Amazon Placement Fees have been around for years, but in 2025, they became much more of an issue for sellers. Between 2024’s change in inventory distribution and API changes hitting in Late December, many sellers ask “How do I optimize for this new “fee”? While I can’t guarantee 100% of the time you won’t pay placement fees as there are many caveats, this article aims to show you how to best optimize the placement fee algorithm in your favor, save money, and increase your sales and conversion rates.
What are Amazon Placement Fees?
I’ll save you the boring details as Amazon does a fair job of explaining what they are in their Help Article. But in short, this is a convenience fee. If you want less hassle by creating only 1 shipment to Amazon with minimal splits, you will pay. What Amazon doesn’t tell you well is how this impacts product movement, delays, or other logistical components. The good news is, there are many ways you can optimize this in your favor.
What's an IXD?
Amazon uses “Inbound Cross (X) Docks” to distribute inventory across their thousands of warehouses. There are nIXDs (National) and rIXDs (Regional) for most standard size inventory. Oversize, Hazmat, and a few other specialty categories like shoes and jewelry often follow different placement mechanics. We will touch on these outliers later in the article, so for now — think about just Standard Size and regular products.
Here’s the gist of how Amazon’s new logistics system works: National Cross Docks feed inventory into Regional Cross Docks. Regional Cross Docks feed inventory into Fulfillment Centers (FCs). FCs ship out orders to consumers that get sent to sort centers and finally delivery centers. This is critical to understand what’s going on with your inventory.
When paying placement fees for standard size items, you are almost guaranteed to go to a nIXD. When doing Amazon Optimized Splits, you are highly likely, with a few odd exceptions, to ship to a rIXD. What this means is you are skipping the line in front of ALL sellers who choose to pay for placement fees by getting product into Fulfillment centers and being prime eligible, faster in totality, cheaper too.
The 5-Box Rule... Amazon is WRONG
Amazon’s policy clearly states you must have 5 or more of every box with the same quantity of units and same quantity of each sku in all 5 boxes to avoid placement fees. This means 5 or more cases of a product or 5 mixed boxes that look exactly the same on the inside. Unfortunately this is hard to manage and Amazon’s help page doesn’t give us much to work with:
“To qualify for the Amazon-optimized inbound option with no inbound placement service fee, your shipments must include at least five identical cartons or pallets per item. Each carton or pallet must contain the same quantity per item and the same item mix.“
Well here is the real story. This is not entirely true. This quote has led to a lot of incorrect information being disseminated. This only applies to “Box (or Pallet) Distribution” method, what we will call “Pre-Pack” in this article. Unit Distribution (We will call this Post-Pack) is also available, which is very similar to older workflows. Unit Distribution takes what you want to send into Amazon, tells you how they want to split it, and then you pack the shipments based on destination. Amazon’s Distribution Mechanics are completely different and will split product differently between these two methods.
Pre-Pack vs Post-Pack
Pre-Pack is what most sellers are familiar with. Select the items you want to ship, tell Amazon “There are 6 per case, 25 cases per pallet, each case weights 20 pounds, etc”, then Amazon gives you options on placement, shipping methods, and destinations. After selecting your ideal shipping method, you then create shipments, print labels, and ship. Simple right?
Well, here’s the problem. Most sellers don’t need to ship 5 cases of every sku, especially if you have a high quantity of units per case. The pre-pack workflow follows the flow chart above. What this means is you must have an absolutely perfect packing setup for you to get ideal placement options. This is hard to control and hard to predict.
Post-Pack on the other hand is much less known, even though Amazon has a Help Page for this! Here is the catch, it currently only applies to Freight (LTL/FTL) domestic shipments. Amazon has stated Small Parcel (SPD) is in development, but for now… (Dear Amazon, Call me! Let’s get this fixed! Happy to show you the impact!)
But the magic comes in Step 1-2. The only information you provide Amazon at the beginning is ASIN/MSKU, Quantity, and Expiration dates where applicable – none of which greatly impact your placement options. This means the likelihood of you getting the option of Amazon Optimized Splits is nearly a guarantee. You can mix boxes/cases after shipments are created and even ship as low as 5 units (1 for each destination) much easier.
This means, if you are shipping enough product in total (across all skus) to ship 5 or more pallets (5 LTLs or more), then you are nearly guaranteed to ship with $0 placements fees, skip the nIXD delays, and getting your product to Prime-elgible status faster leading to more sales and better conversion.
Rule #1: Never Mix Split Types
If you are shipping Specialty Categories, examples listed below, you do not want to ship them in the same shipment plan or batch as other split types. If you ship hazmat, only ship hazmat. Do not mix Hazmat and Regular Standard size together. This applies for Pre-Pack or Post-Pack workflows. There is zero advantage of doing them together because specialty categories go to specialty warehouses. Amazon calls these groupings “Pack Groups” and rarely does a product “jump” pack groups except in cases of product reclassification or dimensional changes (Like Oversize/Large and Bulky).
The reason this is so critical is that Amazon is going to expect consistency across all splits from a plan. Regardless of doing Pre-Pack or Post-Pack, mixing these split types will cause challenges that are too mundane to go into depth with this article.
Rule #2: Split off Low Quantities
In Pre-Pack workflows, if you are trying to build “5-alike boxes”, shipping less than 5 units of a product guarantees you will be charged placement fees for the entire plan/batch. This means you could be 99% optimized, but that one sku/product with only 4 units derails the entire batch. Why pay for placement fees on 100% of a batch when you could potentially only pay it for 4 units on their own plan?
When shipping in Post-Pack workflows, you can often get a special “6-way split” that does the 5 standard splits + a low quantity split. This low quantity split will go to a nIXD for $0 in placement, but due to the current algorithm limitations, the likelihood of you shipping this LTL cost effectively is very low.
If you need to ship quantities of 4 or less, always move these low quantity skus to their own batch or plan. This applies to both workflows.
Rule #3: Ship 5+ pallets, if possible, and ship LTL/FTL
When shipping product into Amazon, you basically have the option to ship by parcel or by pallet. A general rule of thumb is that, often — not always — 150 pounds or more per shipment makes it economical to ship on a pallet. So if you are shipping 750+ pounds or roughly 5 or more pallets worth of product, you are probably better off doing optimized splits.
Now – before you come at me saying paying placement and shipping to a closer warehouse is cheaper, let’s talk numbers. In our analysis across dozens of sellers and testing our data against 6 ship from locations (California, Illinois, Texas, New Jersey, and Colorado, Arkansas), we showed 100% consistent results to our thesis. We did eventually find some weird outlier data later on and our study did not extensively study oversize, hazmat, or other specialty categories, but due to their high variability, they were much harder to analyze. So with that being said, I can definitely say that the vast majority of the time — Placement fees don’t make sense at this volume.
When comparing purely cost, some splits are very expensive to ship to, but because the closer destinations are below average in shipping costs, the average balances out. Don’t get hung up on paying for the most expensive split or destination — focus on the total averages.
Scenario 1: .20 ft³ Item
Minimal Split: 28 Pallets
$2,603.18 Shipping**
$2,553.60 Placement Fee
Total: $5,156.78
Optimized Splits: 29 Pallets
$2,448.77 Shipping
Total: $2,448.77*
$2,708.01 or 52.5% savings
Scenario 2: .06 ft³ Item
Minimal Split: 28 Pallets
$2,603.18 Shipping
$18,816.00 Placement Fee
Total: $21,419.18
Optimized Splits: 31 Pallets
$3,851.55 Shipping
Total: $3,851.55*
$17,567.63 or 82.0% savings
*Notice placement fees exceed the entire shipping cost itself.
**Even in scenarios where you ship a minimal split shipment to a location close to your ship from locaton/warehouse, placement fees + local shipping costs are still likely to exceed 5-way split costs.
Additional Notes
Every seller’s situation is different. I am not guaranteeing using optimized splits for freight will be a savings 100% of the time. But these scenarios were done in the more ideal and better balanced “Post-Pack” workflow and tested across many different sellers’ locations. Additionally, we tested this across multiple sellers and calculated the average product size for most Standard Size products to be 0.09 Cubic Feet. Given this statistic, we can assume the savings will be somewhere in the middle of the two demonstrated scenarios above. Lastly, the savings pivot more in favor of placement fees the smaller the shipment gets and especially gets disproportionally worse once a shipping plan is below 5 pallets. But remember, this doesn’t mean you need to ship 5 72″ tall pallets maxed out on weight either, we just want to avoid 5 15″ pallets.
Placement Fees have MASSIVE hidden costs
So you think placement fees only cost maybe $0.20 or $0.30? Nope! Remember, this is a convenience fee. Amazon prefers you do the heavy lifting yourself. I have had dozens of conversations with sellers of all sizes and almost no one talks about these points.
Up to 2-3 weeks of extra FC Transfer
Did you know by shipping to a nIXD, you likely need to add up to 2-3 more weeks for FC transfer times before your product becomes Prime eligible? Sure, maybe a shipment checks in sooner, but 100% of your inventory is now forcefully delayed because it has to get processed at a nIXD, then transfer to several rIXDs, and then Fulfillment Centers. No one “sees” this additional time (Time is money) cost because technically, yes it is checked in, but you won’t have fast shipping times for most of the country for several weeks and your conversion rate, along with sales, will suffer. If you cut your turnover by even a week, every seller would see better annualized return on invested capital (ROIC), better weighted average cost of capital (WACC), and even save on costs like storage fees and financing interest costs.
Reconciling shipments
Ever have Amazon lose some of your inventory? What am I even saying — of course you have. Well did you know Amazon won’t allow reconciling if “The shipment is still being processed by the fulfillment center.”? This means if you want to get reimbursed for inventory, the extra time mentioned above could delay this reconciling period as well.
Risk Mitigation
Shipping delays are inevitable within Amazon. There are certain things you can do to mitigate and plan for it, but nothing is 100%. With that said, if you ship 100% of your inventory to 1 destination and that warehouse is overloaded, you are stuck. What’s even worse is you could now get hit with Low Inventory Fees as well! When splitting to rIXDs instead of national ones, the likelihood of all 5 splits’ warehouses being backlogged at the exact same time is much lower. Even in Q4, if 3 warehouses are slower with appointments or unloading, 2 warehouses are likely to process much sooner. As that inventory becomes available, the remaining stock will start checking in as well.
Reimbursement
FBA Fee changes happen all the time. Amazon measures your product wrong and bam — massive fee change. The good news? This is easily reimbursable with software, reimbursement companies, or even natively within Amazon’s help interface. They make this fairly easy to fix. Here’s the catch — Inbound Placement Service fees are based on product size and weight. Yet, at the time of writing this article, Amazon and almost all reimbursement companies don’t even touch this form of reimbursement. And the bad part? Amazon has been known to be pretty difficult in getting reimbursements for this recently. Hopefully things will change, but for now — it’s a potential serious issue.
How you can help!
I hope this crash course on placement fees was more valuable than you expected. All I ask is, if you found value or learned something from this article, please share it in your communities, with your friends and colleagues, or I’d be happy to discuss this in more detail on podcasts or webinars.
If you are looking for a software that can handle split type distinction or Pre- and Post- Pack workflows, we use Scanpower.
If you are looking for a 3PL or Prep center that has mastered the FBA shipment algorithm and does all this work for you behind the scenes — hands off — Contact us!