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.

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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.

How to Check Inventory for Long-term Storage Fees

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:

  • SKU
  • Product Name
  • ASIN
  • Quantity to be charged long-term storage fees at 6/12 months
  • Projected long-term storage fees at 6/12 months
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How To Avoid Amazon Long-term Storage Fees on Amazon

  1. Manage In Stock Levels from the beginning. The best long-term storage fee avoidance strategy sellers can have is a preemptive one. Sellers are less likely to be charged long-term storage fees if they carefully manage the quantities that they send to FBA warehouses from the very start. Sellers should send various test quantities to determine the likelihood of selling their products in six months or less.
  2. Use the Recommended Removal Report. This report identifies products that are subject to long-term storage fees up to 30 days before each long-term storage fee charge date, by automatically calculating, on an ASIN-by-ASIN basis, the number of products that sellers would have to remove to avoid long-term storage fees, assuming no further sales.
  3. Evaluate Why Products are Not Selling. For any product that becomes subject to a long-term storage fee, sellers should ask themselves why. Is there an issue with the listing? Is the current price the issue? Is seasonality a major factor (when is it most likely to sell)? Can the inventory mix be improved to avoid these fees in the future? Should they have sourced and bought the item in the first place?

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.

  1. Reduce Prices. In the two weeks before long-term fees are to be charged, sellers should give careful consideration to making price tweaks or to aggressively lowering their prices to clear out inventory.  Sellers should figure out the win-loss ratio between how much they need to lower the price of a product in order to get sold, versus the amount of long-term storage fees they will be charged to keep it in the warehouse, betting that it will eventually sell at the higher price.

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.

  1. Sell Aging Inventory Through Amazon Outlet. Setting up a deal through Amazon Outlet can help sellers to move aging inventory. An Amazon Outlet deal is a promotional offer with a minimum discount of 20%.

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.

  1. Create Sponsored Product Ads and Use Amazon Promotions. Sellers can set up Amazon advertising campaigns a few weeks in advance and run special offers to promote any products that will be subject to long-term storage fees.

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.

  1. Increase Awareness About Slow-moving Products. If shoppers are unaware of certain products in a seller’s inventory, they can’t potentially buy it. Sellers can avoid paying long-term storage fees by…
  • designing product specific landing pages that help drive traffic to their Amazon listing,
  • creating relevant posts for all of their social media and distribution channels,
  • writing blog posts that educate potential customers about how their products will benefit them and the pain points they resolve,
  • creating a video for each slow selling product that showcases all the ways the product can be used.
  1. Time When Restock Inventory is Sent to Amazon. Sellers can time the restocking of their inventories until after the February and August deadlines. If products don’t sell, they will have been in the warehouse for less than 6 months when the next deadline comes and won’t be subject to long-term storage fees.

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.

  1. Create a Manual Removal or Disposal Order. Sellers can avoid long-term storage fees by submitting a removal or disposal order for non-selling inventory before the cleanup deadline. If the removal or disposal order is submitted before the cleanup date, that inventory won’t incur a long-term storage fee, even if it isn’t physically removed before the cleanup date. The deadline for submitting a removal order is 11:59 p.m. (PT) on the 14th of the month.

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).

  1. Set Up Automatic Removals. Amazon has settings that can help sellers to set up automatic removals for non-selling inventory.

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.

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