How should sellers deal with the skyrocketing costs of Amazon’s new warehouse allocation policy?

Starting from March 1, 2024, Amazon's US site will implement warehousing configuration service fees, which will significantly increase sellers' costs.

The warehousing configuration service is to store goods dispersedly in multiple Amazon FBA warehouses to optimize inventory management and improve delivery speed. According to the latest policy, sellers need to choose the warehousing configuration option based on their needs and pay the corresponding fees. When choosing a warehousing strategy, sellers need to weigh costs and benefits to minimize fees.

The reason why Amazon charges warehousing configuration fees is mainly related to the liquidation problem of FBA warehouses in the Western United States. The warehousing configuration fees in this region may be higher than other regions. On the other hand, sellers centrally store goods in popular warehouses, resulting in increased delivery costs.

How do new policies address challenges?

Amazon’s warehouse allocation policy places higher demands on sellers, requiring them to increase the inventory of single products, speed up turnover, and achieve more sophisticated operations. This move will promote the optimization of logistics and distribution, and products using Amazon FBA services will be able to reach consumers faster. Among them, sellers of goods are the most affected group. Since product sellers usually have a large number of SKUs, the sales volume of each product is relatively low. Therefore, after Amazon charges warehousing configuration service fees, their costs will continue to rise, and they can only reduce SKUs to a certain extent.

1. Optimize product packaging and quantity

According to the rules, Amazon’s charging standards for warehousing configuration services are divided based on the size and weight of the shipment. It is recommended that sellers optimize packaging and design according to the size and weight requirements in the charging standards, which can reduce Amazon delivery fees and warehousing fees to a certain extent.

2. Targeted optimization of profit margins

In order to ensure product profits, sellers need to take into account the warehousing configuration service fee and ensure the existence of profit margins through subsequent product selection and new product launch strategies. Without launching new products, it is difficult to remain competitive in the market by simply raising prices.

3. Make reasonable use of third-party overseas warehouses

Amazon's warehousing and logistics system is more suitable for sellers of small items. Sellers of medium and large items are more recommended to deploy third-party overseas warehouses. Relatively speaking, the warehousing and logistics system is more complete and the delivery efficiency is more advantageous.