The whole story about new Fulfillment by
In the Fulfillment by
And people are screaming that now. But this time (unlike this time), the new FBA fees are serious. And in this article I break down exactly what they will mean for
So what’s happening?
Today (Februrary 22nd, 2017),
Before we get into the numbers, the basic nature of these new FBA fees can be summed up as this:
Media sellers are no longer getting a break from
As with all significant changes, the conversation tends to be dominated by doomsday theorists with an unbalanced take on the facts. Yet there is a real cause for concern here, so let’s break it all down…
First, what are the theories as to what havoc these fees will unleash?
Here’s a few…
- The end of penny books.
- The end of selling cheap books on
Amazon . - The end of selling books on
Amazon .
New FBA fees: broad strokes
The new FBA fees are summed up in one line from
“Effective February 22, 2017, fulfillment fees for media items will be increased to be the same as the fulfillment fees for non-media items, and media and non-media items will be consolidated into a single standard-size tier.”
There are some other changes (such as new fees for the holidays & upcoming split shipment increases), but this basically covers it.
New FBA fees: running the numbers
The only effective way to communicate what these new FBA fees will mean is to show the before & after with various size books (weight factors heavily into FBA fees – nothing new).
The idea here was to pick one book from the most common book sizes, then assume what I consider a “common” price for each, then show the old payout versus payout with new fees (payout being the amount
So let’s look at these different book sizes:
- mass market paperbacks
- trade paperbacks
- regular hardcovers
- large hardcovers
- textbooks
Book strata #1: mass market paperback
Book example #1: Rich Dad Poor Dad (mass market paperback edition)
Sales price: $7
Payout before new fees: $3.03
Payout after new fees: $2.18
Net margin drop: 12%
Payout percentage change: 28%
Analysis: These changes are significant. At a $7 sale, your
So is this the end of selling $7 books FBA? More on that later…
Book strata #2: Standard paperback
Book example: Tipping Point (paperback)
Sales price: $8
Payout before: $3.53
Payout after: $2.45
Payout percentage change: 30.1%
Analysis: I chose an $8 sale price here because that’s a common price to sell a standard paperback for as an FBA seller.
Even though the price is $1 higher, our payout is affected even more than the last example because of the increased weight of the book.
I personally don’t sell a book if I won’t get at least a $3 payout, so for me this means the end of selling standard paperbacks for $8. It used to be that a $7.50 selling price would get me above the $3 threshold, but no more.
Book strata #3: Standard hardcover
Book example: Flash Boys (hardcover, 288 pgs)
Sales price: $10
Payout before: $4.83
Payout after: $2.95
Payout percentage change: 39%
Analysis: This is a standard size hardcover, and even at $10 I still won’t meet my $3 payout threshold. This is where the new FBA fees start to feel most serious to me. I could have received a $3 FBA payout selling this at $8 before. Now, I need to sell it for over $10. Meaning I need to increase my sales price over 20% to get the same payout. This is where we start to see how much weight influences the new fees.
Book strata #4: Heavy hardcover
Book example: Money, Master the Game (hardcover, 700 pgs)
Sales price: $10
Payout before: $4.41
Payout after: $2.55
Payout percentage change: 42%
Analysis: This book is about twice as long (and presumably, twice as heavy) as the last one, and the payout drop is brutal. Over 40% difference over the old fee structure.
Book strata #5: Average textbook
Book example: Introduction to Hospitality (textbook, ISBN 013281465X)
Pages / weight: 600 pgs/3 lbs
Sales price: $20
Payout before: $12.50
Payout after: $10.66
Payout percentage change: 15%
Analysis: Notice I set the sales price here at $20. And notice the payout percentage is only 15%. This is where we start to see things take a turn for the better. When you increase the sales price, the impact on your payout becomes dramatically less significant.
What’s the lesson? Best way to buffer against new fees is to raise your prices.
BIG lesson here.
How have new FBA fees affected the
It’s been pretty interesting.
Across the books & media world in
(And btw, our Zen Arbitrage users – who capitalize on finding cheap books on
But it’s not how the small sellers respond – it’s how the big ones do
From an FBA seller’s perspective, the fewer the sellers the better. The fewer FBA sellers on any given product, the higher we can price. Simple as that.
And while a lot of smaller sellers have declared they’re jumping ship, its worth noting that small sellers don’t present a significant level of competition to FBA sellers. Exact numbers are hard to come by, but I would theorize that if even 50% of all sellers with a feedback score of under 5,000 disappeared tomorrow, it wouldn’t be terribly noticeable.
What really matters is how the big sellers respond to new fees (i.e. “megasellers”).
What’s different about huge megasellers?
One, they’re less averse to losing money on a sale. We’ve seen this with penny books for years. Often their business model is built around making money in aggregate, and whether or not they lose money on any one (or 10,000) books is irrelevant. So in that sense, megasellers are more buffered from the impacts of new FBA fees than the rest of us.
On the flipside, there is ZERO chance any of them are simply going to throw there hands up and say “we’re going to start selling garden supplies instead.” Unlike many smaller sellers who can more easily pivot, large sellers will find away to adjust and live to sell books another day. The big hope for small FBA sellers is that many of big ones revert to a merchant fulfilled model, leaving FBA to sellers who are more nimble.
Is this the end of penny books (i.e. books selling for $4 FBA)?
Basic fact: The majority of books on
And the vast majority of
- They hope to make 10 cents per book after FBA fees and make up for it in volume.
- The price drops after shipping in, and they end up losing a little on a sale, but its still cheaper than paying
Amazon to dispose. - They literally don’t know their numbers, and don’t care.
Mostly its #1 or #2.
Many are saying these new FBA fees are “the end of penny books,” but its not that simple.
Here’s a quick look at the books we looked at earlier, before and after the new fees.
Rich Dad Poor Dad
$4 selling price before new fees: 48 cents
$4 selling price after new fees: -37 cents (negative)
Tipping Point
$4 selling price before new fees: 13 cents
$4 selling price after new fees: -95 cent (negative)
Flash Boys
$4 selling price before new fees: -27 cents (negative)
$4 selling price after new fees: -$2.15 (negative)
Money, Master the Game
$4 selling price before new fees: -69 cents (negative)
$4 selling price after new fees: -$2.55 (negative)
Introduction to Hospitality
$4 selling price before new fees: -$1.10(negative)
$4 selling price after new fees: -$2.94 (negative)
So is this the end of penny ($4) FBA books?
Well here’s the thing: Look at the negative payouts for the first two books. Those are the kind of payouts sellers of $4 textbooks have endured for years. And they do it anyway. And there are tons of them (RentU, Flipping Pages, etc). And they never go away.
Then consider that (by my estimation) books the size of the first two examples (remember that size/weight factors heavily into FBA fees) comprise the majority of books on
So penny books aren’t going away. Megasellers have already endured these kinds of losses for years.
But then look at last couple of examples (heavier books). The losses from selling those for $4 FBA approaches $3. That’s brutal. And losing $2.50 per book is much less sustainable than losing 70 cents per book (over 3x less sustainable, by my math).
My theory: $4 textbooks will largely vanish. Many if not most of the $4 smaller books will remain.
How will this shake up the bookselling world as a whole? Four possible scenarios…
It will be very interesting to see what happens over the coming weeks and months. Are we in the midst of a Great FBA Purge, where all the lowball sellers exit the business, or switch over to a merchant fulfilled model?
We may see a massive noticeable difference starting literally today (February 22nd, date the new fees are implemented).
Whatever happens, its going to fall into one of these categories:
- Penny book sellers do nothing, continue selling $4 FBA books.
- Mass exodus of FBA sellers starting today, as they switch to a merchant fulfilled model in droves.
- Sellers raise prices to buffer against costs (and find turnover plummets, then probably concede to #1 or #2)
- Megasellers coast along, losing money on low end books (sub-$5) until they are sold out and stop shipping them in, but remain FBA for all higher-priced books.
Sidenote: There are new fees for non-FBA sellers as well
This site is called “FBA Mastery” and we’re not here to talk about non-FBA fees. But when we’re trying to predict if FBA megasellers will migrate over to merchant fulfilled, its worth mentioning that MF fees for books & media are increasing too.
I won’t bore you with the details, but it roughly averages out to about $1 more per book. Still much less than the new FBA fees.
What do I think this will mean for FBA sellers?
Expect that this will further widen the (previously shrinking) chasm between merchant fulfilled and Fulfillment by
If you’re paying attention, this would be great, great news. If it happens.
And this begs the question: Are the increased Fulfillment by
Time will tell.
How should you respond?
When selling on
- Better sourcing.
- Better pricing.
This is a good time to emphasize the latter:
Everyone should revisit their prices across their entire inventory starting today.
It’s stating the obvious to say that your profits per book will diminish with these new fees. But if you have a minimum payout you need to keep, and you’re militant about maintaining it, you’ll need to go through and raise your prices.
The less obvious thing to consider is that prices among your competition could shift radically with these new fees. No one knows. Between sellers exiting FBA to other sellers raising their prices, we may see an amazing opportunity for FBA sellers to raise their prices on tons of their inventory – offsetting new fees.
Take a look at your current inventory, and see what opportunities have opened up to actually increase your prices – and expose these new fees as a blessing in disguise.
Remember: Higher prices make the new fees negligible.
At a $7 sales price, the new fees are brutal.
At $20, you’ll barely notice.
How am I responding?
Raising my minimum selling price to between $8 to $11 (depending on the weight). I’m still committed to hitting a $3 minimum payout, and will raise my minimum selling price accordingly.
The takeaways
- New FBA fees impact FBA sellers significantly at the low end of the price spectrum.
- New FBA fees impact FBA sellers minimally in the $15+ price spectrum.
Endnotes:
- Thoughts? Leave a comment below.
- The trade in tool teased in the last article is still in the works. Get on the FBA Mastery list to get news of that when it drops.
- And not new, but if you haven’t picked up my FREE book (just pay printing and shipping) Online Book Arbitrage, you can’t go wrong.
Also, claim your free book:
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Nice Job! Does this include the 3/1 fee changes as well for the 45 cent bump to the closing fee plus 15% fee on shipping for MF?
Thanks
I touched on the MF fee changes in the article, but I was focusing on FBA.
I am in a business of selling books online. As Peter mentioned : if you are willing to win less the $3 per payout, then I don’t consider this a business. It’s a hobby. So for me it all comes to better sourcing and pricing it at a level that justifies the effort and work you are putting into.
In my former career as an importer of fashion garment for big chain stores in Europe, I have never sold a garment at costing price just to get a customer. Some of my competitors did and I lasted 23 years doing business and making money but the competitors who priced at cost, all disappeared.
My advice : source well, give great service and price honestly.
Thanks for the reminder about this Peter. What I did this morning was to readjust all my Minimum Price Alerts to account for the new fees. I’ve got 1000+ items so item by item would be impractical. (I’m also changing strategies to only fast flip higher priced items). Buy Cost + New Fees + a markup to still make profit. Then I’ll deal with items as they hit my Price Alerts. I think this is a decent solution.
Great article..i’ve raised all my books to a minimum of $11.99..all books i sent in now go in at $14.99 minimum, no cheaper..tightened up considerably on buying AND condition.. i no longer walk out of library sales with 7-10 boxes..last one..2 boxes
i brought back hundreds of books priced between $8-12 and started putting them on bonanza and others..
what’s missing from your analysis is cost, handling, supplies and shipping to FBA..i figure my cost to be $2 per book..nevertheless, great article..
The best upside to this is that as time goes by, smart FBA sellers should be able to continually increase their minimum sales price. Considering those other factors you mentioned, i.e. cost, shipping, etc, I would love to reach the point to where $25 is the lowest price I’d put on a book. The worst part of all this is that with every increase in the necessary minimum sales price to make a good profit, the much harder it is to find a constant supply of books with that potential. I go to library sales sometimes and walk out with about a dozen books, while other resellers are leaving with a hundred or much more. Of course, I know that in a few months down the road, most of those books will either have to be disposed of or sold for that nickel (literally) profit.
Hi. And what about returns on books. So far I had clothe that been sold, and one was returned. I had to pay FBA fees. With books and markup of 3$ a return will put any of us in a hole.
Thank you
I raised my prices on every FBA book the past few days. Minimum is now $7 and since I source most of my books from yard sales, I am still profitable since the average cost is 20-30 cents each for every book which includes some juicy titles aka textbooks, etc. Just shipped 46 books harvested from yard sales yesterday. Book cost was about $20 total and listing prices were over $400. Must be some profit somewhere in there! Also, I have my FBA settings set to return all FBA books before the long term storage fees kick in. I will sell these MF and perhaps send them back in when the appropriate time allows me to. BTW, I have not read any comments about the upgraded AMZ FBA seller app! First you can scan from the first page that appears when you open the app and second, the response speed has increased substantially! Works so much better than before and I don’t have to reset between scans. Read the results and push the camera icon again and so on. This pretty much replaces my little scanner I was using thru bluetooth to my phone and much more casual like I am sending texts. That’s my two cents worth except I don’t know why FBA sellers continue to list something that they know loses money…
As always, great and timely information. Thanks Peter. I’ve been preparing but I need to check my prices today!
Great write up.
Hi Peter – Great article! Several variables have been pointing us as FBA Sellers to raise our pricing – including the fees increase you’ve illustrated here, the requirement for listing each book in each inbound box (whether you pay the fee or pay by using more of your time), and the more stringent long term storage fees starting at 6 months. All signs point to increasing prices to be profitable and being more selective when sourcing.
This isn’t all bad however as a lot of small FBA sellers with probably bow out and hopefully the larger ones go to Merchant Fulfilled or are forced to increase prices – leading to less competition for us or at least higher overall FBA pricing!
Anything that thins the herd in FBA-land is a good thing, and I’m very hopeful these fees will do just that.
Thanks for this summary Peter, and I’m with you in the idea that it’s always what you make of it. The market is never stagnant, and Amazon will always be changing things, but when one door closes, there are usually two more that are open.
I must say though that I just never understood how or why ANY FBA sellers, big or small, bother to sell books at a loss. I understand clearing out inventory rather than going through disposal, but it seems like many of these big sellers just do it because they can. Just seems very strange to me. And in a brick and mortar store, a loss-leader is a proven concept, but of course, people don’t come to Amazon to shop a “storefront”, so to speak, particularly for books. I’m very interesting in seeing how this plays out. Now off to do some repricing!
I raised my minimum price to $17; disposed of everything priced below that and that had already tanked; and, from now on won’t buy anything that has an MF or FBA price lower than $15.
i’m with you T.G…i spent over an hour this morning adjusting prices…UP…I couldn’t believe how many books had fees of over $7..like you, i’ve decided not to work for Amazon this year..
very interesting. Anyone who does fba as a hobby will probably care less, but for those trying to make a full time living from this these fees are a game changer for sure. I hope it raises the pricing on books. Even among Goodwill books I’ve noticed price hikes lately. Paperbacks that were 50 cents are now 99 and hardbacks that were 1.00 I’ve seen as high as 3.99. I think sourcing is still king in this game more then pricing. If Goodwill’s raising the prices ( which is the King of American thrift stores) on books should we not also consider the same on FBA pricing?
I shopped at a Goodwill in Vermont a few weeks ago and all their pricing was directly correlated to the value of the books on Amazon. When I checked out I chatted up the cashier and she said they had a new system where they scanned books and they either set them aside for sale on eBay or the system generated a price based on popularity of the book.
It’ll be interesting to see how the new fees affect thrift stores who have ventured online.
Regarding Goodwill, they are a franchise based operation so individual owners are free to decide if they’ll try to sell online or not. It’s good news for us booksellers because even if one owner discovers a great system it doesn’t mean that it’ll spread throughout the whole company.
Goodwill operates regionally, not nationally, and there’s a WIDE range of book prices at Goodwills across the country.
Our regional Goodwill chain has actually dropped prices, which was a pleasant surprise.
You’re right, I am repricing today as well.
Hi Peter, I have read and put into practice your ideas for buying books MF and selling FBA. My current purchase max cost is $3 + $3.99 shipping and my minimum FBA pricing starts at $19.95. I have over the last 2 months shipped in about 40 books and have sold 5. I pass on a lot purchases because the FBA offers are low. Example: 20 offers first 10 offers range from $5 to $8 and the balance of the offers barely reach my starting price. Do you have any comments on stretagy for my unique position and for this selling model in general.
Thanks
Ron
Ron
I would caution against a cookie cutter pricing strategy like you describe, because you’re leaving a lot of money on the table. FBA prices should usually be set in relation to other FBA prices, not a fixed amount in my opinion.
My Pricing Mastery course (www.pricingmastery.com) goes into this in detail.
I don’t mean to butt heads with someone who has, without his knowledge, mentored me (Peter Valley), but this one point I am fairly passionate and confident about:
Unless that book is a textbook, in which case you can rightfully ignore everything you are about to read, pricing in relation to other FBA offers while ignoring what the MF offers are asking for the same book will sink you. Said differently, prepare an adequate amount of lighter fluid and a match because you’ll be disposing of a lot of books around the 15th of February and August. The FBA prices will nearly always be dictated by the MF prices for non-textbooks. Why? Because people like to save money, plain and simple, and given the option to pay $4, $5 or $6 MF or $19.95 FBA, they will do the former and simply wait a week. Yes, you can price that $4-$6 MF book at $13-$15 FBA, but more than that it simply becomes unappealing to most people, even with the lure of FBA. Eventually another seller will add that book too and before long you are on the bottom of the page. Do books prices between MF and FBA sometimes become ‘mal-aligned’ with either MF becoming too expensive relative to FBA or FBA becoming too expensive relative to MF? Sure. But if you checked those same books a few weeks or more later, you will find that prices have normalized. Nathan Holmquist discusses this somewhere on his website. He doesn’t even look at FBA prices when pricing books. He bases his prices on MF.
Again and critically, DO NOT follow this advice for textbooks, where MF and FBA prices literally have nothing to do with one another.
You’re awesome Peter, but we simply don’t see eye to eye on this one!
I wonder if a lot of mega book sellers aren’t using their Amazon business as a tax write off. Hence, their indifference to losses.
I was so hoping you’d write about these fees! And you came through with flying colors… Much thanks.
I’m a small fba seller, adjusted a few, but my ASP this month is over $20 so… as you were, keep booking… great article thanks….
Cheers!
Great analysis.My suggestion to anyone who has not done so is to get hold of Peter’s video course on pricing. It has been worth the cost many times over.
I’ve got it, and you’re right.
Thanks for the endorsement! (http://www.pricingmastery.com)
Great post peter,on the new,higher FBA fees.It will be interesting to see,how this all plays out,once the smoke clears,and the dust settles.Those who will come out ahead in the end, are the ones who source and price their books smarter.
OK, I’ve learned how the penny MF sellers make money. It’s volume, volume, volume, volume… + VOLUME and more Volume!!! But, honestly, how does a FBA Seller make money on a $4 book. Even if you have volume, volume, volume, volume…. + VOLUM and more Volume!!! You still don’t make any money. It makes no sense to me! So, I really do think that these are big box sellers just stuffing as many listings as they can with volume, volume, volume, volume…. + VOLUM and more Volume!!! just to make it difficult for the independent seller because they feel threatened by the independent seller! That’s my 2 Cents Worth!!!
FBA Sellers who are selling $4 books are only doing this to clear out inventory because it’s cheaper to sell it for nothing than pay Amazon $0.15 to destroy it. Usually that book has already tanked to $0.01 merchant fulfilled and has hundreds of $0.01 offers. FBA Sellers can afford to do this because they make money on their other books. It’s not unusual to only sell 70 or 80% of your inventory and have to liquidate or destroy the rest to avoid storage fees.
What I don’t understand about your theory Dave is that selling it for $4 actually loses $1.60 on a typical item, and that doesn’t figure in any shipping costs that are already sunk into getting it to the AZ warehouse. No matter the size of the seller, it would be far better to pay a few pennies to dispose of the book rather than sell it and lose even more.
Also, that makes no sense whatsoever when the book is ranked well. There would be no need to do that when the $4 book is a seller. I see it as, these are books which these sellers are sending in at $4 because these are well ranked books. If they need to get rid of inventory then donate them before sending them in and take a tax write off. And, according to Peter, those well ranked $0.01 books will sell for higher than $4 FBA.
I suspect that many of the megasellers that price books at prices that look like crazy losses to the majority of us are Amazon Platinum sellers and get a discount on fees that many of us can only dream of getting. From everything I have read about Platinum selling status on Amazon, it is not something that comes easily, but after several years of great customer service and producing so much income for Amazon that they can’t help but take notice they make you a platinum seller and give you the huge discount in fees.
Undoubtedly, the fee increase will shake up the entire book selling community and we are bound to see drastic changes. My theory is that many FBA sellers will either sell something other than books, convert to MF, or quit Amazon altogether and get a real job.
What will that mean for those us that stay? Some of you have noted that you will respond to the changes by simply increasing your prices. Not so fast. With many book sellers converting to MF, the MF prices will be pressured downwards, probably creating A LOT more penny books than we already have (hard to fathom…!). Increasing your FBA price will only widen the gap with your MF friends. For books whose arrival into the buyers hands aren’t time sensitive (ie. which are most books), the MF seller will win an overwhelming majority of the time. Would you pay $13.95 for “The Joys of Jewish Humor” when you can get it for $4.00 in a week? Probably not.
With that said, a shortage of FBA sellers also has other implications. Textbook season is going to get a whole lot more interesting around here. Savvy, audacious sellers now have full licensure to price textbooks much closer to their list price and still make the sale. Peter is dead on right 99% of the time, but I will respectfully disagree with his assertion that a significant exodus of small seller won’t make a dent in prices. There is a world of difference between a textbook with 15 FBA offers and one with 10 or less. The first several offers generally are within a penny of one another. Towards the middle and bottom of the 1st page however, offers are erratic, bold and much higher. A reduction of merely 25% of FBA sellers changes the dynamic of prices immensely (with text books only) and sellers with enough chutzpah can capitalize in a big way.
In short, if you want to stay relevant, focus on textbooks and price like the mafia.
Thanks Peter for breaking that down. Once again you are on point. As a smaller bookseller who is working on expanding my book business, I’ve been doing the adjustment dance. I think once we get through the rebalancing act we’ll be fine.
Hi Ben, any thoughts on Ben’s comments?
I have a thought on Ben’s comments re: MF winning vs. FBA. My answer: It depends on the MF seller and how good they are at customer service and how accurately they rate the condition of the books. Given the choice between MF and Prime, as a customer I’ll go with Prime everytime if it’s within a $10 price range for most non-textbooks and even household items, simply because some MF businesses pretty much suck. They can take forever, they can grade inconsistently and their customer service can be a hassle. With Prime, I’m covered. I get it quickly with no headaches. My time is valuable to me. So, having made that decision, I think that other Prime members have likely made that decision as well. FWIW.
Hi Amanda,
I fully agree. But notice that you state that $10.00 above MF is just about your max. That’s the point.
Writing this about 3 weeks after the fees have set in, the reality of what is happening is that everybody is raising prices, so the result of the fee increases is that books just cost more than they did on Amazon. Nothing has changed for sellers as far as I can see.
Hi Peter- Thank you for a great article. I’m curious if you hold to the $3 payout for CDs as well as books? And when you say $3, do you mean after cost of goods sold or before?
I’ve only been selling about 18 months on FBA and am still working on determining my minimums.
Thanks to all for your feedback.
With the $3, I am referring solely to Amazon payout. So Amazon pays me $3, minimum. And yes I also apply to CDs.