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Amazon delays its new low inventory fee (again)

by | May 6, 2024 | E-commerce News

Amazon is delaying its controversial new low inventory fee for the second time as it looks to satiate the hundreds of thousands of sellers it outraged with the original announcement. Here's a quick backstory:

December 2023 – Amazon announced a low inventory fee that requires sellers to maintain a certain level of inventory based on historic sales or get charged, as well as an inbound placement fee that is charged to sellers if they don't distribute their inventory to at least 4 different Amazon warehouses. The fee announcements, especially the low inventory fee, caused a ton of backlash from third party sellers and caught the attention of the FTC last month who began examining them.

April 2024 – Amazon decided to pause its new controversial low-inventory fee that was to take effect on April 1st. Technically the company said it would still charge affected sellers as planned, but will credit them back at the end of the month, referring to this grace period as a “transition period” that will show sellers how they would be affected by the new low-inventory fee without yet having to pay for it.

Read Shopifreaks Edition 168 (story #1) for a detailed recap of these new fees and the controversy they evoked. 

May 2024 (Present Day) – Amazon once again delayed the new low inventory fee, announcing via its seller forum that the company would be extending the grace period through May 14th. In addition to the delay, the company also made some general changes to the upcoming fee structure: 

  • The low-inventory fee will not apply to products that have sold fewer than 20 units in the last week.
  • Any fees incurred due to excessive inbounding and processing times caused by Amazon will be credited back to sellers by the 15th of the subsequent month.
  • Amazon will provide an exception on low-inventory fees for products that are part of Prime-exclusive sales for the four weeks following Prime Day.

It's great that Amazon has made those concessions above, but the added stipulations don't help at all with creating transparency around seller fees or with enabling sellers to forecast the costs they'll incur selling on Amazon.

Sellers want a simple fee structure, and Amazon has become the opposite of that. Some experts allege that the confusing and costly fee structure is designed to push out small sellers. 

Jon Elder, CEO and founder at Black Label Advisor, said, “Amazon needs to cut the fat. Amazon is not going to say this out loud, but they want the most successful sellers to stay, sellers who are already doing millions a year, who are extremely optimized. Space can’t be taken up by stale inventory.”

Amazon justifies the new fees as being part of its commitment to its customers. The company wrote, “Having sufficient inventory that is spread across our fulfillment network ensures that we have enough product close to customers so we can deliver it faster. We’ve seen that when products have sufficient inventory levels they will, on average, generate measurably more sales.”