Thanks to FBA, sellers can easily outsource order fulfillment on Amazon. However, these benefits do not come without a cost. Some of these costs are avoidable, but the majority of them are unavoidable. One such cost in particular is the long-term Amazon FBA storage fees.
In this blog, we will explain what long-term Amazon storage fees are as well as how to prevent them.
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What Are Long-Term Storage Fees?
Every Amazon seller is aware of the monthly inventory storage fees, but what about the long-term storage fees? What are these fees and why are they introduced?
While your product sits unsold and overstocked at Amazon’s fulfillment centers for long periods of time, Amazon loses valuable space that it could allocate to other sellers with quickly moving consumer products. This is why Amazon developed the long-term storage cost. By levying this fee, Amazon is able to keep offering its sellers and customers first-rate services and products. These fees are only levied if products have been held for longer than 365 consecutive days or a full calendar year.
How to Check Inventory for Long-term Storage Fees
Amazon notifies sellers through email in January and July of the products that might incur a charge for long-term storage. If you want to check if you are subject to this fee, you can view the Inventory Dashboard in your Seller Account by going to the Inventory tab and clicking Manage Inventory. Then, under the Dashboard, scroll down to the FBA Inventory Age box and click View Details. Under this tab, you will be able to view the expected long-term storage costs for each product as well as the number of units that have been in storage for six and twelve months. As an alternative, you can monitor the status of your inventory using the Inventory Health Report.
Keep in mind that in addition to a long-term storage fee, Amazon also charges an unavoidable monthly inventory storage fee. These fees depend on the weight and size of your product. The only method to lower these monthly storage fees is by using clever packaging techniques.
How Much Is Each Item Charged?
For products in long-term storage, sellers will be charged $6.90 per cubic foot, or $0.15 per unit – whichever is larger.
This indicates that the minimum charge per unit is $0.15. These fees are not multiplicative; instead, you are only charged for the square footage they take up or a set rate per unit.
How to Reduce Long-Term FBA Storage Fees
Here are a few tactics you can use to avert and lower long-term storage fees:
1) Manage In-Stock Levels From the Start
The best method for sellers to avoid incurring long-term storage fees is to adopt a preventative approach. Sellers will be less likely to incur long-term storage fees if they properly manage the quantities they send to FBA warehouses from the start. If you are unsure of how many products to send to the fulfillment center, you can start with a small test number and increase it as sales increase.
2) Offer Products at a Discount During Flash Sales
One of the best advantages of selling on the largest retail marketplace in the world is the ability to sell during flash sales. During an Amazon Flash Sale, offer items at a discount that are going to reach the 365-day mark to avoid the long-term storage fee.
Before doing this, consider the size of the product. Given that the long-term storage charge is computed using both duration, the number of units, and the cubic feet occupied by the product, you might want to offer bigger discounts for larger items. The larger the product, the greater will be the fee. By offering larger products for a greater discount, you can considerably lower the amount you will be charged.
3) Create a Removal Order
If you have any lagging inventory that you don’t think you’ll be able to sell by the next inventory cleanup date, you can request that Amazon remove it and return it back to you. You are free to determine what to do with your merchandise once it has been returned to you without having to worry about paying Amazon fees (you can either keep it and fill orders yourself, sell it on another marketplace, or try to return them to your source).
4) Bundle Your Products for Sale
Another easy yet efficient strategy to avoid long-term storage costs is to create Amazon bundles. For instance, if you sell 5 items, you will need to cover the fulfillment costs associated with those 5 items.
However, if you bundle those 5 items into a single package, it will be regarded as a single product, therefore you will only be responsible for paying a storage cost for that one item. This lowers the monthly storage fee in addition to the long-term storage fee.
5) Evaluate Why Products are Not Selling
Although there are several strategies to reduce storage fees for long-term items, merchants should consider why a particular product is charged for long-term storage. Is there an issue with the listing? Is the price an issue? Is seasonality a key consideration?
With these crucial insights at their disposal, sellers will be better able to choose the type and number of products they sell in the future, lowering their exposure to long-term storage fees.
6) Set Up an Automated Removal System
Keeping frequent track of your products on Amazon FBA can be highly taxing. Although, you can manually submit a removal order for long-term storage products as mentioned before, using an automated removal system is more convenient and greatly reduces the likelihood of making any mistakes. To do this, follow the steps below:
- 1. Click Fulfillment by Amazon in Seller Central’s Settings menu.
- 2. Select edit after locating Automated Long-Term Storage
- Removals Settings.
- 3. Type in both your email and home address.
- 4. To complete the setup, click update.
Summary
If you don’t plan ahead, hidden expenses like long-term storage fees could reduce your revenues. We hope that this guide has given you a better understanding of long-term storage fees and how to avoid them.
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