Making the Switch to Amazon Warehousing and Distribution (AWD)
Any seasoned Amazon seller will surely have heard about Amazon’s many changing fees. Recently, we’ve seen the low-inventory fee go into effect in April and the new returns processing fee in June. The Seller Forums have been inundated with questions, concerns, and suggestions. For those worried about rising costs, relief may be ahead.
As of April 1, 2024, Amazon reduced its base off-peak monthly inventory storage fees by $0.09 per cubic foot, per month for standard-sized products in Amazon’s FBA network. Those $0.09 can make a huge difference for anyone looking to cut costs and improve profit margins, providing a much-needed reprieve from the low inventory and returns processing fees.
You may notice that some of the total monthly inventory storage fees have increased because of increased storage utilization surcharges. However, you won’t always pay more; the lowered costs in weeks 1-28 can counteract the cost increase for later weeks depending on how long you’ll be storing for.
AWD, a cheaper alternative
If storage is now more expensive after calculating costs, other options exist. Amazon Warehousing and Distribution (AWD), a 2022-launched program, provides a less expensive storage alternative to FBA, with no incremental cost increases.
AWD’s storage costs much less than FBA, at $0.48/cu ft/month in all months of the year. For reference, FBA costs $2.40/cu ft/month in the peak season, October through December. Amazon transportation via AGL or PCP cuts storage costs by another 25%. Looking at fees, AWD has much fewer than FBA, which is attractive to those whose main priority is cost-cutting.
Incorporating AWD into your business
While AWD isn't a complete replacement for FBA, combining AWD with Amazon FBA allows sellers to leverage the strengths of both models for lower overall fees. AWD can be a great alternative to managing a 3rd party logistics warehouse or overstocking your goods in FBA locations, giving you more flexibility for fulfillment and storage across all sales channels.
Is AWD right for your businesses? This will depend on your business model, products, and priorities. For your consideration, the following are the major associated fees for both:
FBA:
- Storage fees: base cost of $0.78/cu ft/month for standard-size items, with surcharges depending on period of storage
- Fulfillment fees: generally between $3.06 and $6.92 per unit for standard-size items, depending on the size and weight
- Referral fees: around 15% unit price per item
AWD:
- Storage fees: base cost of $0.48/cu ft/month for standard-size items, with discounts for AGL and PCP users
- Processing and transportation fees: generally between $2.98 and $4.15, depending on the fulfillment options chosen
- Referral fees: around 15% unit price per item
We encourage you to review the AWD Fee Reports and FBA Fees articles on Seller Central for more details. They provide an in-depth look into both fee structures and can help you decide how best to incorporate the two.
Selling on Amazon is a strict and complex endeavor, and understanding the fee structures is key to success. We at AO2 are here to offer clear, digestible guidance on these issues and help grow your business. Explore our resources for tips on optimizing your seller account, reducing fees, and increasing profits. Visit our blogs, our YouTube channel, or connect with us directly to discuss your needs with our team.
