You’ve finally started to see some profit from the minefield that is Amazon, overcoming problem after problem, obstacle after obstacle and issue after issue.
You’ve worked tirelessly to create a name for yourself and your brand.
You’ve battled with duplicate listings on your products, with other selling trying to undermine your prices- you've gone through it all!
Then boom, like a punch to the gut, the dreaded email from Amazon comes along informing you of FBA long-term inventory storage fees... and the changes you most definitely will not like.
We're all in the same boat.
If you have done your research when starting the Amazon journey , you are aware of the existence of the long-term storage fees, but probably not of the changes that are about to take place.
If you've just started and thinking: ''I've paid my dues, what the heck are these fees?'', read along, we have the answers to turn that frown upside down.
We will cover everything you should be aware of when it comes to long-term storage fees and most importantly- how to avoid them and ''ease the pain'' of any additional hidden Amazon cost.
What the Heck are Amazon Long-Term Storage Fees?
It is the beginning of August, which means- heads up, the fees are right around the corner.
On February 15 and August 15 of every year, FBA conducts an Inventory Cleanup.
And the timing used to make ALL the difference.
It is exactly how it sounds: Amazon goes through your inventory, assesses your units and performs a cleanup.
Units that have been in Amazon fulfillment centers between six and twelve months are assessed a one long-term storage fee that is different ( smaller) than the fee for the items that have been in the US fulfillment centers for more than 365 days ( higher fee).
It’s a lot like having two more property tax bills dropped in your lap, except you don’t own the space.
It’s a semi-annual headache, or at least, it used to be. Now, things have changed.
Some of you who are not familiar with storage fees, might read this and wonder what new unexpected hassle that’s about to land in your lap.
Perhaps you’ve seen it mentioned in social media groups and tech media you consume, but you just don’t quite get what it’s about.
It’s pretty simple, actually.
Up until now, Fulfillment by Amazon goes through their warehouses, figures out whose inventory has sat there and for how long and charges a fee for long-term storage.
If it’s been there half a year to a year, it’s $11.25 a cubic foot.
If it’s been there longer than a year, it doubles to $22.50.
Starting in September, Amazon is going to do this monthly. Every 15th of the month, starting this September, Amazon is going to assess your inventory and charge you:
a) $3.45 per cubic foot of inventory on hand between half a year and a year.
b )$6.90 per cubic foot if it’s been there longer than a year.
But, there are additional changes.
Minimum Long-Term Storage Fees
Starting 15th August ( meaning in 10 days), Amazon is introducing a minimum long-term storage fee of $0.50 per unit per month for items that have been in a fulfillment center for more than 365 days.
Minimum long-term storage fee will be charged in cases this fee is higher than the monthly long-term storage fee (you will not be charged a double one, just a higher one).
So, they will take a look at your inventory on the 15th and assess a flat rate of 50 cents.
If your inventory consists of cubic foot boxes from China, they’ll charge you the flat rate.
If your inventory is books and you can fit 20 into a cubic foot, they will charge you $10.
Under this new program, it’ll take less than four months in storage fees to equal what you’re being charged now for half a year.
Your aging inventory is about to become a regular problem, and this is on top of the hike to monthly storage fees they set down earlier this year.
Wait, but Why?
According to Amazon, these fees will contribute to better improved inventory management, which will in turn help sellers and customers in the long run.
“Through the inventory management tools and FBA storage fee structure, our goal is to encourage efficient inventory management that benefits you, customers, and Amazon.
While we continue to invest in our fulfillment network to better serve your business, at times we experience physical constraints on inventory capacity during key shopping seasons.
To help minimize these constraints, we want to continue to allow the most efficiently managed inventory to flow through the network, while limiting less efficiently managed inventory.”
If you have inventory that has been sitting around at Amazon, chances are their long-term storage fees are diminishing your potential business profit.
Amazon does not want excess inventory stored in their warehouses and they have decided to implement these new restrictions and fees.
So, their solution is to raise the bar by introducing some limitations to sellers based on their Inventory Performance Index.
FBA Storage Limits
The Inventory performance Index rates your inventory management and starting on July 2018, they have introduced limits to poor-performing inventory management, which are evaluated every three months on a quarterly cycle.
Sellers with an Index of 350 and above will have unlimited storage for standard size and oversize items.
If your Inventory Performance Index is less than 350 six weeks before the start of a quarter, you will be notified of your potential storage limits.
In case it remains below 350, then you will be charged $10.00 per cubic foot over the storage limit
If your Inventory Performance Index score is still less than 350 at the end of that quarter, those limits will apply for the next quarter ( and you will be charged this additional feel on a monthly basis).
So, to sum up we have:
1) FBA Storage Limits which are active since July 1, 2018
2) Minimum Long-Term Storage Fees, starting from August 15, 2018
2) Long-Term Storage Fees, effective from September 15, 2018.
Ouch. Not fun.
These numbers may seem steep, that’s because they are.
So, question is: how to make this situation less painful?
You don’t need a solution. You need a way to turn a liability into an asset.
How To Handle Amazon Long-Term Storage Fees
1. Discover Which Items Are At Risk for Amazon FBA Storage Fees
An important step for sellers looking to avoid extra charges is to assess their current FBA inventory in order to figure out which products or items are likely to accrue long-term fees.
This will help you estimate the number of items which are susceptible to long term inventory fees in the Amazon fulfillment centers for 6 months to one year or for one year or longer.
The Recommended Removals report (sign-in required) can also help you identify subject to a long-term storage fee.
This report automatically calculates on an ASIN-by-ASIN basis the number of items you need to remove to avoid the long-term storage fee.
You can find the Inventory Age page by clicking Inventory Planning under the Inventory tab in your seller account.
For the Inventory Health and Recommended Removal reports, click Fulfillment under the Reports tab.
2. Pay the fees
You could just pay the fees. It’s the simplest, the most straight forward and the most painful solution.
That’s cubic feet, mind you. Long, wide, and up. So you know the number at the end of all that math is going to hurt.
But, you don’t need math.
Amazon’s Inventory Age tool helps you know what in your inventory costs you money just sitting there.
And as mentioned above, it’s going to become a monthly payment, too.
3. Place a removal order.
Amazon permits sellers to have inventory removed from their warehouses.
Submitting a removal order is simple.
Go to your inventory management page and find the drop-down list that offers a removal order. When you start creating the order, it’ll even recommend which inventory you should have removed.
Go in forewarned, however. This isn’t a magic wand that makes your problem go away.
You have to pay a fee, and then you either have to have it shipped off-site or disposed of by Amazon.
There’s also a time frame where you can’t send your inventory back to their warehouses.
Yes, this would remove the items that are catalogued for charges, but you would be unable to send in additional units for these ASIN’s until January 1st 2019.
This is obviously is a huge disadvantage for you trying to move this product long-term and continue making profit- which is hard enough as it is without this unnecessary hassle.
4. Lower Your Prices and Do Paid Promotion
You could also try to sell it all off with a tactic of ''reduce and promote''.
That can be done by playing with the prices, meaning lowering them way down, so you can gain a competitive advantage in your category.
Lowering prices and advertising discounted merchandise is a pretty traditional strategy to deal with a glutted inventory. Make a bargain and move it.
Things to consider are the costs of lowering your prices and/or doing an aggressive paid promotion.
Yes, it costs... and depending on your category, maybe even way too much.
In addition to paid promotion costs you should ideally pay at a time when it’s at its premium demand. And since you’re paying to advertise product that you’re selling at a discount you’re burning money at both ends.
Aggressive promotion is a viable option as it will reduce inventory in big, but temporary pushes.
The cons of this strategy is that it is expensive and predictable, as all of your competitors will also be trying this technique.
That means you’re spending money to be more competitive in a market that’s been temporarily made ultra competitive.
Do a Product Launch- ''Golden Option''
There is, actually, a different approach to this. You could do a product launch.
We’re not talking about rolling out new product right before an inventory deadline.
We are talking about reducing your current cubic footprint in Amazon’s fulfillment centers by boosting the rank fo your existing products.
How it works is simple. Find target customers, offer something you need to move at a discount and they start buying it.
That boosts your ranking in Amazon’s search algorithm and you’ll get through targeted discount sales what you thought you could only get by paying a premium for advertising.
Your product … launches. And takes your storage problem with it.
The mechanics are a bit more complicated, and that’s where we come in.
On all of your products that are going to be charged, a professional product launch means you get rid of the excess inventory that you will be charged for, solving your issue of long-term storage fees thus holding on to your profits.
Not only will you not have to pay the fees once you sell your product, you will increase on organic sales, which is gold dust for any Amazon seller.
A professional product launch can also improve your visibility on keyword searches with an improved keyword search rank, putting closer and closer to the top.
The Amazon algorithm will recognize your product as something worthwhile and your sales should go through the roof the closer to the first search page you get.
An easy choice, right? This is clearly the option we recommend, not only for obvious reason, but because it is- out of all the options- the most advanced one.
This is next-level thinking of sellers, truly a 'hack'. Turning a weakness into an opportunity is a ability only 10-20% possesses.
Whatever you decide, take into account that timing is everything.
This is something that will be ongoing, so you need to be well-organized in order to avoid being charged the excessive fees.
Do a regular check up of your inventory at the beginning of each month and make sure you have active management of aged inventory, especially when your inventory has been in Amazon fulfillment centers for six months or longer or you risk having a long-term storage fee charged on the 15th of every month.
And in case you have decided to do a product launch- we are here for you.