In today’s post I am going to be sharing my process for managing Fulfillment By Amazon (FBA) long term storage fees as an FBA Seller.
These fees used to occur on August 15th and February 15th every year, but now are charged every month. On the 15th of every month, Amazon charges FBA sellers a fee for items that have been in stock for 6 months or greater.
First, I will go over the details of Amazon FBA storage fees, and then I will dive into the strategies that I use to minimize the Amazon long term storage (LTS) fees I pay.
You can read all of the details about LTS fees direct from Amazon HERE. A few noteworthy takeaways if you don’t want to read through the full page:
- Every item in stock for 6 months or greater on the 15th of each month will be charged long term storage fees.
- Units in stock for 6 to 12 months as of the LTS fee date will be charged $3.45 per cubic foot
- Units in stock for 365 days or more as of the LTS fee date will be charged $6.90 per cubic foot
Now, I will go over how to determine which items will be impacted by Amazon long term storage fees. Here’s my process:
- Login to your seller account
- Hover over reports and select Fulfillment
- On the left hand side of the screen under the Inventory heading, click show more
- Select Inventory Health
- Click the Download tab and click Request Download
- Download the report as it becomes available
- Open the text file that downloads
- Click anywhere in the text file and select all. This can be done by right clicking and then clicking select all, or can be done by holding the control key and pressing the letter A (Ctrl + A).
- Copy the data you have selected
- Paste this data into either Excel or Google sheets
- Select the top row, click the data tab, and select filter
- Then you will want to sort the columns with the heading “projected-ltsf-12-mo” and “projected-ltsf-6-mo” from high to low. For me these are columns AN and AU, respectively. Make sure to sort one column at a time.
Note: A similar report that will work for this instead of steps 1 through 5 is to go to Inventory > Manage Inventory > Inventory Dashboard > Inventory Age > Download Report
If you go through the above steps, you now have the info needed to analyze which items you will be charged storage fees on. The report you downloaded will let you know exactly how much will be charged in fees for each item as well.
Now, I will go over some of the strategies I use to make sure I don’t pay more in Amazon long term storage fees than I need to.
Pricing Strategies to Avoid Long Term Storage Fees
My preferred way to avoid Amazon long term storage fees is to sell through them. Even if that means selling the item for a slight loss in some cases. I recommend using the reports above to identify inventory that has been in stock for over 90 days. After you’ve identified these items, identify if you have room to lower the price or take a different action to increase the likelihood that a product sells. I’d recommend going through these items every week or two to continue to aim to sell through them before 180 days.
Then as you get to be about two weeks before long term storage fees are going to be charged, I recommend going through in even more detail to see if there’s any pricing tweaks you can make to get sale. In these last two weeks, I’d consider being very aggressive on pricing to get the inventory sold. If it’s been in stock for six months and hasn’t sold, there’s a good chance that recovering any cash you can to reinvest in new inventory is the right move.
Fixing pricing is my preferred option whenever possible to avoid long term storage fees.
Use Amazon Promotions & Sponsored Product Ads
Another strategy I use is to run promotions and ads for items that will be charged LTS fees if they don’t sell. If the items don’t sell in time, you will either pay the long term storage fee, or a $0.50 fee to remove the item. So if you can get the item sold paying less than one of those fees, it’s actually a net win at the stage it’s at.
These items will be charged fees either way, so it’s worth spending a little money on ads, or offering a discount to get them sold.
I’d recommend setting up a campaign with all of the items that are subject to fees at least a few weeks in advance.
Take Advantage of Free Removal Promotions
Amazon will sometimes offer a promotion for FBA sellers to remove items from Fulfillment By Amazon warehouses for free. This promotion waives removal order fees for items that are removed during the promotion period.
There’s no guarantee that this promotion will be offered, but when it is, I recommend using it to your advantage.
One thing to note is that when removing items to avoid Amazon long term storage fees there is a deadline that needs to expire before you can send the item back to FBA warehouses. Typically this is 3 to 6 months in the future. For example if you remove an item prior to February of 2019 to avoid long term storage fees, you cannot send the item back to FBA warehouses until July 1st of 2019. The timelines may vary slightly, but make sure you are aware of them in advance.
Manage In Stock Levels from the start
One of the best ways to avoid long term storage fees is to manage the amount of inventory that you send in to FBA warehouses in the first place. If you only send in quantities that are likely to sell in 6 months or less then you should have minimal long term storage fees to worry about.
Over time you should be able to get better and better at this. Use your experience to guide you here.
One thing I definitely recommend doing is for any items that do end up subject to LTS fees, is to evaluate why. Take a look at if you should have bought the item in the first place, if there was an issue with the listing, if there was an issue with pricing, or anything else you can identify. Then use that information to improve the products you buy in the future.
Time When You Send in Inventory
This applies primarily to when you are buying large quantities of items. If you are buying several months worth of supply of a product, you don’t need to send it all in at once. Send in what you think will sell in 3o to 45 days, and hang onto the rest until you have proof of sales. This can be especially useful for seasonal products that are a bit harder to gauge sales velocities on.
Determining Which Items to Remove
If you have enough inventory, most likely you’ll have some that need to be removed. In this section we’ll walk through how to decide which items need to be removed.
Most likely when it comes up to the day before long term storage fees, you will still have some items that you were not able to sell. That means it is time to figure if you should pay the long term storage fee or if you should have the item sent back to you. I go through this process 1 or 2 days before the LTS fees will be charged.
The first step that I take in this process is determining what my costs are for having an item sent back to my location. I want to calculate the time it will take me or someone on my team to go through an item, store it for 3 to 4 months, the time to process it again to be sent back in, and the cost of inbound shipping & supplies to send it back in. This gives me a baseline to see what level of fee it makes sense to pay. To be clear I am only willing to pay the fee if I think the item has a chance to sell in the next 30 days.
When there is a free removal promotion available, I typically will pay a LTS fee on any item where the fee is $0.5 or less. If there is not a free removal promotion available, I will typically pay the LTS fee on any item where the fee is $1.00 or less. Again this assumes that I think there’s a very good chance the item will sell in the next 30 days.
I say typically, as there are exceptions to this. For example if I have a toy that sells for $100 that is very likely to sell in December, I would be likely to pay a storage fee of $1.25 each month from September through November if needed. If I was to remove it, I might lose the opportunity to have the item sell due to having to wait 3 to 6 months to send the item back in.
On the flip side, if I have an item that will sell for $5 or less, I generally won’t pay any fee, and will just have the item returned to me if free removals are available. Then I will donate or liquidate it.
On the items where the LTS fee is higher than my aforementioned threshold, I will evaluate each product individually to determine if a removal or paying the LTS fee makes more sense. I look at things like current selling price, competition, what season the product is most likely to sell in, how the product is currently selling, among other factors. Most of these items I will end up removing, and then either store in my warehouse to be sent back at a later date, or liquidate via other means.
By removing the items, I avoid the LTS fee and help to lower this particular expense.
One last note, as I am going through all of the items that are subject to Amazon long term storage fees, I am reviewing to see if there are ways I could improve my inventory mix to avoid these fees in the future. This is a very important step, as generally speaking, I don’t want to have more than a few months supply in stock at a given point in time.
We’ll wrap it up there for today. That’s my strategy for dealing with Amazon long term storage fees. Do you have any additional strategies you would recommend? any questions on this post? Let me know in the comments below.