Everything there is to know about rising Amazon FBA fees: What the fees are, and what impact they’ll have on your business (backed up with real math)
Many Amazon sellers have doomsday prophecies about rising FBA fees. To settle this issue, I’ve surveyed the wreckage to take stock of what has changed for sellers on Amazon.
Brief list of how rising fees affect the Amazon selling landscape
Anytime Amazon raises their FBA fees, here’s what happens:
- Lowball FBA sellers raise their prices dramatically.
- The low-end of the market vanishes.
- A mini-exodus of FBA booksellers moves to the merchant fulfilled model.
- A mini-exodus of Amazon booksellers get out of the business altogether.
Can rising FBA fees ever be a good thing?
How can new Amazon fees ever be a good thing for sellers?
It’s very simple. Higher FBA fees can be good if one of two things happens:
- Skittish sellers flee the business, reducing competition.
- They force FBA prices higher, so more books become more profitable.
With that out of the way, let’s examine the six possible effects of new FBA fees, and which of them did or did not happen (in no particular order).
The impact of new FBA fees: Fear vs Reality
Here are a few theories Amazon sellers have raised about the effect new fees will have, and which of them actually happened (so far)…
Theory #1: An exodus of FBA booksellers move to the merchant fulfilled model.
Did it happen? A: Uncertain.
Fact is, there’s no way to monitor exactly how many FBA sellers switched to merchant fulfilled after the new fees. Any examples are anecdotal, and hardly scientific. So the verdict is inconclusive.
Theory #2: Lowball FBA sellers would raise their prices dramatically.
Did it happen? A: Yes.
What is conclusive is that books on the extreme low end of the spectrum have vanished (see below). Whereas $4 FBA book offers were epidemic before, it is now extremely rare to see FBA offers below $6.
So prices on the cheap end of the spectrum have gone up. But just enough to get (most) books from selling at a net loss. I.e., the extreme lowball offers have gone from $4 to $6+.
Theory #3: Penny merchant fulfilled books would vanish.
Did it happen? A: Yes.
Remember, there were new books & media fees for merchant fulfilled sellers as well.
You still see penny books here and there (rarely), but by and large you now see few books below $1.
(Note: This means we need a clever new term to replace “penny books.”)
Theory #4: $4 FBA books would vanish.
Did it happen? A: Yes.
Again, you’ll still see these now and then, but they’ve almost totally disappeared.
With new FBA fees, profits from selling a $4 FBA book went from mere pennies (at most), to a significant loss. Literally no books can now be sold profitably at $4. Consequently, they have almost entirely vanished.
Theory #5: Megasellers would do nothing, and continue selling $4 FBA books.
Did it happen? A: No.
See above.
Theory #6: A mass exodus of Amazon booksellers would get out of the business altogether.
Did it happen? A: Yes. And I can prove it.
Using some data I obtained, later in this article I’m going to prove with hard data that the number of Amazon booksellers has dropped dramatically. And I’m going to reveal numbers as to what percentage of Amazon booksellers have left the business.
So how much do Amazon sellers need to raise our minimum prices now?
My rule has always been that I won’t sell a book that won’t bring me at least a $3 Amazon payout. Below that, it starts to feel like I’m just playing a bottom-feeder’s game.
I have no doubt I have walked away from six-figures in net profit over the years by passing on 50 cents books that would give a $2 Amazon payout. But I (mostly) held firm to my $3 payout rule.
So how have I had to adjust to new FBA fees?
Before new Fulfillment by Amazon fees, getting a $3 payout for the average book meant a selling price of $7.50.
Today, a $3 Amazon payout requires a selling price of around $12. Huge difference.
On one hand, its true that FBA prices have been forced upward. But I’m not seeing the same number of books that can be sold at $12 today that I could sell for $7.50 before the fees.
So the game of “selling a high volume of cheap books” as an Amazon bookseller has been significantly comprised.
High-priced books are minimally impacted by new FBA fees
If you’re not doing much business in books or media below, say, the $20 to $25 range, you’re not going to feel the new fees much at all.
At a selling price of $35, your profits are only impacted by about 10%. Not an existentially threatening amount.
That means Amazon sellers who are sourcing online (i.e. “online book arbitrage”), or generally dealing in higher priced books or media, are minimally affected.
Bottom line is if you’re doing most of your business in the $20 and up strata, you should barely notice.
What about the rest of us?
How to cope with new FBA fees if you’re selling cheap books
Nothing genius about this part. If you’re doing significant business in sub-$10 books on Amazon and want to maintain your current revenue, you have to sell as many $12 books as you were selling $7.50 books.
Problem is, there are dramatically fewer $12 books than $7.50 books. Any trip to a well-stocked book source will reveal as much.
So your options for adapting to this new reality are really simple:
- Increase your average selling price (do more business in $10-and-up books).
- Increase your sales volume (i.e. more / better book sources, or decreasing payout threshold to $2).
#1 is difficult to engineer without expanding your inventory sourcing range.
#2 is simpler, and my personal choice.
Within #2, getting more creative about sourcing is impossible to argue with, while decreasing payout threshold is a more controversial option.
To get a $2 Amazon payout today, your selling price must roughly be $10.75. Given this, I’ll start looking very closely at how common $2 books are now, and consider (read: consider) lowering my payout threshold if it will mean a lot more opportunity.
While I don’t like the implications of accepting extremely low Amazon payouts, consider that decreasing your minimum payout by 33% could mean you can increase your volume by 100% (or more).
Note I said “could.” It remains to be seen how many $7.50 offers exist with all the FBA offer price-shuffling taking place. But with lowball FBA prices now forced upward, we see the bazillions of $9 FBA offers becoming $12 FBA offers.
And if you’re willing to become a $2 bookseller, this could mean lots of new opportunity. Time will reveal all.
Takeaways from Part I
- FBA prices for lowball books have gone up, but far just enough to get lowball sellers back to 30 cent profits (shift form $4 to $7)
- This is significant for books in the sub-$12 range.
- This means very little for sellers in a higher price range / online sourcing.
- Penny books have mostly vanished.
- Getting a $3 payout now requires roughly a $10.75 selling price.
- Options to cope are to increase your average selling price or increase your sales volume.
- Lowering payout threshold to $2 could mean a lot of opportunity (jury still out).
Part II: Have new fees plunged FBA megasellers into crisis?
In this section:
- Why Amazon megasellers may be in serious trouble.
- How the megaseller business model has been destroyed.
- Megasellers flee the cheap book game.
I’m getting very heavy in this one. So settle in.
What new FBA fees mean for lowball FBA sellers
Like I said, I’m getting heavy here. Nothing I’m going to talk about is anything short of existential for our Amazon megaseller competition.
So here we go…
Amazon megaseller crisis #1: Sellers can no match the merchant fulfilled offer and get the top spot.
FBA megasellers now face a literal existential threat.
Consider these facts:
- FBA megasellers make up the better part of our lowball Amazon competition in the book market.
- Before new FBA fees, a majority of FBA book offers on Amazon matched the lowest merchant fulfilled offer.
- The entire Amazon FBA megaseller business model is built around high turnover & low profit per book. (I.e. “selling books for pennies and making up for it in volume.”)
- High book turnover is achieved by having the top spot in the Amazon listings.
- For the majority of all books on Amazon, the top spot in the listings now results in a negative net profit.
The significance of the last point cannot be overstated. The entire business model of megasellers is now obsolete.
Take an average paperback book on Amazon with a glut of used merchant fulfilled copies. Since penny books have now all but vanished, you’ll find merchant fulfilled copies have bunched up in the 25 cents to 50 cents range.
Now say you’re the average FBA megaseller. Your entire business hinges on high turnover, and having that top spot in the Amazon listings. Owning the Buy Box is not enough. To claim that top spot, you need to price your book around $6.
Major problem here: For the average book, you’re not breaking even as an FBA seller below roughly $8.50. Your entire business was predicated upon getting that top spot, and now instead of making you 10 cents, you’re actually losing $2.
In one day, many sellers may have found that the majority of their inventory was suddenly selling at a loss.
I’m not an Amazon megaseller, nor do I know any. But they must be absolutely freaking out right now.
It is virtually certain that FBA megaseller inventory turnover is plummeting
Faced with a lose-lose scenario of either forfeiting the top spot (i.e. cheapest Amazon listing) or lose money on each sale, Amazon megasellers must be losing their minds. Again, I have no inside insight here, but I see no light at the end of the tunnel for penny booksellers faced with new FBA fees that destroy their model.
Don’t take my word for it. If you’ve been selling books on Amazon for any amount of time, you know that most books for which there are over 100 used copies use to have the top spot occupied by an FBA offer.
Go back and look at those same books on Amazon now. In fact, it is extremely difficult to find any book priced less than $8 (including shipping) for which the top spot is occupied by a Fulfillment by Amazon offer.
The FBA megaseller business model has been destroyed.
Amazon megaseller crisis #2: The megaseller repricing crisis
I’m a militant proponent of manually repricing all medium-to-high demand inventory on Amazon, no matter what the time cost. Amazon repricing software does not work and will cost you money.
Fact: Third party software (including scanning and repricers) cannot “see” any FBA offer that’s not priced in the bottom twenty. You simply cannot tell a repricer to match the lowest FBA offer and have it do this with accuracy the majority of the time. It’s simply not possible.
A lot of sellers are in denial about this, but its not a conspiracy theory. It’s a limitation of Amazon’s API and a verifiable fact.
Now consider that you cannot claim the top spot (i.e. merchant fulfilled price + $3.99 shipping) for the majority of books on Amazon now without losing money.
Now consider that with the new fees, it is extremely rare for an FBA offer to be priced in the bottom 20.
What’s a megaseller to do?
Your only option (as I see it, not being a user of Amazon repricing software myself) is to set your repricing rules like this:
- Match the lowest MF price for all books that will return a positive net profit (i.e. any book with an MF offer of $8 or more, roughly).
- Price all books with a MF offer below $8 at $8(or whatever, just to return a few pennies of profit).
Pricing rule #1 can be effective. With #2, its a different story.
Because now Amazon megasellers are aiming with a blindfold on. They can set an automatic price of of $8, but they have no idea where that puts them on the offers page. Lowest? Third lowest? They have no way to know. They’re just letting their repricer throw darts blind.
Remember that before new FBA fees, megasellers could gleefully match the lowest FBA offer on everything and return at least a few pennies of profit a majority of the time – even on penny books.
No more.
Amazon megaseller crisis #3: Megasellers exit the sub-$10 game
I chose two of the bigger FBA megasellers and did a little spying on their Amazon storefront to answer the question: How are megasellers responding to new FBA fees? How have they adjusted their FBA pricing?
Warning: What follows is not a thorough scientific look at new Amazon megaseller pricing practices. Just an anecdotal look at two of them. But I believe like any top sellers, they are bellwethers of Amazon megaseller trends.
Part III: Have new FBA fees caused an Amazon bookseller exodus?
I’m about to break down the evidence Amazon booksellers may have dropped by over 10%. Lots of people have speculated booksellers are fleeing Amazon, but I haven’t seen anyone give solid numbers yet. So you’re getting an FBA Mastery exclusive here.
How I got this data
As a co-founder of the online book arbitrage tool Zen Arbitrage, I’m privileged to have access to the massive amounts of Amazon data we harvest (data on millions of books daily).
I wanted hard evidence that new FBA fees caused a huge exodus of Amazon bookseller, forcing them out of the business. I wondered if the answer might lie in all the data we collect over at Zen Arbitrage.
So I called up Zen Arbitrage’s lead developer and asked: “Do we log the number of sellers for a particular book, going back at least two months?”
We did. He was able to give me the exact number of Amazon sellers for any book, going back at least a year. And what I learned supported a major suspicion:
New Amazon fees have caused a large number of sellers to leave the Amazon bookselling business.
To test this, I chose 5 books with more used sellers on Amazon than any books I could think of
I wanted to see the number of total Amazon sellers for used copies before the latest FBA fee increase, and the Amazon number of sellers after.
To return the most accurate information. I picked five titles you find used copies of everywhere. Books that flood every source of second hand books, and for which there are generally around or over 1,000 used copies for sale on Amazon at any moment.
The books I chose are:
- A Million Little Pieces (Frey)
- Bridges of Madison County (Waller)
- Midnight in the Garden of Good and Evil (Berendt)
- The Chamber (Grisham)
- The Lovely Bones (Sebold)
To make the significance of any fluctuations as statistically sound as possible. I chose books with a flood of used copies for sale.
Here’s what I learned:
Sample Book #1: Million Little Pieces (ISBN: 0307276902)
Total sellers (used) before new FBA fees: 1,274
Total sellers (used) after new FBA fees: 1,142
A drop of: 10.36%
Sample Book #2: Bridges of Madison County (ISBN: 044651652X)
Total sellers (used) before new FBA fees: 1,643
Total sellers (used) after new FBA fees: 1,438
A drop of: 12.48%
Sample Book #3: Midnight in the Garden of Good and Evil (ISBN: 0679429220)
Total sellers (used) before new FBA fees: 1,288
Total sellers (used) after new FBA fees: 1,014
A drop of: 21.27%
Sample Book #4: The Lovely Bones (ISBN: 0316168815)
Total sellers (used) before new FBA fees: 981
Total sellers (used) after new FBA fees: 895
A drop of: 8.77%
Sample Book #5: The Chamber (ISBN: 0385424728)
Total sellers (used) before new FBA fees: 1050
Total sellers (used) after new FBA fees: 912
A drop of: 13.14%
What’s the average drop in sellers over the last two months?
Average across five books: 13.2%
What did we learn from this?
There is a significant difference among these books, with drops from 8% to over 20%. But the sheer quantity of books represented across the five titles provides us with a statistically significant sample.
And from this, we can see a trend indicating that, since FBA fees were last increased, somewhere in range of 10% of Amazon sellers may have left the bookselling business.
What does this Amazon bookseller exodus mean for us?
To get close to an accurate answer, we’d have to know one very important detail: Is it the megasellers who are leaving? Or the little sellers? Or both?
There’s no way to know. We don’t log the seller’s names at Zen Arbitrage, only how may there are.
By any measure, 10%+ is significant. It means fewer sellers to compete against. Which means prices go up (although probably not noticeably so). And it means these things work in some small part to offset the increased fees.
This exodus is probably just the beginning
It’s only been six weeks since the new Amazon fees. In all likelihood, this exodus has only begun.
February 22nd was probably only the start date of The Great Purge. New fees are shaking the tree as we speak, and as sellers liquidate their inventory, many will continue to drop out.
For now, enjoy the decrease in competition, and cross your fingers this Darwinian herd-thinning continues.
There it is: A complete look at the impact of new FBA fees
That was possibly the longest article I’ve ever written.
-Peter Valley
Great article, as usual. I, for one, am NOT willing to accept $2 payouts. I’m not sure how you’re figuring that number, but if a book costs $1.25 and then the inbound shipping is $0.75 or more, then the $2 payout becomes zero (or even less than zero). If by $2 you mean after the COG and inbound shipping have been accounted for, it’s STILL too low (in my mind) to make the time and effort worth it. As an advanced comment on Part 2 regarding the scanning app, I go strictly by the Lowest Offer of All, usually ignore the FBA column, and usually don’t buy anything that shows a LOA less than $10. This makes finding a lot of inventory much more difficult, but it helps to avoid buying books that are already tanked out. I see the FBA “penny” offers as continuing to be the major problem, no matter how high that bottom-feeder level rises to.
#1: “Payout” refers to the amount Amazon pays you for a sale, and is different than net profit.
#2: Your scanning app approach is definitely safe, however there’s a lot of money to be made by knowing how to read between the lines of scanning app data and “see” FBA offers the app won’t show. But it does slow the process significantly.
Peter,
I pretty much have been following your bookselling approach for about 4 years now and have done very well until March with high weekly payouts. We took a detour last year and bought around 14 pallets last year and were going to try the Murf way, but it didn’t work out for us in the end. The first time, the pallets were very good with high quality stuff, the second time around it was pure junk.
I do think that now you have to take into consideration the merchant prices when pricing FBA because of buyer sticker shock. Except for textbooks and some rare titles I don’t think you can put such a high premium on FBA anymore. My minimum is 9.99 which gives me a payout of between 2.50 to sometimes 4.50 depending on size, weight etc. I’ve also been sourcing in unusual places where I can get the books cheaper. I got a load of around 800 scholarly books a few weeks ago for 300.00 with price ranges of 25.00 average to around 75.00 and up. That’s what I’d like to do instead of thrift stores in the future.
Peter,
So glad to hear your take on all of this. Thanks for your input. I was wondering when we might be hearing from you.
I’m staying in and still jockeying how to best manage the change.
You nailed it, Peter. I have all ready dropped my prices to Net (hopefully $2 +/- on any book under $9.50 or so. My plan is to basically dump as many of my cheap books as I can and concentrate on sourcing better quality higher priced books. No more bodice rippers! This is mostly to save on storage fees. If I were a negative thinker, I would think negatively about WHY Amz did this…my negative thinking is that this clears a huge volume of warehouse space to fill with other trinkets, not books and might save on manpower as well. I will be spending more time on Zen Arbitrage as well…
Hey Peter. Great information and I think you are pretty spot on with your takeaways. The only thing that I would suggest caution is with takeaway #5. I know that you say roughly a $3 payout but you have to be really careful with the weight and cost of the books now. If you are buying a heavier hardback non-fiction book for $2 at Goodwill and selling for $9.25 you will likely only break even now once you factor in shipping to Amazon. I’m finding that my sweet spot for cheaper books is around $10.95 selling price to get a $2.50-$3 profit as long as my cost is under $1 per book and the book is not overly heavy. I’m looking forward to Part II. I have actually cancelled my FBA Scan subscription for now because of exactly what you mentioned. I was getting home and discovering way too many dud books after the tool indicated “buy”. I’ve gone back to the slow but accurate (and free) Amazon seller app for now.
Fro the $9.25 / $3 payout figure, I was looking at an average smaller size paperback book (Like Power of Now). But yes, you’ll have to price higher for larger books to get the same payout.
You’ll definitely want to check out the next article. Lots of updated scanning app info there.
I stay with FBA Scan because it shows the 6-month average rank on Live mode; the Amazon App doesn’t give this info, and I never buy just based on the current rank.
Peter
After checking my Amazon acct. I don’t see me making $2 for a $7.50 book. Barely making a profit on $7.50 and $9.50 books. I adjusted to a $12 sell price on all new purchases. Yes there are less but you have to change or die.
I’m wondering if prices are going to tank every six months before the long term storage fees are assessed. Maybe you could address this and what we should do.
I think we saw that when the LTS fees first hit but I don’t expect it to be as dramatic in the future. The tree is being shaken.
I find my minimum sale price needs to be 9.50 now. The FBA fee(s) are typically starting at 7 for most of the books I send in. Not really comfortable at the 9.50 so don’t send in much at that price point. My main focus is stock that will go for 12+ and as you state, there’s less of that available, just sending less in.
If Amazon would stop dumping new stock so low it would make things easier. Hope that all comes to an end pretty soon.
Thanks! Very informative, as always. Is your Pricing Mastery course updated to reflect the new fee realities? I bought a bunch of (well-ranked) textbooks after doing some arbitrage, and I haven’t sold a single one yet. I’m wondering if I should get a repricer…
People keep undercutting the price I set manually. I’m tempted to follow but I know you say a lot of people leave money on the table when they do that.
Pricing Mastery deals 90% with principles vs hard numbers, so its still relevant and I’ll also be updating certain modules.
Repricers are definitely not the answer (as I’ve explained in other articles). Trick is to buy with expectation of a certain return, but buffer yourself against possible price drops. And to raise prices as needed. That’s my approach.
Hi I really enjoy your information Handed out. I have been selling 7 years but had just started fba when the floor dropped. The question I have is how can we compete @ 7.50-9.00 when most merchant guys are selling at 5.99 free shipping or 2.00? The buyer gets free shipping from them but not fba.
Thanks
Patrick
You’re not competing with the MF sellers because as FBA sellers, you’re selling to a different part of the market.
I have noticed that several of the ubiquitous book drop shippers that are seen on EVERY listing disappeared from Amazon within the last month. Anybook, and dailydeals are totally gone. Quality7 disappeared for a bit but seems to have started back up again in the last week. Those sellers alone account for millions of offers disappearing. I also suspect this will help prices rise as people begin to price only against books that actually exist.
I’m going to have some hard numbers on this in Part III, so look for that.
I, too am considering dropping my FBA scan account. I will, for now (or until Peter saves us again) use the
free (albeit slow) Amazon App. At least the data can be trusted. The listing software that asellertool offers is
pretty good because you can see all offers during your listing process. That doesn’t help when I’m sourcing.
I try to catch every library sale I can. The books are 50 cents or $1 and when they have their bag sales, they are only $2 per bag. I will still use Zen Arbitrage, but with a keener eye. I have had no luck with textbooks. I need to change my greedy eyeballs to reality and price differently. I think I have tried too often to price simply according to Amazon’s price(?) I only have 1,500 books listed with Amazon (all FBA) but I have still average about $30-$75/day in sales. I watch Amazon’s Pricing window in the Seller Central window. I will lower my rice to match Buy Box if 1) The price is not too low 2) Depending on the number of sellers there are
Great Info Thanks
We have ceased our FBA bookselling activities, though if certain books are worth selling MF, then we’ll do so. Our take on the huge increase in fees is that it was AZ’s way of making room in their warehouses for items of greater ROI per unit. The picking & packing of books must have been extremely high labor/low rewards for them. By the way, a great article! Many thanks for sharing your ideas.
Peter, one of the factors driving down the price of the former bread and butter FBA books also seems to be Amazon’s new policy of allowing third party sellers to win the new book buy box. I see many examples of books where that buy box is owned by a third party seller pricing a book at $6-$7. This becomes the new ceiling just like Amazon’s own new price used to be. Maybe I’m wrong, but I believe it is this new twist that is causing prices to huddle around the low end of the spectrum instead of spreading out as they used to. The old reality only applies now when no third party seller is offering the book as new. Thoughts?
My concern as well, Stephen. I truly don’t see how sharing the new buy box with MF sellers benefits Amazon. Also, how in the world can so many MF sellers suddenly have “new” textbooks? The influx I’m seeing is HUGE, and my sales are WAY down. I’ve gone a whole week with no sales at all … Perhaps these sellers will begin to get called out for not actually having “new” books. I hope this all clears up soon. I’m not concerned about the fees, but this makes me nervous.
ahhh, so that explains my mystery this morning..as i repriced some books this morning i notice my fee review was $8.36..my price was $13.99..the buy box was $6.75..i thought some idiot is selling at a loss..but now i know its the MF sellers lowering the buy box…damn them
and i find myself raising more prices than lowering them…i will not sell for less than $4 a book profit after all expenses …if i do i should get paid to be on amazon’s payroll..after all sometimes i feel i work for them and not myself
When doing repricing, how are you handling books that have competition from Amazon themselves? Are you lowering them below your threshold then or are you still holding ground to keep your minimum profit margin?
Nice info…so if we do MF is $9.25 the lowest asking to clear $3.00???
Or are the fees being less could we list for $7 to make $3.00??
I feel like I’m living in the bottom of the barrel!
TIA
Thanks for the information about FBA books; do you have any insight on other items sold FBA? I mostly sell toys, plush, some china, etc. Thanks for any info you can provide on other FBA segments.
I like the series of articles, but I strongly disagree with this sentiment – ” if you’re doing most of your business in the $20 and up strata, you should barely notice.”
If the selling fee of a book goes up $2, that $2 that will come out of the seller’s pocket has the same
purchasing power whether the selling price was $7.50 or $75. Whatever percentage of the sales price the $2 is does not matter when the seller needs to pay his bills. That $2 per book is $2K if a seller moves 1K units, regardless of the ASP. $2K out of a seller’s pocket is $2K out, a seller with a higher ASP will not feel the $2K less. For example, if I had two accounts, one with $100K in it and one with $5K in it, and $1K was missing from one of the accounts, I would not be less concerned if the $1K was missing from the larger account because the percent is smaller.
To focus on percent takes the seller’s eye off the only thing that matters – dollars.
Percent is everything when speaking of financial solvency. $2 from a $35 book leaves you with $33. $2 from an $8 book leaves you with 75 cents. The seller of the $8 book is keeping only 25% of the money than they used to, while the $35 bookseller is keeping close to 90%.