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Amazon Long-Term Storage Fees drain profits.
Amazon charges fees for inventory storage each month, but there is an additional monthly inventory long-term storage fee for any seller whose products have been sitting in an Amazon Fulfillment Center warehouse for more than a year.
Amazon sellers who develop and execute specific strategies to avoid amazon long-term storage fees can potentially save thousands of dollars, which can be reinvested into their businesses towards Amazon advertising campaigns or to purchase additional inventory.
Each year, on the 15th of February and the 15th of August, Amazon conducts a warehouse inventory cleanup. Items that have been stored in their warehouses for over 365 days will incur long-term storage fees of $6.90 per cubic foot or $0.15 per unit, whichever is higher every month.
FBA determines inventory age using a ‘first-in, first-out’ basis across the whole fulfillment network. Items sold or removed are deducted from the inventory that has been in the fulfillment network the longest, regardless of which unit was actually shipped or removed.
If a seller’s total inventory has exceeded the 365 days allotted, Amazon will waive the long-term storage fees for a single unit of each ASIN group as a professional courtesy.
One of the few pluses about Amazon Long-term Storage Fees is that sellers know when they will be assessed and can implement strategies to reduce or eliminate inventory that is collecting dust in a Fulfillment Center warehouse. Amazon sends a notification email in January and July informing sellers as to which items will have a long-term storage fee applied to them.
Sellers can check on and calculate their possible long-term inventory fees in Seller Central by going to the Inventory tab > click Manage Inventory and check the Inventory Dashboard. Once inside the Dashboard, sellers can scroll down to the FBA Inventory Age box to click on View Details. There they will be able to see the ‘inventory age’ for each of their products, the number of units that have been in storage for both 6 and 12 months, and the estimated long-term storage fees for each product.
Sellers should highlight the following information:
Armed with these key insights, sellers will be able to improve upon the types and quantities of products they purchase in the future, reducing their exposure to long-term storage fees.
Sometimes a seller will take a loss on a product by doing this. However, if the product has been in stock for six months or longer without selling and is unlikely to ever sell at its current price, continuing to accumulate high long-term storage fees, it’s probably a prudent decision to just sell it off at a lower price.
By following this strategy, the seller can at least recoup a portion of their initial costs and then repurpose that money towards purchasing new (and faster selling) inventory.
Sellers can review Outlet deal recommendations in the Manage Inventory Health tool and create markdown deals to be featured on the Outlet page once they are approved by Amazon. Implementing this strategy can help sellers to reduce long-term storage fees, while increasing cash flow and optimizing inventory levels.
If these products do not sell, sellers will either be charged a long-term storage fee or have to pay a fee to have them removed. Therefore, if they can get the earmarked products sold for less than either of those fees, it’s a worthwhile strategy to spend a little money on Sponsored Products ads or to offer a special discount.
Pro Tip: If buying in large quantities (several months supply of a product), only send to Amazon what you believe will sell in 30 to 45 days until there is proof of sales. This is a good strategy especially for seasonal products that are more difficult to gauge sales velocities on.
To return inventory, Amazon charges $.50 for a standard sized unit and $.60 for an oversized one. If a seller doesn’t want these products or doesn’t have the space to store them, Amazon will dispose of them for $.15 for a standard unit and $.30 for an oversized one.
Sellers should crunch all the numbers. Sellers will need to decide if it is more cost effective for them to keep the products in storage and pay the fees or to move them out.
Pro Tip: If a seller chooses to remove units of an ASIN that would be subject to long-term storage fees at the next inventory cleanup date, they won’t be able to send Amazon more units of that ASIN for three months after that date, unless their FBA inventory of that product falls below Amazon’s projection of its sales for the next eight weeks.
For example, if the ASIN removed sold 180 units in the preceding 90 days, Amazon would project sales for the next eight weeks as 112 units based on the following calculation: 180/90 (units sold/day) x 7 (days/week) x 8 (weeks). If a seller’s inventory utilization falls below projected sales (112), they could send more units of that ASIN to an Amazon fulfillment center, up to the number sold in the previous 90 days (180). So if inventory utilization fell to 111 units, a seller could send up to 69 more units to the fulfillment center (180 – 111 = 69).
Sellers can enable removal of all inventory subject to amazon long-term storage fees or select removal of only products in a particular price range. Sellers can also keep inventory that is priced above a specific amount in the warehouse and pay the long-term storage fees for those products only.
By setting up automated removals, sellers won’t have to be concerned about checking their inventory on the 14th of each month.
Keeping track of amazon long-term storage fees and every possible fee or business expense can be difficult, time-consuming and overwhelming throughout the year.
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He is the owner and founder of PPC Entourage, one of the original amazon ad software and management companies. Mike started off as a physical therapist in 2015 and just knew there had to be a better way so he started his ecommerce journey. Using the power of Amazon Ads, he built a 7 figure brand in less than one year. Now he helps other sellers do the same with free valuable education, PPC Entourage software and the ad agency. He is also the author of the Amazon Ads Playbook series.
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