Amazon Storage Fees Are Changing. Here’s Why You Should Be Worried…

Dave HamrickUncategorized14 Comments

  • Amazon storage fees, especially long term storage fees, are drastically increasing August and September.
  • The cost to remove or destroy inventory at Amazon fulfillment centers will cost less than the long term storage fees, so you should remove excess inventory immediately.
  • Use tools like Fetcher and Forecastly to predict forthcoming sales and cast inventory projections.

If you’re an experienced Amazon FBA seller, then you no doubt know about Amazon storage fees. And if you’ve really been selling for a while, six months or longer, then you probably know about the long term storage fees, too. Starting August 15th, Amazon’s changing their long term storage fees. And if you’re not prepared for these new fees, you could find yourself losing hundreds, if not thousands, of dollars in a single day.

What are Amazon storage fees?

When you sell goods via Amazon FBA and send your inventory to Amazon’s fulfillment centers, Amazon charges fees to keep your inventory there.

Currently, there are two types of Amazon storage fees:

  • Monthly Amazon storage fees. These fees come out once a month and are subtracted from your earnings. They are based on the amount of cubic feet your combined inventory takes up in Amazon fulfillment centers.
  • Long term storage fees. Before September 15th, these fees were assessed semi-annually. After September 15th they will be assessed on a monthly basis. And after August 15th, there will be a minimum per unit fee as well.

Why does Amazon have Amazon storage fees in the first place?

While Amazon Fulfillment Centers are huge million-acre facilities capable of holding tons and tons of products, they do have only so much space. And if every seller was sending slow-moving inventory to it and cluttering up that space, pretty soon, there’d be no room for all of the stuff that does sell well.

Therefore, Amazon storage fees are put in place to deter sellers from abusing Amazon’s FBA system.

How much are Amazon storage fees?

Amazon’s upped their inventory fees considerably this year. In fact, if you aren’t aware of the changes in advance, you could easily lose a lot of money.

Amazon Monthly Storage Fees

This chart from Amazon shows you the breakdown of monthly Amazon storage fees:

Amazon Monthly Storage Fees

Monthly storage fees break down into two periods (Q1-3 and Q4) and then by two sizes (standard-size and oversize). As you can see, after April 1st, 2018, all of the monthly storage fees went up by $0.05. Not too big of a deal. But still, costs are costs.

Be aware of Q4 Amazon Storage Fees

Q4 is a busy time of year. And Amazon only has so much space in their fulfillment centers. So it’s important that you’re aware of what your inventory needs will be during the holiday season. Otherwise, you could end up paying almost 4x what you normally do for inventory.

My recommendation is to only bring in the inventory you need for post-Black Friday/December sales in mid-to-late November. And preferably after the 15th so you don’t get hit with fees for the month of November. Of course, it might still be cutting it close to the Black Friday date as shipping slows down considerably in those months.

Amazon’s Long Term Storage Fees

The changes that sellers should really be concerned about is Amazon’s long term storage fees.

This chart from Amazon shows you the breakdown of Amazon’s long term storage fees:

Amazon Long Term Storage Fees

Here’s the biggest things you need to consider with these Long Term Storage Fees:

  1. Monthly Long Term storage fees instead of semi-annual. Before September 15, 2018, long term storage fees are assessed twice per year, February 15 and August 15. The last semi-annual long term storage fee assessment will be on August 15th, 2018. On September 15 and every 15th of the month thereafter, long term storage fees will be assessed monthly.
  2. Double fees for slower moving inventory. A cubic foot of inventory that has been in the fulfillment centers for 365+ or more costs double what inventory 181 to 365 days costs.
  3. All LTSFs are nearly double after September 15th. Prior to September 15th, long term storage fees were roughly $1.88 per cubic foot per month for items that have been there for 6 months to a year and $3.75 per cubic foot per month for items that have been there for 12 months or longer. September 15th and onward those fees are nearly doubling to $3.45 and $6.90 per month respectively.
  4. Minimum Storage Fees. The biggest and costliest change to Amazon’s long term storage fees are the minimum fees that will accrue per unit starting August 15, 2018: $0.50 per unit per month.

Why should I care about Amazon storage fees?

Storage fees are costly, and can eat straight through your profits. To give you an example of how rough storage fees can be on your margins, check out the long term storage fees I got hit with back in late Feb of this year:

 

long term storage fees

Ouch! Which ended up crushing my margins for the next few days…

And that was before the big hike in fees!

How can I prepare for Amazon storage fees?

Now that we understand the basics of Amazon storage fees and the big changing to long term storage fees that are coming up, it’s time to start preparing today. As of this writing, there’s just a little more than a month left. And if you’re caught off guard with this fees, you could end up losing a lot of money.

Here’s how to prepare for Amazon long term storage fees in 5 simple steps:

1 – Check how many products are “old age”.

On your Amazon seller central account, scroll down to the bottom right widget titled “Inventory Planning.” There’s a lot of useful information here. But what we want to focus on is the bottom notification telling me that I have 995 units that will get slammed with long term storage fees on August 15.

Remember: on August 15th, Amazon starts charging $0.50 per unit. So that means I’m going to get clobbered with $497.50 in long term storage fees! Ugggh!

2 – Review the items that are going to accrue storage fees.

Click the notification. It takes you straight to the Amazon inventory age page which shows you which exactly products are old age units and need to be removed.

3 – Dispose, remove, or liquidate your old age units.

Here comes the tricky part. Now you’ve got to decide what to get rid of and more importantly, how to get rid of it. You’ve got three options: dispose, remove, or liquidate.

Each method comes with its own set of fees, too.

Amazon removal fees chart

Notice how each of the methods are either less than or equal to the minimum long-term storage fees. Coincidence? Not likely 😉

Disposing of Inventory

The first option you have is to dispose of your inventory. You pay Amazon and they simply get rid of it. This should be a last resort. Try selling it or returning it to yourself before you destroy your inventory. Furthermore, I’d save this only if you’re doing wholesale or selling used books and have individual SKUs that just aren’t selling at all.

Removing Inventory

Next is removing inventory. It’s $0.50 per unit, so it’s the most expensive option. However, it does save your inventory from destruction. You can send it back to yourself, of course. But, if you’re able to wholesale your inventory on Ebay or to another seller, this is an easy way for you to send the inventory to the buyer.

“Boomeranging” Inventory

Okay, so you might be thinking, “I’ll just send it back to me, then ship it right back to Amazon to restart the clock.” And that seems like a great idea! In fact, a couple years ago, you could do just that. However, Amazon’s pretty smart, and caught on fast.

Now, whenever you return inventory to yourself, you’re not allowed to send back any of that SKU for a minimum of 30 days. 

Liquidating Inventory

Finally, there is liquidating inventory. In this instance, Amazon puts your inventory up for auction and it’s bid on by wholesalers. This might sound ideal, but I’ve found that the amount you end up earning from inventory liquidation is incredibly low. Like pennies-on-the-dollar low. And then Amazon takes their 10%. And the worst part? There’s nothing stopping whoever bought your old inventory from reselling it on your listing.

4 – Calculate how much inventory you should get rid of.

Now that you understand your options for getting old age units of Amazon’s fulfillment centers to avoid Amazon storage fees, you need to decide on how much you want to get rid of and how you’re going to do it. The best way to determine this is to estimate how much inventory you’re going to need in stock for the next 45-60 days, and keep that amount there. Then, send back the rest.

For example, I can see that one of my SKU’s has sold 192 units in the past 30 days.

Predict Amazon sales

Because I’ve sold 192 units in the last 30-days, it’s safe to say I’ll sell that many again. And if I remove the excess (about 200 units), it’ll cost me $0.50 per unit. If I keep those units there, I’ll also get hit with $0.50 in long term storage fees on August 15th, but likely sell the excess after that. Therefore, it will cost me approximately $100 no matter what I do.

But for other slower moving products where I have 5-6 months of sales in stock, it would behoove me to return 3-4 months of those products to my distribution center (aka my garage).

The 3-Month Sales Rule

As a rule of thumb, never keep more than 3-months sales worth of inventory in stock. So if Fetcher shows me that I’m selling 200’ish units per month, then I need to keep no more than 600 units in stock. The remainder of any stock I own I keep at my distribution center and then send it as it depletes at the FC’s. While this may require a little more work on my part (roughly 15 minutes per month… backbreaking labor, I know), it does save me from getting smashed with massive Amazon storage fees.

Additionally, as soon as you’ve sent the last “chunk” of inventory from your distribution center to Amazon, that’s the perfect time to place an order with your supplier as it will take roughly 60 days to get your inventory ordered, manufactured, and shipped.

5 – Create your removal order.

Now that I know how much inventory I need to remove from Amazon’s fulfillment centers, it’s time to create a removal order. The process is simple.

Simple click on the “Update Product Settings” button to the far right of the listing column. Then, when the drop down menu appears, click Create Removal Order. Then you’ll see this screen:

Make sure “ship-to-address” is clicked. Then enter in your name, address, and phone number. Finally, at the bottom of the screen, enter in the number of units you wish to send to that location.

From there, click continue, review it, and place the order.

Don’t get caught!

Believe me, there’s nothing worse than getting smooshed with a bunch of fees that you could have otherwised prevented.  It can easily erase half a month’s profits. And every dollar you spend on something dumb like Amazon storage fees is another dollar you could have spent buying new products and taking your Amazon business to the next level.

Final takeaways:

  • Use the 3-Month Sales Rule. If you’re having trouble keeping track of your inventory, use Forecast.ly’s powerful inventory forecasting tools to protect yourself. I love Forecast.ly. Plus, it starts you off with a 14-day FREE trial so you can’t beat that.
  • Track your margins. There are three apps I check everyday: Gmail, Slack, and Fetcher. If you aren’t using Fetcher, you probably have no idea what your real Amazon FBA profits are. Not even joking. Get it now.
  • Don’t hate on Amazon. Amazon’s a business. And the rules they put into place are here because people abused the system. I won’t lie… even I took for granted how much inventory I could keep at Amazon FC’s without feeling the pinch of Amazon storage fees.

If you have any questions or comments, let us know! We love tackling your questions!

And don’t forget… August 15th is coming!

Author: Dave Hamrick

14 Comments on “Amazon Storage Fees Are Changing. Here’s Why You Should Be Worried…”

  1. HI Dave,

    I’m confused on some things. Please clarify.

    1.) So regarding LTSF , we will be charged 0.50 per unit EVERY month after August 15th?
    2.) I send my products in roughly every 2 months [about 500-700] bottles but its always at the warehouse [not sitting idle but there to get shipped out] am I getting LTSF on that or just the monthly storage fees?

    1. Hi Sam,

      1) Yes. It’s pretty nuts. But that’s just for products that are 6-months or older.
      2) No LTSF is only for products that are 6-months or older in warehouses.

      1. Whoops, my mistake. Minimum affects 365 days or more units. So if you’ve had stuff there for a year, it’ll get the minimum.

        Basic LTSF fees, though, do affect anything that’s 6 months or older.

  2. Thanks for this breakdown. Do you know if the same changes (monthly LTSFs, per unit fees, etc) apply in the European marketplaces beginning in August? I can’t seem to find any information about this.
    Thanks!

    1. Great question Chris.

      Right now it looks like this is just for the US markets however historically the EU drags alittle behind. We are staying on top of this issue and can update you as more information becomes available.

    1. Hello Maurizio

      Right now it appears these changes are limited to the US market only. However we will continue to follow these changes and can update you as more information becomes available.

  3. Everything in the chart is basically talking about stuff that sits forever. If you are turning your inventory quickly, then theres nothing to worry about. Pretty much means you cant keep anything in there that doesnt sell fast.

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