If you’re selling products on Amazon, being able to use their robust system for pick and pack is a hugely beneficial aspect of being a third-party seller.
The “FBA” or “fulfilled by Amazon” program is incredibly popular and allows third parties to ship products to Amazon in bulk, and orders are processed by Amazon’s warehouse employees. The system is automated and it is easy to see why so many people opt for this method of fulfillment.
The third-party seller share on Amazon has continued to grow, and there are thousands of sellers taking advantage of FBA.
However, there are some downsides, and some extra fees incurred. In this guide, we’re explaining the inventory storage fees that Amazon imposes on sellers.
It’s just the cost of doing business with Amazon.
These seller fees make sense, and you’ll struggle to find other warehouse facilities that don’t charge fees for using their space and services.
Amazon charges inventory storage fees to protect their business model, too. Without, there would be no incentive for sellers to either remove their products from sale or make them available at a knock-down price to shift the stock.
Warehouse space is a business commodity, and Amazon centers are growing rapidly. Check out the distribution of these fulfilment centers and warehouses.
If you weren’t paying fees then Amazon would be storing your unsold stock for free, and this is not their business model.
How are the fees you pay worked out? If you have stock sitting in one of the Amazon fulfillment centers then you need to know, and it is essential that you take this into account with your financial forecasting. You may be surprised at how this can impact the profitability of a product.
The following aspects are considered when working out inventory storage fees:
Amazon shares the following example on their site to help you to establish the costs:
Fee per product = average daily units x volume per unit x applicable rate
100 average units per month x 0.05 cubic feet per unit x $0.75 per cubic foot (standard-size rate in July) = $3.75 total monthly storage fees
Monthly storage fees are usually charged some time between 7th and 15th of the month. You’ll be charged for the previous month’s storage.
If you’re lucky, you will be able to sell through your inventory and not have to worry about long-term fees, but if your items are stored in the warehouse for more than 365 days then you will also be charged an additional fee.
Again, this is to encourage sellers to purge their items to make way for fresh stock, either through selling items off cheaply to shift inventory or even removing inventory from the warehouse altogether.
As you can see from the example above, you’re either charged based on the cubic-foot fee or the per-unit fee depending on which is bigger. It’s either $6.90 per cubic foot, or $0.15 per unit. If your units are low-priced items then the smaller end of the fees can cut into your profit. If your items take up a large amount of space then the long-term storage fees can make a huge difference.
Check out more of the details about the fee below, and how it is charged:
The Recommended Removal report is a tool that Amazon has put into place in order to help you to calculate the number of items you need to remove to avoid incurring any storage fees. It can warn you 30-days before you are going to incur the fees so you have a chance to take action and remove the products from the warehouse.
There are no exemptions from the fees. If you’re using the storage space then it is up to you to pay the fees. However, you can avoid long-term storage fees in many circumstances.
Storage fees can be intimidating for a new seller. Fortunately, long-term fees are only applicable after a full year, and you will be warned beforehand. Good inventory management and sales forecasting are key to keeping these extra expenses to a minimum and maintaining your account health.