Amazon sellers are barely catching their breath from a record holiday shopping season. And yet, spurred by significant changes to Amazon’s fulfillment fees, the time to plan for the 2025 season is already here. 

In response to rising transportation costs and a desire to get products closer to buyers, Amazon rolled out a new Fulfillment by Amazon (FBA) fee in 2024 that penalizes sellers for missing on inventory planning. The practical impact of this change is that most Amazon sellers have until the end of April to finalize their demand planning and fulfillment plans for the 2025 holiday season. This is especially true for sellers of products manufactured overseas. 

It’s not uncommon for Amazon to make changes to its policies and fee structures, but the marketplace’s 2024 changes reflect the company’s evolving strategy, and illustrate important shifts in online commerce and logistics. Brands that sell on these platforms must take note and adapt if they want to avoid penalties that impact both revenue and profit margins.

Sea Changes in Online Commerce

Amazon has always prioritized the end consumer above all else, aiming to offer the best prices on the widest range of products with the fastest delivery times. In 2024, it rolled out a new FBA fee which essentially penalizes sellers who carry consistently low levels of inventory. Sellers can duck this fee by maintaining four weeks of inventory, without going above or below this level, but maintaining this “goldilocks” inventory level is fraught with challenges. 

The change is part of Amazon’s response to rising transportation costs and a strategy of doubling down on getting diverse products as close to consumers as possible. Amazon chief executive officer Andy Jassy, has consistently said that conversion rates are much higher for items delivered within a day. For Amazon, that means more selection and just the right amount of inventory to avoid out-of-stock items, all within a short shipping distance of every consumer within its reach. The 2024 FBA fee structure shifts the costs of executing this approach onto brands.

This change is a microcosm of how e-commerce is changing for sellers. Consumers have grown to expect a wide range of in-stock items delivered extremely quickly. An experience that used to seem like magic is the new expectation. Amazon is shifting its policies and practices accordingly. Sellers will have an unfunded mandate to adjust, or they’ll have to go off-marketplace to sell their products, a path that makes little sense for many brands.

Christmas in April?

These changes put even more pressure on brands to get their demand planning and inventory forecasting just right. The problem is, forecasting is always wrong — and that’s before you factor in the unpredictability of the holiday season.

Imagine you typically sell 100 items per month. This means you’ll need 400 units of product for every 30 days to avoid Amazon’s FBA fee and other possible punitive measures like algorithmic downgrades, or even de-listing. Now, what if your holiday inventory needs to be 500 or 600 units? This creates a number of follow-on challenges, such as activating your supply and manufacturing chains to meet demand, and optimizing shipping against “just-right” inventory levels instead of full truckloads. This all assumes your forecast is right.

This becomes a tough change during months of static demand, and the volatility of a holiday season introduces additional question marks around demand planning and logistics. Even if a seller gets forecasting and inventory right, shipping logistics is the next hurdle, as more trucks than ever before are trying to get into Amazon’s system. In 2024, for example, sellers that didn’t have their holiday inventory to Amazon’s logistics network by late August risked missing the holiday Prime Deals window.

In short, the new expectation for Amazon sellers is to have more accurate forecasts and just the right amount of inventory manufactured, shipped and into Amazon’s fulfillment system on time. For the 2025 holiday season, sellers need their forecasting and planning for making, shipping, and processing holiday inventory complete in the first four or five months of 2025.

What to Do About It

Many brands have been understandably frustrated by Amazon’s recent changes, and some have opted to push back on the e-commerce giant. However, direct lobbying of Amazon is unlikely to be successful. The company understands the shift in consumer expectations, and aims to force its sellers to adapt. For brands, energy is best spent modifying their approach, instead of trying to get Amazon to change its mind.

The only way forward is for sellers and logistics partners to work together. Sellers will have to get better at dynamic demand planning so that their forecasts are more accurate, and they can quickly pivot when the inevitable variances between supply and demand pop up. They may need fulfillment and logistics partners who get creative around taking “just-right” inventory levels from multiple sellers to make full trucks. They’ll also need better data to understand and manage volatile supply chains.

Amazon’s 2024 changes to policies and fees won’t be the last. Sellers must adapt to handle increased uncertainty and complexity across their entire supply chain, from forecasting to fulfillment. While much is at stake, brands that find the right processes and partners may find that their most successful days are ahead.

Rob Hahn is chief operating officer at Pattern.