Fulfillment By Amazon (FBA) sellers may not be aware of Amazon’s FBA long-term storage fees that they are charged for products that sit on Amazon’s shelves for over a year.
According to Amazon, products that are overstocked or stored for too long in their warehouses limit their ability to offer space for fast-selling products that make money.
So, on the 15th of each month, Amazon performs an inventory cleanup and assesses what’s called a “long-term storage fee” to their FBA customers whose inventory has been stored in their fulfillment centers for too long.
How Much Are Amazon’s FBA Long-Term Storage Fees?
Well, this depends on what you have in storage. Amazon charges you the higher of the following two scenarios:
- By space: $6.90 per cubic foot for inventory that has been stored for over 12 months
- By unit: $0.15 per unit of stock that is stored for over 12 months.
So, based on what you sell, Amazon tallies up your costs based on the two scenarios above and charges you the greater amount.
Yes, this is a bit difficult to understand. But, let’s say you sell small key chains and you have about 100 of them in FBA storage. They may not take up much space, let’s say a cubic foot. If you don’t sell these key chains and they sit on Amazon’s shelves for 365 days, Amazon calculates your fees:
- By space: $6.90 since your key chains take up 1 cubic foot of their warehouse.
- By unit: $15 since you have 100 key chains left and they charge $0.15 a unit.
So, Amazon charges you $15 since that’s the greater value.
How to Avoid Long-Term Storage Fees
Now is a good time to take a look at what you can do to avoid Amazon’s FBA long-term storage fees.
Check Your Inventory Health
The first step is to identify how your inventory is doing, and if you have any that you are at risk of being charged for. If you have FBA inventory management software, like the solution offered by ecomdash, then you will be able to run reports and use calculator tools that tell you what you need to know. Otherwise, you can access Amazon’s Inventory Health report to see if you have inventory that has been stored in Amazon’s fulfillment centers for too long.
Determine How to Handle At-Risk Inventory
After you’ve identified the at-risk inventory, you have to come up with a strategy for avoiding the long-term storage fees. You have a few options:
#1 – Request Removal
This is the easiest of the options. When you submit a removal request, Amazon ships your requested inventory back to your place of business for a small fee. Return fees can be a little as $0.25 per unit for shipping weight under 0.5 lbs, up to $1.90 per unit for units more than 10 lbs, with an additional $0.20/lb above the first 10 lbs. You can check out the latest removal fees here. This may be the best way to avoid the long-term storage fees as long as you can afford to take the hit on your margins.
#2 – Request Disposal
Your second option is to submit a disposal request. For a cheaper price than removal, Amazon will dispose of the stock for you. The decision to use this option may be a hard one to make. But, if the amount you paid for your inventory is minimal, it may be the best one. Maybe you were testing a new product and it didn’t sell, so it’s time to cut bait.
Unfortunately, even if you choose to have Amazon dispose of your inventory, there is a cost to you. Disposal is $0.25 for standard size units and can get up to $1.90 per unit for units more than 10 lbs, with an additional $0.20/lb above the first 10 lbs. You can check out the latest disposal fees here. The good thing about disposal is that Amazon makes it really easy. All you have to do is designate that you want the products disposed of and Amazon does the rest.
#3 – Try to Sell the Items
Your third option is to try to sell the at-risk inventory before Amazon assesses long-term storage fees. This is the best option for you if there is still a chance that you can sell your products – even at a small profit margin. There are a couple of methods to do this.
- Create a Sales Promotion – Amazon makes it easy to add promotions to your products. From the Seller Central area on Amazon’s website, you go to the Advertising drop-down and choose Promotions. From there, you can choose to offer your customers free shipping, buy one get one, money off, or other deals. This may allow you to move at least a portion of your inventory, making the removal or disposal fees for the rest more palatable.
- Create a Sponsored Products Campaign – If you think that your inventory has been sitting on the shelves because it’s difficult for customers to find, you might try bidding on ad placement through Amazon’s Sponsored Products. You place a bid on relevant keywords, and if your bid wins, your ad gets displayed to customers. It’s a form of pay-per-click, meaning you only pay when someone clicks your post. If it works, your products will receive much more visibility and some of your inventory may sell. Here are a few tips to optimize your Amazon ads.
You don’t have to decide on just one way to avoid the long-term storage fees. You may want to try to sell your inventory until the deadline is closer and then decide what to do with the remainder. It’s a good idea to determine exactly what the numbers are for each option – which is going to hurt your profit margin the least – and then go from there.