Amazon Long Term Storage Fees: Things to Know
If you are selling on Amazon then you have to know that long term storage fees really impact your bottom line twice a year when they are calculated. If you are about to get hit by long term storage fees or if you are not sure if these things affect you then this article is just the right fit for you. These advices might save you a huge amount of money!
Well, first, let’s understand what long term storage fees are. These are fees that Amazon and many other warehouses or storage providers charge you if you have inventory or items that sit with them for extended periods of time. You must also know that over the past few years the cost for long term storage fees, particularly at Amazon, had continued to rise as more and more people continued to utilize their FBA services. Quite frankly they are running out of space.
What really happens is – twice a year Amazon calculates how long your inventory has been sitting at their warehouse. And they are doing it unit by unit, they don’t look at it in overall as a SKU. They don’t want inventory sitting at their warehouses that is not going to sell within 6 months. Keep that in mind!
They will penalize you for inventory that has been sitting there for longer than 6 months, and they will REALLY penalize you for inventory that has been there for over a year. So let’s discuss ways of not getting in a situation when Amazon charges you for storing your inventory with them for extended periods of time.
That’s an advice NUMBER ONE, if you don’t want to get charged by FBA! Plan out your inventory, try to forecast your sales, send in products that you are confident will sell through quickly.
What if that didn’t happen?
So your launch went sour? And now you have bunch of products sitting there. Maybe you had a great deal on reduced shipping rate if you ordered 2 containers full of products, and 6 months ago it was really selling like crazy but it’s more of a seasonal product and right now it’s moving slowly and you are about to be hit with long term storage fees. Maybe you just miss-estimated how much you would sell?
So let’s try to go over a rescue plan, options that you might consider if you got yourself in this situation.
First thing to know are numbers. Right now within Seller Central it should be displaying a warning to you if you are about to get hit with long term storage. If it is not displaying a warning to you you might want to go to your Manage Inventory section and there is an Aging Report that you can run, that will show you exactly which inventory is about to be subject to long term storage.
If you are seeing products that are at risk and you are looking at long term storage fees that are $500 or less, there is really not much that can be done, unless (and here is the key) that inventory is never going to sell. If you have such a product and you have tried everything to sell it, get it ranked, get it moving and it’s just not working, and you know that it will still be sitting there another 6 months or more, then get rid of it! Destroy it, have Amazon destroy it, have it sent to your house, have it sent to a third party for utilization, or have them donated from you, and right off tax. But you should only use that option if you are adamant that this product is not going to move.
So if it’s less than $500 in storage fees, then i recommend not doing anything just yet, if you are unsure if that product is going to move.
And so, if you are about to be billed above $500 and some of you are about to billed thousands of dollars, or even tens of thousands of dollars, it is truly going to be a huge hit to your bottom line, and I do really recommend to take an action.
For most of us it may be a product that is actually selling and you want to continue to have access to that product and not destroy it. But if you have $25 000 worth of inventory and you are about to be hit with $15 000 of storage fees, then it is going to be a huge hit to your profit margin.
So here’s the rule: you can have those items removed from Amazon (either sent back to you or sent back to a third party service), but you are limited to at how quickly you can send those items back. And I believe that period is somewhere between 3 to 6 months. In other words if you have inventory that has been sitting there for let’s say a year and you want those items removed to avoid paying long-term storage fees, you can’t have them sent right back next month. Amazon will limit how much inventory off that particular SKU you can remove within a period of time.
Keep in mind, that you don’t want to remove any more inventory than you have to, and you don’t want to remove so much that your item runs out of stock.
How do you have inventory removed from Amazon? Where do you have it sent to? And what to do from there?
One of the options is to have items sent back to you. That will work if you have a huge garage or a storage building, or someplace to store these items. Keep in mind that when Amazon sends you back your inventory it does not send it the way you sent it to them. It’s not going to arrive all neatly packed and wrapped for you. It’s going to come back in a bunch of boxes, usually sent by UPS, and it may be 3 units in one box and 30 in another box. They are going to chunk them in there. And there usually is some damage… Usually 5% or a little bit less of damage.
Another option (if you have no storage space) is to send them to a third party service.
From there you can return these items at a later date back to Amazon, once that penalty window has closed, or use it for third-party fulfilment (you might sell on Shopify or Ebay), or donate those items, and sometimes you can receive a really nice tax write off. Or mix these options: you can store some of them, fulfill some of them through third party service, send some back to Amazon at a later date, and donate some of them.
Clearly, in not every case this is the best option to go. You need to understand your numbers, get some quotes and understand the pricing of having items removed and stored. If that turns out to be of the same or close amount to what Amazon will charge you in long term fees, then you are better of paying the fees to avoid unnecessary hassle.