handle shipping to non-Amazon customers themselves.
Assessing the Changes to Multi-Channel Fulfillment Fees & Keeping in Mind the Bigger Picture
Most of the changes seem fairly reasonable given that shipping/mailing prices do increase (think stamps) as costs like fuel increase. Media, however, is hit hard and I am eager to hear from sellers how these changes play out financially for them in the longer term. Already some sellers are asking “Does Amazon want all the sellers out of Multi-Channel?” and claiming “Amazon Just Killed Multi-Channel” (not that the Seller Central boards are ever places for over-reaction or assuming the absolute worst in terms of intentions and outcomes, mind you).
Let’s not look at the February’s FBA changes or August’s MCF changes as isolated adjustments so much as steps in a larger push for Amazon to exert even more control over supply and fulfillment processes and costs. I think the bigger indication here is that, by rolling more of MCF into FBA rather than treating them quite so differently, Amazon is consolidating yet again. This, along with mirroring UPS’s calculations, suggests that existing synergies within the fulfillment and shipping processes are being further aligned and tightened up.
Finally, a positioning point worthy of note: Amazon treating MCF increasingly like FBA makes a statement; it says “What matters more to Amazon than the buyer’s point of purchase is that Amazon holds the inventory, controls the fulfillment process and costs, and believes that in time, the buyer will purchase directly from Amazon. In the meantime, Amazon will treat every purchase, whether shipping to an Amazon shopper or to an external buyer, as if it were made by an Amazon shopper. And in time, Amazon believes that it will be.