Managing inventory costs on Amazon is one of the biggest challenges for sellers. Storage fees, long-term holding costs, and restock limits can quickly eat into your profits if not managed properly. Many sellers struggle with overstocking, stockouts, and excessive fees that hurt their bottom line.
If you’re feeling the pressure of rising inventory costs, don’t worry—you’re not alone. The good news? There are proven strategies to optimize your inventory management and reduce these costs.
In this guide, we’ll cover:
✅ Why Amazon inventory costs are so high & how they impact profitability
✅ Smart inventory planning strategies to avoid overstock and stockouts
✅ How to reduce FBA storage fees and improve turnover rates
✅ The best tools & tactics for tracking and optimizing inventory
✅ How to leverage Amazon’s Restock Limits & IPI Score to your advantage
By the end of this article, you’ll have the knowledge to cut costs, improve cash flow, and scale your business efficiently. Let’s dive in!
Why Are Amazon Inventory Costs So High?
Amazon FBA (Fulfillment by Amazon) is an incredibly convenient service for sellers, but that convenience comes at a cost. Here are the three main reasons why inventory costs can skyrocket:
1. High FBA Storage Fees
Amazon charges monthly storage fees for keeping your products in their fulfillment centers. These fees are based on:
- Volume (cubic feet) – Larger products cost more to store.
- Seasonality – Q4 storage fees are much higher than the rest of the year.
🔹 Current Amazon FBA Storage Fees:
- January – September: $0.87 per cubic foot (standard-size)
- October – December: $2.40 per cubic foot (standard-size)
That’s almost 3X higher during peak season!
2. Long-Term Storage Fees
If your inventory sits for more than 181 days, Amazon starts charging aged inventory fees. This can be devastating if you have slow-moving products.
🔹 Current Long-Term Storage Fees:
- $1.50 per cubic foot for items stored over 181 days.
- $6.90 per cubic foot OR $0.15 per unit (whichever is greater) for items stored over 365 days.
3. Restock Limits & IPI Score
Amazon imposes restock limits based on your Inventory Performance Index (IPI) Score. If your score drops below 400, your storage space gets restricted, meaning you can’t send in as much inventory.
If you run out of stock due to these limits, you lose sales and rankings, making it even harder to recover.
Now that we know the challenges, let’s talk solutions!
Solution #1: Smart Inventory Planning to Reduce Costs
The key to reducing inventory costs without hurting sales is to balance stock levels effectively.
Here’s how:
A. Forecast Demand Accurately
Many sellers either overstock (paying high storage fees) or understock (losing sales).
✅ Use Amazon’s Demand Forecasting Tool in Seller Central.
✅ Analyze last year’s sales data to predict demand.
✅ Use third-party tools like Teikametrics or Helium 10 for AI-based forecasting.
B. Follow the 80/20 Rule (Pareto Principle)
Focus 80% of your inventory budget on your top 20% best-sellers. Avoid overstocking slow-moving items that rack up storage fees.
C. Implement a Just-in-Time (JIT) Strategy
Instead of sending massive shipments to Amazon, send smaller, more frequent shipments based on real-time sales data.
✔️ Reduces long-term storage fees
✔️ Prevents Amazon restock limits from capping your growth
✔️ Frees up cash flow for other business investments
Solution #2: Reduce FBA Storage Fees with These Tactics
A. Remove or Liquidate Slow-Moving Inventory
If products aren’t selling within 180 days, don’t let them sit!
✔️ Create a Removal Order to send stock back to you.
✔️ Use Amazon’s FBA Liquidations Program to recover some cash.
✔️ Sell excess inventory on other platforms (eBay, Walmart, Shopify).
B. Use Amazon Warehousing & Distribution (AWD)
Amazon now offers AWD (Amazon Warehousing & Distribution), where you can store products at a lower cost and ship them to FBA as needed. This can help reduce high storage fees at fulfillment centers.
C. Avoid Storing Excess Inventory in Q4
Since Q4 storage fees triple, try to keep only fast-moving stock in Amazon warehouses from October – December.
Solution #3: Optimize Your Amazon PPC to Prevent Overstock
One big reason sellers get stuck with high inventory costs is that they order too much stock but don’t sell it fast enough. Fix this with better PPC strategies!
A. Increase PPC for Slow-Moving Items
If a product isn’t selling well, try boosting visibility with higher PPC bids.
✔️ Use Sponsored Product Ads for high-converting keywords.
✔️ Run Amazon Coupons or Lightning Deals to attract more buyers.
B. Use External Traffic to Drive Sales
Don’t just rely on Amazon—use Facebook Ads, Google Ads, TikTok, or influencers to send more buyers to your Amazon listing.
✔️ Helps clear out inventory faster
✔️ Increases your sales velocity (helping you rank higher)
Solution #4: Improve Your IPI Score to Avoid Restock Limits
Amazon restricts storage space if your IPI score falls below 400. Here’s how to keep your score high:
✔️ Remove old inventory that isn’t selling.
✔️ Sell through stock faster to improve sell-through rates.
✔️ Keep top-selling items in stock to maintain performance.
🔹 Bonus Tip: Use Amazon’s Restock Recommendations in Seller Central to track your IPI score and avoid restrictions.
Solution #5: Consider FBM (Fulfilled by Merchant) for Slow Sellers
Instead of paying high FBA storage fees, consider switching some products to FBM (Fulfilled by Merchant).
✔️ You store and ship products yourself (or use a 3PL service).
✔️ No monthly storage fees with Amazon.
✔️ Great for seasonal or slow-moving items.
Final Thoughts: Manage Inventory Smarter & Maximize Profits
Amazon inventory costs don’t have to drain your profits. By following these solutions, you can cut storage fees, prevent stockouts, and improve cash flow.
Key Takeaways:
✅ Forecast demand accurately to avoid overstock & stockouts.
✅ Reduce FBA storage fees by removing slow sellers & using AWD.
✅ Optimize PPC & external traffic to move products faster.
✅ Improve your IPI score to prevent restock limits.
✅ Use FBM or third-party storage for better cost control.
💡 Now it’s your turn! What’s your biggest challenge with Amazon inventory costs? Drop a comment below—I’d love to help! 🚀
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