As an online marketplace giant, Amazon offers sellers a variety of benefits and tools to help them grow their businesses. One such tool is...
As an online marketplace giant, Amazon offers sellers a variety of benefits and tools to help them grow their businesses. One such tool is the Amazon Fulfillment program, which allows sellers to store their inventory in Amazon's fulfillment centers and have Amazon handle the shipping and customer service. While this program can be a game-changer for sellers, it also comes with certain fees, including long-term storage fees.
In this blog, we will provide a comprehensive guide to Amazon's long-term storage fees. We will define what long-term storage fees are, how they are calculated, and how they can impact sellers. We will also explore strategies that sellers can use to minimize or avoid long-term storage fees and discuss the exemptions that are available. By the end of this blog, sellers will have a better understanding of how to manage long-term storage fees on Amazon and maintain profitability on the platform.
Quick Guide
- Definition of long-term storage fees
- Fee calculation
- Impact on sellers
- Exemptions
- Remedies
- Strategies for managing long-term storage fees
- Conclusion
- Definition of long-term storage fees
Long-term storage fees are a type of fee charged by Amazon to sellers who store their products in Amazon's fulfillment centers for an extended period. These fees are assessed twice a year in February and August.
- Fee calculation
Certainly! Amazon long-term storage fees are calculated based on the volume of a seller's inventory that has been stored in Amazon's fulfillment centers for an extended period of time. Here are the details of how the fees are calculated:
Volume measurement: Amazon measures the volume of a seller's inventory in cubic feet. They calculate this by multiplying the unit dimensions (height, width, and length) of each item together and then summing the volumes of all items stored in the fulfillment center.
Fee structure: Long-term storage fees are calculated on a per-unit basis and vary based on the length of time an item has been in storage. As of 2021, the fees are as follows:
For items stored between 181-365 days, the fee is $6.90 per cubic foot.
For items stored over 365 days, the fee is $15.00 per cubic foot.
Calculation: To calculate the long-term storage fee for a particular unit of inventory, Amazon multiplies the item's volume in cubic feet by the appropriate fee based on the length of time the item has been stored.
For example, let's say a seller has 10 units of an item in Amazon's fulfillment center. Each unit has dimensions of 1 ft x 1 ft x 2 ft, so the volume of each unit is 2 cubic feet. If these items have been stored in Amazon's fulfillment center for between 181-365 days, the long-term storage fee for each unit would be $6.90. Therefore, the total long-term storage fee for these 10 units would be:
(10 units) x (2 cubic feet per unit) x ($6.90 per cubic foot) = $138.00
It's important to note that long-term storage fees are assessed twice a year, in February and August, and are based on the inventory stored in Amazon's fulfillment centers at that time. Sellers should keep track of their inventory levels and be aware of the potential impact of long-term storage fees on their profitability. By managing their inventory effectively, sellers can minimize their exposure to these fees and optimize their sales on Amazon's platform.
- Impact on sellers
The impact of Amazon long-term storage fees on sellers can be significant, particularly for those who rely on Amazon's fulfillment centers to store and ship their products. Here are some of the ways in which these fees can affect sellers:
Increased costs: Long-term storage fees can increase a seller's costs, particularly if they have inventory that has been stored in Amazon's fulfillment centers for an extended period of time. These fees can reduce a seller's profitability and make it more challenging to compete with other sellers on price.
Pressure to sell: To avoid long-term storage fees, sellers may feel pressure to sell their products more quickly, which can impact their pricing strategies and overall profitability. They may need to offer discounts or promotions to encourage sales and reduce their inventory levels.
Inventory management: Long-term storage fees can also impact a seller's inventory management strategies. They may need to adjust their inventory levels to avoid storing products for an extended period of time, which can require additional planning and coordination.
Competitive disadvantage: Sellers who are unable to manage their inventory effectively and avoid long-term storage fees may be at a competitive disadvantage compared to other sellers on Amazon's platform. This can make it more challenging to win the Buy Box and attract buyers.
Storage options: Lastly, sellers may also explore other storage options outside of Amazon's fulfillment centers to avoid long-term storage fees. However, this can also require additional logistics and costs associated with shipping and storing their inventory.
Overall, the impact of Amazon long-term storage fees on sellers can be significant, but can be mitigated with effective inventory management and pricing strategies. Sellers should monitor their inventory levels closely and factor in the potential impact of long-term storage fees when setting their prices and managing their operations on Amazon's platform.
- Exemptions
Amazon offers several exemptions to long-term storage fees that can help sellers avoid or reduce these fees. Here are some of the exemptions that are currently available:
Inventory that has been in Amazon's fulfillment centers for less than 365 days: As mentioned earlier, long-term storage fees are only assessed on inventory that has been stored in Amazon's fulfillment centers for more than 365 days. Inventory that has been in the fulfillment center for less than 365 days is exempt from these fees.
Inventory that has a sell-through rate of 0.5 or higher: Sellers can request an exemption from long-term storage fees for inventory that has a sell-through rate of 0.5 or higher. This means that at least half of the inventory that has been in the fulfillment center for more than 30 days has been sold within the past 90 days.
Inventory that is seasonal: Sellers can request an exemption for inventory that is considered seasonal, such as holiday or event-specific products. These exemptions are only available during specific times of the year and require sellers to provide evidence of the seasonal nature of their products.
Inventory that is subject to product restrictions or hazmat regulations: Some products are subject to restrictions or hazmat regulations that require them to be stored in Amazon's fulfillment centers for an extended period of time. In these cases, sellers can request an exemption from long-term storage fees.
Removal order placed before the fee assessment date: If a seller places a removal order for inventory before the long-term storage fee assessment date, they will not be subject to these fees for that inventory.
- Remedies
If a seller has been charged long-term storage fees by Amazon and believes that they were charged in error or were unfairly assessed, there are several remedies available. Here are some of the options for sellers:
Submitting a reimbursement request: If a seller believes that they were charged long-term storage fees in error, they can submit a reimbursement request to Amazon. The seller will need to provide evidence to support their claim, such as inventory reports, sales data, and other documentation. Amazon will review the request and may provide a refund or credit for the fees that were assessed.
Removing inventory from Amazon's fulfillment centers: One way to avoid long-term storage fees is to remove inventory from Amazon's fulfillment centers before the assessment date. Sellers can use Amazon's Removal Order service to request that their inventory be returned to them or disposed of.
Adjusting pricing and inventory levels: Sellers can also adjust their pricing and inventory levels to avoid long-term storage fees. They can reduce prices or offer promotions to encourage sales and reduce inventory levels, or they can adjust their inventory management strategies to avoid storing products for an extended period of time.
Applying for exemptions: As mentioned earlier, Amazon offers several exemptions to long-term storage fees, such as for seasonal products or inventory with a high sell-through rate. Sellers can apply for these exemptions to avoid or reduce these fees.
Contacting Amazon support: If a seller has questions or concerns about long-term storage fees, they can contact Amazon support for assistance. Amazon has a dedicated support team that can provide guidance on how to manage inventory and avoid long-term storage fees.
- Strategies for managing long-term storage fees
Developing a strategy to manage long-term storage fees on Amazon is an important part of a seller's overall business plan. Here are some strategies that sellers can use to minimize or avoid these fees:
Monitor inventory levels: One of the key factors that affects long-term storage fees is the amount of inventory that a seller has in Amazon's fulfillment centers. To avoid these fees, sellers should monitor their inventory levels closely and ensure that they are only storing inventory that is likely to sell within 365 days. Sellers can use Amazon's inventory reports and sales data to help them make informed decisions about their inventory management.
Plan ahead for seasonal products: If a seller has seasonal products that are likely to have slower sales during certain times of the year, they can plan ahead by reducing inventory levels before the slow season begins. This can help to avoid long-term storage fees during the slow season and ensure that inventory levels are optimized for the busy season.
Utilize promotions and pricing strategies: Sellers can use promotions and pricing strategies to encourage sales and reduce inventory levels. By offering discounts or promotions on slow-moving inventory, sellers can increase sales and reduce the amount of inventory that is subject to long-term storage fees.
Optimize product listings: Optimizing product listings with high-quality images, detailed descriptions, and relevant keywords can help to increase visibility and sales. This can also help to reduce inventory levels and minimize the risk of long-term storage fees.
Consider alternative fulfillment options: For some sellers, using Amazon's fulfillment centers may not be the most cost-effective option. Sellers can consider alternative fulfillment options, such as third-party logistics providers or self-fulfillment, to avoid or reduce long-term storage fees.
- Conclusion
In conclusion, long-term storage fees can have a significant impact on a seller's profitability on Amazon's platform. These fees are assessed on inventory that has been stored in Amazon's fulfillment centers for more than 365 days, and they can add up quickly for sellers who are not proactive about managing their inventory levels.
However, there are several strategies that sellers can use to minimize or avoid long-term storage fees. By monitoring inventory levels, planning ahead for seasonal products, optimizing product listings, and considering alternative fulfillment options, sellers can reduce the risk of being assessed these fees and maintain profitability on Amazon's platform.
Sellers should also be aware of the exemptions that are available for long-term storage fees, such as for seasonal products or inventory with a high sell-through rate. By applying for these exemptions and taking proactive steps to manage their inventory, sellers can minimize the impact of long-term storage fees on their business.
Overall, managing long-term storage fees on Amazon requires a strategic approach to inventory management and pricing strategies. By implementing these strategies, sellers can optimize their business performance and maintain a competitive edge on Amazon's platform.
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