Amazon is at it again. In an effort to clean up their warehouse space for quick selling, in-demand items, they are making some pretty major adjustments to their FBA Long Term Storage Fee policies. Beginning in April, the Long Term Storage Fee increased. And, in September, fees will move from semi-annual assessment to a per month basis. These are big changes for FBA sellers. It’s important to stay on top of these fees so you do not risk losing money on any sale. Or worse, being charged an arm and leg for warehouse space. Read on for more details on these changes and how to account for them in your business practices.
So what’s changing?
A whole host of things! Here’s the skinny on the Amazon Long Term Storage Fee changes:
$0.05 Fee Increase
Starting on April 1, 2018, FBA Long Term Storage Fees were increased by $0.05 per cubic foot for both standard and oversized items. This change will first show on May 2018 invoices for for FBA storage space. The previous charge per cubic foot for standard sized items was $0.64 from January to September and $2.35 October to December. Now, the charges are $0.69 and $2.40 respectively. Oversized items were previously charged per cubic foot at $0.43 from January to September and $1.15 October to December. Now, the charges are $0.48 and $1.20.
Semi-annual to Monthly Fee Assessment
This one begins on September 15, 2018. Currently, Amazon assesses the Long Term Storage Fee twice a year; in February and again in August. Starting in September, however, Amazon will assess these storage fees every month. Currently, Amazon assesses these fees twice a year, charging $11.25 per cubic foot for items in the warehouse between six months and one year. And $22.50 per cubic foot for items in the warehouse for over a year or more. After September 15th, Amazon will assess these storage fees every month on the 15th. Here’s how they will charge: $3.45 per cubic foot for items in the warehouse for six months to one year. And $6.90 per cubic foot for items one year or older.
Minimum Long Term Storage Fee
On August 15, 2018, Amazon plans to introduce a minimum LTSF charge for any unit at the warehouse for one year or longer. A fee of $0.50 per unit per month. The greater of the applicable total long-term storage fee or minimum long-term storage fee will be charged.
Introducing the Inventory Performance Index
Amazon isn’t finished yet! They are also introducing a new program that evaluates a professional seller’s inventory performance. Here’s what Amazon says about it:
The Inventory Performance Index is our first step in setting a bar on inventory performance. Beginning July 1, 2018, we may limit access to storage for sellers with an Inventory Performance Index below 350. Your score is updated weekly based on your ongoing inventory management. Sellers who maintain an index score of 350 or greater will have unlimited storage for standard size and oversize items (monthly storage fees and long-term storage fees still apply). See FBA Storage Limits Changes for more details.
This is from a test account so feel free to giggle.
What happens to professional sellers who don’t maintain an index score of 350 or greater?
Beginning July 1, 2018, Amazon storage limits will be assessed every three months. Score less than 350 six weeks before a new quarter and Amazon will notify you of your storage limits for the upcoming quarter. If your Inventory Performance Index does not improve by the end of the current quarter, those storage limits will apply for the following quarter. See FBA Storage Limits Changes for more details and examples.
What does a storage limit mean?
Essentially, once Amazon places a limit on your storage capacity, you will not be able to create new FBA shipments until your inventory level drops below the imposed storage limit. If existing inventory at the warehouse exceeds your storage limits, Amazon will change an Inventory Storage Overage Fee on the portion of your inventory that exceeds the limit. This will be charged in addition to the usual monthly storage fees (and LTSFs, where applicable). The overage fee is assessed at $10.00 per cubic foot and is based on the daily average volume of inventory that exceeds the storage limit.
Where can I go for more information on these fee changes?
What can I do about aging inventory so I can avoid the Amazon Long Term Storage Fee?
Stock (and source) smarter
Test new products by fulfilling them yourself before sending large quantities to FBA. This ensures their viability for quick turn around once in the warehouse. Send only what you think will sell in 6 month time spans. You can always restock as needed, but you lessen the risk of getting caught with overstock when the fees hit. Send new items in 2 months or so after either FBA inventory clean up. This way, your items aren’t quite 6 months when the next fee is assessed, giving you a 10 month window of listing the item via FBA before it is eligible for storage fees.
Discount items as they age in the warehouse
Lower your price for items as they hit age milestones in the warehouse like 2 months, 4 months, 6 months, etc. Discounting the price as the item ages will ideally push slow moving items to a price point in which they sell before the Amazon FBA Long-Term Storage Fees are assessed. A smart automated repricing tool like Sellery, can be utilized to set these strategies up automatically, so you can take the guess work out of when and how to drop your prices on at-risk items.
Create a removal order
Remember, if you do this, you won’t be able to ship them back to FBA for at least 6 months. However, you may regain the ability to send these ASINs to Amazon if your inventory levels fall below the projection of your sales for four consecutive weeks. This projection is based on your actual sales from the previous 90 days.
As a last resort, create a removal order to pay Amazon to dispose of items before the Long Term Storage Fee is assessed.
Sellery’s smart lists allow you to easily and quickly segment your inventory based on limitless filter options, including FBA Inventory Age. Once you segment items into age groups, you can apply whatever repricing strategy you’d like to use for each group (or all) of items.
You do this by mapping each list to a pricing rule in the Pricing Overview. This is also where you tell Sellery to discount items as they age. This is done by applying a negative mark-up that deepens as items age. Sellery will display a warning about losing money when you apply a negative mark-up. But in this case, it’s likely to save you money in the end to lose a bit on the sale versus having to pay a hefty LTSF or for removal or disposal.
As items age, they will automatically move into the appropriate smart list. When an item moves to a new smart list, Sellery immediately reacts by repricing that item with the new discount. Hopefully it a chance to sell at a lower price point and make its way out of Amazon’s warehouse.
Pack it up, pack it in
We know these changes can be overwhelming, especially if you’ve got stock sitting at the warehouse without much movement. Hopefully these suggestions are a helpful jumping off point for you to be aware of these fees and adjust your business practices to account for (or avoid!) them. As always, if you have questions or concerns, please let us know in the comments below. We’re always happy to help!
Kate has been helping e-commerce sellers navigate and succeed in Amazon’s ever changing landscape for 7 years. From mom & pop stores to multi million dollar brands, she enjoys assisting online entrepreneurs in achieving their goals and breaking records for sales and growth. Kate seeks to share that collective industry knowledge and experience through her writing. In her free time she fronts an indie/pop band, travels the world, surfs, and reads all the books.