When products cannot be sold on Amazon, long-term storage fees are likely to be incurred. So today I will take you to analyze Amazon’s storage fees in detail!
1. What are long-term storage fees?
On the 15th of each month, Fulfillment by Amazon (FBA) will conduct an inventory count and calculate long-term storage fees. Effective February 15, 2020, products stored in a fulfillment center for more than 365 days will be charged a total long-term storage fee of $6.90 per cubic foot. We will charge the greater of the applicable total long-term storage fee and the minimum long-term storage fee.
2. What is the minimum long-term storage fee?
Starting February 15, 2020, Amazon will charge a minimum fee of $0.15 per unit per month for products that remain in Amazon fulfillment centers for more than 365 days. Long-term storage fees or minimum fees apply, whichever is greater.
3. Situations where long-term storage fees are likely to be incurred
1. When selecting products, I did not conduct sufficient market research, and I arrogantly believed that the products I selected would definitely sell well. I did not expect that large quantities of goods would become unsalable after being sent.
2. Product infringement. When the products were first sold, the sales were pretty good, but the brand or patent owner hadn’t discovered it yet, so the sellers thought they had gotten a great bargain and shipped the products in large quantities. Unexpectedly, the product was taken off the shelves directly after receiving complaints, and the inventory was stuck in Amazon's warehouse.
3. There are problems with product quality. When the product was stable in the early stage, sales and reviews increased. So we shipped multiples of products, but found that the quality was not up to standard, which led to more negative reviews and returns, and our ranking dropped, leaving us with a bunch of problematic products.
4. The store was closed. When many sellers first start their business, they frantically look for people to fake orders and post reviews. Their sales increase rapidly in a short period of time. However, they did not expect that after the goods were shipped, they would encounter strict inspections by Amazon, their stores would be closed, and the goods would pile up in the warehouse.
5. Products have peak and off-peak seasons. For example, some products have a peak season in summer, and the goods prepared for the peak season are not sold out and are piled up in the warehouse. But when the peak season came the following year, they found that the products were out of date and could not be sold.
In addition to the common problems mentioned above, there are many other situations that are difficult to prevent. When products are piled up in Amazon warehouses, sellers should find ways to clear out the inventory instead of waiting for Amazon to conduct an inventory check and deduct fees. When long-term storage fees appear, the subsequent costs will accumulate over time, and the best strategy is to stop losses in time.
4. How to avoid storage fees
1. Reduce prices or offer discounts for promotions
This method is naturally used on slow-selling products. When these products with low sales and annoying orders are about to expire, we quickly and decisively adopt a price reduction strategy, which can not only clear the inventory but also avoid FBA storage fees. Another option is to pay to clear inventory, which is relatively less cost-effective. However, as I mentioned in the previous paragraph, Amazon has a free inventory clearance event, but some sellers missed it. This shows how important it is to pay more attention to platform information.
2. Use Amazon payment software
If you want to solve this batch of products through drainage, there is no doubt that Sponsored Products is the best choice. It uses the principle of auction to decide which ads to display first, and you can also set bids. Additionally, Amazon promotions can be taken advantage of as well.
3. Be prepared and plan accurately
If you want to avoid inventory backlogs, the best way is of course to accurately estimate sales in advance. Sellers who have overseas warehouses naturally don’t have to worry about this problem, but it is more difficult for sellers who ship products through FBA. They will always be annoyed by the problem of insufficient or excessive inventory. It is best to estimate the shipment volume of each ASIN to ensure that all of them can be sold out within a certain period of time.
Also pay attention to the delivery time. Amazon charges storage fees on February 15th and August 15th of each year. Sellers whose inventory is about to be stored for more than 6 or 12 months should be careful of these two dates. Sellers should choose the appropriate delivery cycle based on the date when the storage fee is charged, thereby greatly saving unnecessary storage fees.
But what else can be done to clear the inventory? Almost every seller who sends FBA products will encounter this situation. The day for collecting storage fees is approaching, but some products are still piled up there. How to judge whether to destroy or not?
Many sellers choose to ship the goods back to their country. The shipping cost is really painful, but the longer the savings period, the greater the loss. If there is still some left after taking advantage of various activities and low-price clearance, and the shipping cost is within an acceptable range, shipping it back to the country is indeed an option.
But if you are a multi-platform seller, you are a seller selling on at least 2 or more platforms. This way, the products can be smoothly transferred to other platforms, alleviating the embarrassing inventory situation on Amazon while continuing to sell on other platforms.
