Amazon FBA (Fulfillment by Amazon) inventory storage fees are one of the ongoing costs that sellers must manage when using Amazon’s fulfillment centers. These fees are charged based on the amount of space your inventory occupies in Amazon’s warehouses. Understanding how these fees work and learning strategies to minimize them can help improve your profitability. Here’s a detailed guide on how to deal with FBA inventory storage fees.
1. Understand FBA Inventory Storage Fees
Amazon charges two types of inventory storage fees:
Monthly Storage Fees
- Standard-Size Items: These are items that are small and lightweight. Monthly storage fees for standard-size items are charged based on the volume of inventory in cubic feet.
- January to September: $0.75 per cubic foot.
- October to December (Holiday season): $2.40 per cubic foot (higher fees due to increased demand and storage space).
- Oversize Items: These are larger or heavier items.
- January to September: $0.15 per cubic foot.
- October to December (Holiday season): $0.38 per cubic foot.
These monthly storage fees are assessed at the end of each calendar month and are based on the volume of inventory that you have stored in Amazon’s fulfillment centers.
Long-Term Storage Fees
- Amazon also charges long-term storage fees for items that have been in their warehouse for an extended period of time without selling.
- Long-Term Storage Fees: These fees are applied to inventory that has been in Amazon’s warehouse for more than 365 days (1 year). The fee is $6.90 per cubic foot or $15 per unit (whichever is greater).
- These fees are charged twice a year: on February 15th and on August 15th.
2. Strategies to Minimize FBA Inventory Storage Fees
a. Monitor Inventory Turnover
One of the best ways to avoid high storage fees is to maintain efficient inventory turnover. Faster turnover means your inventory doesn’t stay in Amazon’s warehouses for too long, thus reducing storage costs.
- Use Inventory Reports: Amazon provides various reports in Seller Central, including the Inventory Age Report and Restock Inventory Report. These can help you monitor how long products have been sitting in Amazon’s warehouses.
- Forecast Demand: Based on historical sales data, forecast your inventory needs. This can help you send the right amount of stock to Amazon without overstocking, which leads to unnecessary storage fees.
b. Optimize Stock Levels
While it’s important to maintain inventory availability, sending too much stock to Amazon can result in unnecessary storage fees, especially during months with higher storage costs (October to December).
- Just-in-Time Inventory: Consider implementing a just-in-time inventory system where you send smaller shipments based on current sales trends and demand forecasting, reducing excess stock sitting in Amazon’s fulfillment centers.
- Use the Amazon Restock Inventory Tool: This tool can help you decide how much inventory to send to Amazon based on your historical sales and expected sales velocity.
c. Use Amazon’s Removal Orders
If you find that certain products are selling slower than expected or have been sitting in Amazon’s warehouses for too long, you can use Removal Orders to have them sent back to you or disposed of. This can help prevent long-term storage fees and keep your inventory levels optimal.
- Request Removals: From Seller Central, go to the Manage Inventory page, select the products you want to remove, and create a removal order. You can choose whether you want the items returned to you or disposed of.
d. Liquidate Slow-Selling Inventory
If you have products that aren’t selling well or are slow-moving, consider liquidating them through promotions or discounts to free up warehouse space and avoid long-term storage fees.
- Create Promotions: Use tools like Amazon Coupons or Lightning Deals to push slow-moving items.
- Amazon’s Liquidation Program: Amazon offers a program that allows you to liquidate unsold inventory, either through their marketplace or via liquidation partners.
e. Use Multi-Channel Fulfillment (MCF)
If you sell on other platforms like your own website, eBay, or Shopify, consider using Amazon’s Multi-Channel Fulfillment (MCF) program to fulfill orders from your existing FBA inventory. This can help reduce excess stock sitting in Amazon’s warehouses by selling it through other channels.
3. Prepare for Seasonal Demand
Since Amazon increases its storage fees during the peak holiday season (October to December), it’s crucial to manage inventory strategically:
- Stock Up Early: To avoid high storage fees in October and December, consider sending inventory early in the year or adjusting your strategy so that you don’t overstock during the holiday season.
- Run Promotions: Increase sales during these months through promotions to ensure your inventory is moving quickly.
4. Use Amazon FBA’s Inventory Performance Index (IPI)
Amazon uses the Inventory Performance Index (IPI) to assess how well you are managing your inventory. A higher IPI means that you are managing your inventory efficiently, and you can enjoy greater benefits, such as fewer restrictions on storage space.
- Maintain a High IPI Score: To keep your IPI score high, focus on managing slow-moving inventory and avoid overstocking. Amazon recommends maintaining an IPI score of at least 400 to avoid restrictions.
5. Be Aware of Amazon’s Upcoming Changes
Amazon frequently updates its fee structure, including storage fees. Stay informed by checking Amazon’s announcements for any changes to storage fees, long-term storage fees, or the introduction of new programs that could help you reduce storage costs.
6. Evaluate Alternatives to FBA
If storage fees are becoming too high for certain products, you might consider using a third-party fulfillment service or self-fulfillment to manage inventory more effectively. In some cases, using a non-Amazon fulfillment service can help reduce storage costs while still providing a good customer experience.
Conclusion
FBA inventory storage fees can add up quickly if you don’t actively manage your inventory. To minimize these costs, it’s important to stay on top of your inventory levels, avoid overstocking, and keep track of your product turnover. Additionally, using Amazon’s tools and strategies, like removal orders, inventory forecasts, and seasonal planning, can help you mitigate these fees and maximize profitability. By keeping inventory efficient and lean, you can reduce storage fees and improve your overall business profitability on Amazon.