It’s that time again: online sellers are bracing themselves for the twice-yearly hit of Amazon FBA long-term storage fees.
Every year on February 15th and August 15th, Amazon performs what it calls an “inventory cleanup.”
Part of that “cleanup” calls for any items that have been in an Amazon FBA Fulfillment Center for over six months to be charged a long-term storage fee based on the amount of cubic space they take up.
Clearly, any mention of the word “fees” does not bode well for Amazon sellers.
But are Amazon FBA long-term storage fees really that big a deal?
In this post, we analyze whether they’re even worth getting worked up over, along with the best ways for sellers to overcome FBA long-term storage fees to maximize their bottom lines.
Keep reading for all the details!
Why Amazon long-term storage fees exist
Companies are always looking for new ways to pad their profits. Online sellers understand this as well as anyone.
So it’s easy to see why Amazon FBA long-term storage fees exist: Amazon’s wants more money to fuel its commercial dominance.
As Amazon explains it:
“Inventory that is overstocked or stored indefinitely in our fulfillment centers limits our ability to provide space for fast-selling products customers want. Long-term storage fees help ensure that we can continue to provide high levels of service to all sellers and provide customers with products that they want.”
That’s why they tack on this twice-per-year lump-sum charge.
According to Amazon, here’s how you can avoid being hit with long-term storage fees:
“Any inventory that sells before they've been in our fulfillment centers for six months, or that sell after they've been in our fulfillment centers for six months or longer but before the inventory cleanup dates (February 15 and August 15), will not be charged the long-term storage fee.
“Likewise, any inventory for which you submit a removal request prior to the inventory cleanup dates will not be charged the long-term storage fee.”
As you can see, it pays to be on top of your inventory so you know roughly (or exactly) how many of your products will be subject to these added expenses.
Thankfully, Amazon Seller Central includes several reports that will help you understand your potential FBA long-term storage fee liability. Among them are the Inventory Health Report and Recommended Removal Report, both of which we’ll delve into later in this article.
Amazon long-term storage fees by the numbers
Amazon charges long-term FBA storage fees based on the amount of cubic feet taken up in their Fulfillment Centers.
For items in FBA inventory for between six months and one year, the fee is $11.25/cubic foot of space.
For items in FBA inventory for over one year, Amazon charges double at $22.50/cubic foot of space.
Here’s a chart from Amazon summarizing the fee structure:
For sellers slinging smaller items, such as books and toys, these fees won’t necessarily do much damage.
Consider the following charts from Amazon that offer examples of FBA long-term storage fees for each of the above-mentioned products:
Hopefully, your products are moving quickly and only a small portion of them will be liable for Amazon FBA long-term storage fees.
But, if you sell large, bulky items that have poor sales velocity, you may be better off pursuing another strategy, such as liquidation, having your products removed from inventory and returned to you before the “inventory cleanup” date, or having Amazon dispose of the products liable for fees before you get charged on August 15th or February 15th.
Also, if you’ve dealt with FBA long-term storage fees before, note that Amazon changed a seller-friendly aspect of this policy in February 2017.
Previously, one unit from each ASIN was always exempt from the long-term storage fee. This, however, is no longer the case, and any item in FBA inventory longer than six months on August 15th or February 15th will trigger the fee.
Doing the math on Amazon FBA long-term storage fees
To put things into perspective, Peter Valley at FBA Mastery performed a detailed analysis on Amazon FBA long-term storage fees as related specifically to books. What he found out is that the bottom line impact isn’t so bad.
For starters, Valley deduced that one cubic foot of space equates to 36 typical-sized books on average (and 11.6 thick textbooks for comparison).
He argues that FBA long-term storage fees only sound bad when you look at the lump-sum payout you owe Amazon without any context.
To make these fees feel less horrible, sellers should first consider the added cost per book subject to long-term storage fees, which amounts to $0.31 for anything in inventory between 6 months and 12 months, and $0.94 for books in inventory over 12 months (the original fee of $0.31 + the second long-term storage fee of $0.63).
From there, you can calculate FBA long-term storage fees across your entire inventory by dividing your anticipated total long-term storage costs by the total number of items in your inventory—even products that are not liable for long-term storage fees.
Analyzing long-term FBA storage fees in this fashion helps you keep the perception of these costs more in line with how they truly affect your marginal profit. If you have decent control of your sales velocity, this should be a relatively tiny amount.
Of course, not every Amazon merchant sells books or small items like toys, so dismissing FBA long-term storage fees as “not that bad” doesn’t fit every seller’s scenario. Not to mention the fact that some sellers may have initially shelled out inventory placement service fees to limit the number of Fulfillment Centers they’d have to send FBA shipments into.
With that being said, here’s how to analyze the effects of these fees on your store.
Using reports to assess the effect of Amazon FBA long-term storage fees on you
It’s not like Amazon is “out to get sellers” by hitting them with FBA long-term storage fees.
These fees actually help smart sellers by discouraging less-savvy sellers from clogging FBA fulfillment centers with slow-moving products that could affect Amazon’s ability to store better-moving products in their place.
In fact, Amazon even goes the extra mile to help sellers avoid long-term FBA storage fees, or, at the very least, assess the overall impact they could have.
Sellers have access to a variety of reports that can help them determine what products in their inventories are liable for these fees.
Here’s more info on the Inventory Health Report from Amazon Seller Central:
And, here’s more detail on the Recommended Removal Report:
Both of the above reports offer more information fields when you download the full report (as opposed to looking at the online version), so to get the full picture, we recommend that you analyze them after downloading.
Important notes on reports and removing inventory from Amazon
Products that will be affected by long-term storage fees start appearing in your Recommended Removals Report six weeks before each inventory cleanup date (February 15th and August 15th).
As mentioned in the screenshot above, sellers can initialize the removal of items in inventory via the Recommended Removal Report by clicking the “Begin Removal Process” button. This will pre-populate a removal order where you can select whether you want the items returned to you or disposed of.
Amazon even allows sellers to automatically remove inventory that will be subject to a long-term FBA storage fee:
While you may not want to have auto removal on default for every item in your inventory, it might make sense for certain large items that would incur hefty long-term storage fees.
Just note that, as with most things related to sellers on Amazon, FBA removal orders are not free.
The screenshot below (from Amazon Seller Central) explains FBA removal order fees in detail:
Because removal/disposal fees are per item, that means you’d pay the same amount to remove a refrigerator as you would a pack of rechargeable batteries.
That means careful analysis is required in determining if you’d rather incur long-term storage fees on small items, since in some cases, the removal or disposal fees could be higher than the long-term storage fees.
You also may have noticed that there’s also a third removal option to liquidate your Amazon inventory.
Sellers looking to minimize long-term storage fees may want to select this option for products that have been in inventory more than six months that are also at the end of their product lifecycle. That way, there’s a chance that you’ll recoup some of your initial inventory costs.
Strategies for overcoming Amazon FBA long-term storage fees
For sellers holding lots of slow-moving small products in FBA inventory, it might make more sense to pay long-term storage fees, since the cost of removing, disposing of, or liquidating them could very well be higher, depending on the quantity liable.
But for sellers with lots of large products about to get hit with long-term storage fees, it might make sense to have those products removed and shipped back to you. Then, you can try selling them on other marketplaces or shipping them back to Amazon later to reset the amount of time they’ve been in FBA inventory.
Of course, if you wind up shipping products to Amazon again after paying removal fees (to avoid long-term storage fees), you need to consider your selling prices, since you have many extra costs cutting into your net profit for those items.
For those products, it might make sense to use of an automated repricing tool that allows you to build custom formulas so you could set strategic minimum price points that account for your costs of sending multiple shipments to FBA plus your removal cost.
A solid repricer can also help you liquidate your stagnant inventory at higher prices than you’d get via Amazon’s liquidation program. Just set up a repricing strategy that price matches (or beats) the lowest-priced competitor to rapidly drive sales of your products facing impending long-term storage fees.
And here’s another tactical approach you can take to avoid Amazon FBA long-term storage fees in the future:
Consider sending shipments to FBA Fulfillment Centers so they arrive just after February 15th and/or August 15th.
That way, when the first inventory cleanup date hits after your initial shipment, the longest your products will have been in FBA inventory would be just under six months.
Amazon FBA long-term storage fees: the bottom line
Hopefully, now you have a better perspective of how Amazon FBA long-term storage fees will affect you.
To sum things up, here are the main takeaways from this article:
• To avoid experiencing shock when you see the lump-sum long-term storage charge from Amazon, calculate the cost across your entire inventory to understand the effect on your profit-per-item.
• Amazon’s removal and disposal charges are per item, which means it costs the same to remove tiny items as it does large items. Because of this fee structure, it's vital to weigh the difference between paying long-term storage fees on smaller items versus paying to remove/dispose of them.
• If you remove products from Amazon and then re-ship them to FBA later on, an automated repricer can help you optimize your minimum and maximum price points to account for your added shipping and removal costs.
• If you want to liquidate inventory before it triggers a long-term storage fee, an automated repricer can potentially help you earn more money than Amazon’s liquidation program by automatically price-matching (or beating) your lowest-priced competitor. Start using this aggressive repricing strategy on listings liable for long-term storage fees about four to six weeks before the inventory cleanup date.
• Don’t be afraid to be tactical when sending in FBA shipments: By timing your shipments to arrive at Fulfillment Centers just after the “inventory cleanup” dates, you’ll guarantee you won’t be hit with long-term storage fees on the first inventory cleanup after your shipment arrives.
Best of luck avoiding FBA long-term storage fees, and we hope this post helps keep your profits soaring!
Looking to liquidate inventory to free up cash before Amazon FBA long-term storage fees cut into your profits?
Appeagle can help.
Our automated repricing tool continuously updates your prices 24/7, keeping them optimized for any selling objective and fueling your sales.