Fulfillment by Amazon or FBA has become a fundamental part of e-commerce and is the largest fulfillment network in the world. On top of expanding scale, FBA has worked to improve its speed and service to customers. In 2023 Amazon achieved a significant milestone of delivering more than 4 billion units with same-day or next-day shipping speed to Amazon Customers in the US. The disbursement of inventory across Amazon’s fulfillment facilities is a key part of maintaining and improving service to Amazon customers. On March 1st, Amazon FBA started charging Inbound Placement Fees on FBA inbound shipments. This new fee improves the transparency and relevance of the inbound distribution costs sellers pay to Amazon. Sellers must understand how this new fee impacts the costs of their business so that adjustments can be made to pricing and inbound methods to meet profitability goals.
What is an Inbound Placement Fee for Amazon FBA?
The Inbound Placement Fee is a fee charged by Amazon that reflects the cost of distributing inventory through their fulfillment networks to allow for same-day or next-day coverage nationwide. This fee should not be confused with the legacy Inbound Placement Service fee, which is no longer active. The historic Inbound Placement Fee allowed sellers to pay an additional fee to force the FBA shipment to route to a single location. The new Inbound Placement Fee has replaced the historic Inbound Placement Service. They are related but not identical.
Before March 1st, Amazon paid for the freight cost of distributing inventory through the network when inventory was initially received. This freight cost was then incorporated into other FBA Fee Costs and Rates. To increase transparency and improve the relevance of fees charged to sellers for distribution, in 2024 FBA Fee changes Amazon created the Inbound Placement fee. This allowed Amazon FBA to remove blended distribution costs and lower other fees. In 2024 Amazon has decreased FBA Fees for standard-size products by $0.20 and large-bulky products by $0.61 on average. The fee also has allowed for more relevant fees to be charged to sellers based on the exact cost of network distribution of the unit. The fee is based on factors including Item Size, Weight, Number of ship-to locations in the shipment, and Inbound location. See below for the fee rate table.
Source: https://sellercentral.amazon.com/help/hub/reference/GC3Q44PBK8BXQW3Z
Understanding the Cost and Operational Impact of FBA Inbound Placement Fee
As this fee is a new separate cost being charged to sellers, it is important to evaluate the financial and operational costs associated with the new fee structure. Under the new fee structure, when sellers create FBA inbound shipments, they have the choice of multiple placement options. The first option, “Minimal shipment splits” allows sellers to ship to a minimal number of locations. Often the shipment is not split at all and is sent to a single shipping address. This provides convenience to the Seller in handling and preparing the shipment, but results in an increased FBA Inbound Placement cost as Amazon takes on the responsibility of distributing the inventory through the FBA network. The second option is “Partial or Amazon-optimized shipment splits” which allows sellers to split the shipment into several smaller shipments. Here the seller provides the service of distributing inventory through the FBA network vs. Amazon FBA receiving the inventory at one location and then distributing it. This placement option can partially or fully discount the Inventory Placement Fee. However, the increased number of shipments and varied ship destinations create more work internally for sellers when preparing and labeling the shipment. Also, the net shipping cost of these smaller separate shipments is usually higher than the shipment cost of the shipment to a single location in the “Minimal shipment splits” option. It’s important to keep in mind that “Partial or Amazon-optimized shipment splits” are not available for all inbound shipments.
When comparing and deciding between “Minimal shipment splits” and “Partial or Amazon-optimized shipment splits” it is important to first get a good understanding of the rate at which “Partial or Amazon-optimized shipment splits” are available on your inbound shipments. Based on your product category or size/weight it may not be an available option to mitigate Inbound Placement Fee cost. Once a seller has a good understanding of the rate of “Partial or Amazon-optimized shipment splits” availability on inbound shipments, they can compare cost and internal operation convenience for the two options. When comparing costs, create both “Partial or Amazon-optimized shipment splits” and “Minimal shipment splits” versions for the exact same shipment and, ideally at the same time. Then calculate (Inbound Placement Fee Cost + Inbounding Shipping Cost) for both shipments. This will provide a direct comparison of inbound costs for the two options. Once this comparison is drawn, weigh the operational/time cost of single vs. split shipment preparation for your business. Depending on your business’s fulfillment operations it may be worthwhile paying a higher inbound cost per unit and simplifying shipment prep and labeling.
How to Adapt Your Business for the New Inbound Placement Fee
Experiment with Different Shipment Sizes
Experiment with different-sized shipments to see how it impacts Inbound Placement Fees per unit and total shipping cost. Increasing or decreasing the size of your shipments could undercover savings. The quantity of inventory you are inbounding is considered when Amazon FBA is deciding how to distribute your inventory through the fulfillment network. Sending more or less inventory in a shipment could provide cost savings.
Keep in mind other FBA Fees like Low-Level Inventory Fees and Monthly Storage Fees when you are experimenting with shipment quantities. Additional or increased fees of other types may outweigh inbound savings.
Evaluate and Merchant Fulfillment as an Alternative
If Inbound Placement Fees have a substantial enough impact on the profit margin of the business, consider transitioning your offer on the product to merchant fulfillment. Depending on your product price point and size tier, additional costs from inventory placement may make FBA fulfillment no longer economic for your business.
Investigate average fulfillment offering in your products category to see if there is flexibility in customer demand for non-prime Merchant Fulfilled shipping. Merchant fulfillment can be a great alternative to FBA fulfillment as long as customers do not expect a two-day shipping speed in the products category.
Utilize Amazon Warehousing & Distribution (AWD)
Using Amazon Warehousing & Distribution to stage inventory before shipping it into fulfillment centers negates the Inbound Placement Fee. AWD services also allow for automated rule-based restocking of FBA inventory, mitigate the chance of out-of-stock scenarios, and may help increase total storage capacity for fulfillment of Amazon orders. Weighing and comparing the value of this additional warehousing service against your business's current warehousing practices is key to determining if AWD is a good fit for your business.
Review Profitability and Updating Pricing
For your business to be successful, it’s important to understand your profit per unit on Amazon after all fees. The inbound placement fee is an additional fee to consider when reviewing this. As mentioned, the regular FBA fees per unit have gone down, but the inbound placement fee was added. There are ways to avoid or minimize the fee as discussed above, but if your product margin is tight you may need to consider a price increase. It’s important to remember your price on Amazon must be as low as your prices on any other website, so any increase will likely have to be across the board.
Frequently Asked Questions
What is an Inventory Placement Fee?
The Inbound Placement Fee is a fee charged by Amazon that reflects the cost of distributing inventory through their fulfillment networks after initial receipt of your inbound FBA shipment to allow for same-day or next-day coverage nationwide.
What factors are considered when determining FBA Inbound Placement Fee?
Factors that impact Inbound Placement Fees include Item Size, Weight, Number of ship-to locations in the shipment and Inbound location.
How do sellers avoid Fulfillment by Amazon’s Inbound Placement Fee?
Seller’s can mitigate or negate the Inbound Placement Fee on FBA shipments by selecting “Partial or Amazon-optimized shipment splits” in FBA shipment creation or by staging inventory using Amazon Warehousing & Distribution (AWD) which negates Inbound Placement Fees on FBA shipments.
How are Inventory Placement Fees billed to Sellers?
Inventory Placement Fees are billed on a 45 day delay. This allows Amazon to adjust the Inbound Placement Fee based on changes in distribution needs and differences in received inventory vs. inventory communicated at shipment creation.
When did the Inbound Placement Fee go into effect?
The Inbound Placement Fee went into effect on May 1st 2024.
Are Inventory Placement Fees the same as Amazon FBA's historic inventory placement service?
No. Amazon’s historic Inbound Placement Service ended as of May 1st, 2024 with the release of the new Inbound Placement Fee. The historic Inbound Placement Service fee structure was simpler and less robust than the current Inbound Placement Fees. Rates and variables of cost for the two are different.
Where are Inbound Placement Fees visible?
Inbound Placement Fees are visible in the FBA Shipment Creation and in the Payment Period reporting 45 days after shipments are received by Amazon.
Why does Amazon need to redistribute inventory to fulfilment centers aside from the fulfillment center location my inbound shipment is initially sent to?
In order to provide same day and next day shipping that drives customer satisfaction and loyalty, inventory needs to be evenly distributed throughout the country to ensure similar shipping speed to all regions and states.
Conclusion
Amazon’s new Inbound Placement fee has allowed Amazon to reduce transactional FBA Fees for a majority of sellers. It also has increased the relevance of cost charged to sellers based on product dimension and weight. Understanding how the new fee impacts the fulfillment and profitability of your business is key to evolving your business strategy to match Amazon’s focus on customer experience through fulfillment service quality and speed. Goat Consulting works with our clients to develop a detailed understanding of their warehousing and fulfillment processes and capabilities so that we can recommend tailored Amazon fulfillment strategies. Click the Contact Us button below to start a conversation with us today.
About the Author
Eric is the Operations Manager of Goat Consulting and is thankful for the opportunity to work with and learn from retail brands of varying sizes and categories. Eric recognizes that the Amazon marketplace can be a complex environment where merchandising and distribution can be impacted by a variety of factors and parties. He enjoys helping our clients gain a better understanding of their brand's current position in the marketplace and finding creative ways to implement the client's ideal brand image. If you have a question about updating the content displayed on your product detail page, Eric can help identify what factors may be impacting the publication of the content and provide instruction on how to improve the rate of correct display. If you have any questions or need assistance with improving your brand's image on Amazon, please reach out using the Contact Us form.