As an Amazon FBA (Fulfillment by Amazon) seller, understanding how Amazon’s storage fees work is crucial to maximizing your profits. Storage fees, particularly long-term fees, can quickly eat into your margins if you don’t actively manage your inventory. Whether you’re a seasoned third-party seller or just starting, minimizing these costs is essential for a sustainable business on Amazon.
In this blog post, we’ll break down the types of Amazon FBA storage fees, how they’re calculated, and most importantly, how you can minimize them to keep more of your hard-earned revenue.
What Are Amazon FBA Storage Fees?
Amazon FBA storage fees are the charges Amazon applies to store your products in their fulfillment centers. These fees are primarily based on the amount of space your products occupy and how long they remain in storage. Amazon splits its storage fees into two main categories: monthly storage fees and long-term storage fees.
1. Monthly Inventory Storage Fees
Amazon charges monthly inventory storage fees based on the space your products take up in their warehouses. The fee is calculated in cubic feet and varies depending on the time of year (since demand for storage increases during peak shopping seasons, such as Q4).
- Off-Peak (January to September):
- Standard-size items: $0.87 per cubic foot
- Oversize items: $0.56 per cubic foot
- Peak Season (October to December):
- Standard-size items: $2.40 per cubic foot
- Oversize items: $1.40 per cubic foot
These fees increase during peak season because Amazon’s fulfillment centers experience higher demand for space as sellers stock up for the holiday shopping rush.
2. Long-Term Storage Fees
Amazon also imposes long-term storage fees on inventory that has been sitting in their fulfillment centers for more than 365 days. These fees are much higher than monthly storage fees and can drastically impact your profitability if you have slow-moving or excess inventory.
- Long-term storage fees (over 365 days): $6.90 per cubic foot or a minimum charge of $0.15 per unit (whichever is greater).
These fees are assessed on the 15th of each month and can quickly add up if you don’t actively manage your inventory.
How Are FBA Storage Fees Calculated?
Amazon calculates storage fees based on the volume your products take up in their fulfillment centers, measured in cubic feet. The fee is applied per cubic foot for both monthly and long-term storage. Here’s how you can estimate your storage costs:
- Monthly Storage Fees: Multiply the volume (in cubic feet) of your stored products by the monthly storage fee rate. This will give you the total cost of storing your inventory for that month.
- Long-Term Storage Fees: If products remain in storage for over 365 days, multiply the volume (in cubic feet) by the long-term storage fee rate, or use the $0.15 per unit rate if that’s higher.
For example, if you have a product that takes up 2 cubic feet of space and it’s stored during peak season (October-December), your monthly storage fee would be:
2 cubic feet x $2.40 (peak rate) = $4.80 per month.
If that same product remains in storage for over 365 days, your long-term storage fee would be:
2 cubic feet x $6.90 = $13.80, or $0.15 per unit, whichever is greater.
Tips to Minimize Amazon FBA Storage Fees
Now that you understand how Amazon FBA storage fees work, let’s look at practical strategies you can implement to minimize these fees and boost your profitability.
1. Regularly Monitor Your Inventory Levels
One of the easiest ways to avoid excess storage fees is by regularly monitoring your inventory levels through Amazon Seller Central. Amazon provides a variety of reports, such as the Inventory Health Report and FBA Inventory Age Report, that give you insights into how much inventory you have, how long it’s been stored, and whether it’s at risk of incurring long-term storage fees.
- Inventory Health Report: This report shows you your stock levels, sales velocity, and which products are overstocked.
- FBA Inventory Age Report: This report helps you track how long your products have been stored in Amazon’s warehouses, allowing you to take action before long-term fees kick in.
By keeping a close eye on your inventory, you can make informed decisions about when to reorder products and when to run promotions to move slow-moving items.
2. Forecast Demand Accurately
Accurate demand forecasting is essential for avoiding both stockouts and excess inventory. Overstocking leads to high storage fees, while understocking can result in lost sales and missed opportunities. To forecast demand, consider using tools like Helium 10, Jungle Scout, or Amazon’s own Restock Inventory tool.
- Analyze historical sales data: Look at past sales trends and seasonality to predict future demand.
- Account for seasonality: If certain products perform better during specific times of the year (e.g., holiday season), adjust your inventory levels accordingly to prevent overstocking during slower periods.
- Monitor trends: Stay informed about changes in market trends, consumer behavior, and competitor activity that could affect demand for your products.
3. Create Removal Orders for Excess or Slow-Moving Inventory
If you have excess inventory or products that are moving slowly, create an FBA removal order to either have the products returned to you or disposed of by Amazon. While creating a removal order incurs a small fee, it’s often far cheaper than paying long-term storage fees.
- Removal Order Fees: Typically, removal orders cost between $0.25 and $0.60 per unit, depending on the size and weight of the item.
- FBA Liquidations: You can also use Amazon’s FBA Liquidations program, which allows you to sell your excess inventory to liquidators and recover some of your costs.
4. Run Promotions to Clear Slow-Moving Inventory
Running promotions is a great way to move excess inventory and avoid long-term storage fees. Consider using Amazon’s built-in tools to offer discounts, coupons, or run Lightning Deals to increase sales velocity and free up warehouse space.
- Amazon Coupons: Offer discounts on slow-moving products to entice customers to make a purchase.
- Lightning Deals: These time-limited promotions can generate a surge of sales and help you clear out inventory quickly.
By running promotions, you not only avoid long-term storage fees but also improve your sales rank, which can lead to more organic sales.
5. Send Inventory in Smaller, More Frequent Shipments
Instead of sending large quantities of inventory to Amazon all at once, consider sending smaller, more frequent shipments. This will help you maintain lean inventory levels and reduce storage fees, especially during peak seasons when fees are higher.
- Track lead times: Work with your suppliers and monitor lead times to ensure you can send inventory in smaller batches without running out of stock.
- Optimize your shipment plans: Use Amazon’s shipment planner tool to create efficient shipping plans that reduce the number of products you send at one time.
6. Set Reorder Points and Restock Alerts
Amazon’s Restock Inventory tool provides recommendations on when to reorder products based on sales velocity and lead times. Setting reorder points and restock alerts helps you avoid over-ordering, which can lead to high storage fees.
- Set Reorder Points: Determine the minimum inventory level you need before placing a new order to prevent stockouts.
- Restock Alerts: Use tools like InventoryLab or Sellerboard to set restock alerts that notify you when it’s time to reorder, ensuring that you maintain optimal inventory levels.
Conclusion: Effective Inventory Management Is Key to Reducing Amazon FBA Storage Fees
Managing your Amazon FBA inventory efficiently is essential to avoiding costly storage fees and maximizing your profitability. By understanding how Amazon’s storage fees work and implementing strategies like demand forecasting, removal orders, and running promotions, you can significantly reduce your fees and optimize your FBA business.
At Marketplace Valet, we specialize in helping third-party sellers optimize their FBA operations. From inventory management to listing optimization, we’re here to help you succeed on Amazon. Contact us today to learn how we can support your Amazon business and help you keep your storage fees under control!
FAQs:
- How often are Amazon FBA storage fees charged? Amazon charges monthly storage fees based on the volume of your inventory. Long-term storage fees are assessed on the 15th of each month for items stored for over 365 days.
- What happens if I don’t manage my inventory properly? If you don’t manage your inventory efficiently, you may incur high long-term storage fees, leading to reduced profit margins. Overstocking can also tie up capital in unsellable inventory.
- Can I recover costs from excess or unsellable inventory? Yes, you can use Amazon’s FBA Liquidations program or create a removal order to recover some costs from excess or unsellable inventory.
