Amazon Long-Term Storage Fees

Amazon FBA (Fulfillment by Amazon) continues to be a cornerstone for e-commerce sellers aiming to streamline their operations and reach a broader customer base. However, with the convenience of Amazon handling storage and fulfillment comes the responsibility of managing associated fees effectively. Among these, long-term storage fees can significantly impact your profitability if not monitored closely. As we step into 2024, it's crucial to stay updated on the latest fee structures and strategies to optimize your Amazon business. In this guide, we'll delve into what Amazon long-term storage fees entail in 2024, how they're calculated, and share actionable strategies to minimize or avoid these charges. Whether you're a seasoned seller or just starting, understanding these fees is vital for maintaining a healthy bottom line.

What Are Amazon Long-Term Storage Fees?

Amazon long-term storage fees are additional charges applied to inventory stored in Amazon’s fulfillment centers for over 271 days as of 2024. Previously assessed on inventory aged over 365 days, Amazon has updated its policy to encourage even more efficient inventory management.

Storage Duration: Inventory held for more than 271 days is subject to long-term storage fees.
Frequency: Assessed on the 15th of each month.
Fee Amount: The charge is $1.50 per cubic foot for items aged between 271 to 365 days, and $6.90 per cubic foot or $0.15 per unit (whichever is greater) for items aged over 365 days.

Key Update for 2024: The introduction of fees for inventory aged between 271 to 365 days is a significant change from previous years, where only items stored over 365 days were charged.

How Are Long-Term Storage Fees Calculated?

The calculation for long-term storage fees depends on the volume of the inventory and its time in storage. Amazon charges the fees based on cubic feet or per-unit pricing, applying the higher amount.

For Inventory Aged 271 to 365 Days:

Fee: $1.50 per cubic foot.

For Inventory Aged Over 365 Days:

Fee: $6.90 per cubic foot or $0.15 per unit, whichever is greater.

Example Calculation:

Case 1: You have 2 cubic feet of inventory stored for 300 days.
- Fee: 2 cubic feet × $1.50 = $3.00.
Case 2: You have 10 units stored for 400 days, each taking up 0.1 cubic feet.
- Total Volume: 1 cubic foot.
- Volume-Based Fee: 1 cubic foot × $6.90 = $6.90.
- Per-Unit Fee: 10 units × $0.15 = $1.50.
- Applied Fee: $6.90 (since it's greater).

Understanding these calculations allows you to anticipate potential charges and make informed decisions about your inventory levels.

When Do Amazon Long-Term Storage Fees Apply?

Long-term storage fees are assessed monthly on the 15th. Amazon conducts an inventory cleanup on this date, evaluating items based on their time in storage.

Inventory Cleanup Date: 15th of every month.
Inventory Age Thresholds:
- 271+ days: Subject to $1.50 per cubic foot fee.
- 365+ days: Subject to $6.90 per cubic foot or $0.15 per unit fee, whichever is greater.

Important for 2024: The additional fee tier for items aged between 271 to 365 days means more of your inventory could incur charges if not managed properly.

Storage Fees Based on Size in 2024

Strategies to Minimize Amazon Long-Term Storage Fees

Regularly Monitor Inventory Age

Utilize Amazon’s Inventory Age Report to track the age of your inventory.

This tool helps you identify items approaching the 271-day and 365-day thresholds.

Tip: Set up automated alerts within Seller Central to notify you when inventory nears these critical dates.

Implement Dynamic Pricing Strategies
- Adjust prices to encourage sales of aging inventory.
- Consider using Amazon’s Automate Pricing tool to stay competitive.

Tip: Pair price adjustments with promotions to boost visibility.

Run Targeted Promotions
- Use promotional tools like Lightning Deals, Coupons, or Prime Exclusive Discounts to accelerate sales of older inventory.

Tip: Schedule promotions ahead of the inventory cleanup dates for maximum impact.

Create Removal Orders Proactively

If products are not selling and are nearing the fee thresholds, consider creating a removal order.

Options:
- Return to Seller: Get your inventory back for potential resale elsewhere.
- Disposal: Have Amazon dispose of unsellable inventory.
- FBA Liquidations: Recover a portion of your inventory cost by liquidating through Amazon’s program.
Optimize Inventory Replenishment
- Use forecasting tools to align your stock levels with demand, avoiding overstocking.
- Tools: Forecastly, SoStocked, or Amazon's own Restock Inventory tool.
Leverage Multi-Channel Fulfillment (MCF)
- Sell your Amazon-stored inventory through other channels like your own website or other marketplaces.
- Benefit: Increases sales velocity, reducing inventory age.

The Consequences of Ignoring Long-Term Storage Fees

Eroded Profit Margins

Accumulating storage fees can significantly reduce your profits, making it harder to compete on price.

Negative Impact on Inventory Performance Index (IPI)

Excess and aging inventory can lower your IPI score, potentially leading to storage limitations imposed by Amazon.

Cash Flow Constraints

Funds tied up in storage fees are unavailable for other critical business activities like marketing or new product development.

Hypothetical Case Study to apply your learnings

Case Study: Mark’s Outdoor Gear

Mark, an Amazon seller specializing in outdoor equipment, noticed a spike in his storage fees with the new 271-day threshold. To combat this, he:

Analyzed Inventory Age: Identified products nearing the 271-day mark.
Adjusted Pricing: Implemented strategic discounts on slow-moving items.
Utilized FBA Liquidations: Liquidated overstocked items to recover costs.
Optimized Reordering: Aligned stock levels with seasonal demand using forecasting tools.

Result: Mark reduced his long-term storage fees by 40% and improved his IPI score, leading to better inventory management and increased profitability.

Conclusion

Navigating Amazon's updated long-term storage fees in 2024 requires proactive inventory management and strategic planning. By staying informed about fee structures and utilizing Amazon's suite of tools, you can minimize unnecessary charges and maintain a healthy profit margin. Regularly monitoring your inventory, adjusting pricing strategies, and leveraging programs like FBA Liquidations can make a significant difference in your bottom line. As the e-commerce landscape continues to evolve, staying agile and informed is key to your success on Amazon.

If you need personalized guidance or help fine-tuning your strategies, Superfuel AI can assist. Our AI-powered assistant analyzes 36+ key Amazon metrics to identify and address the root causes of sales fluctuations, helping you optimize your storefront and boost sales. Reach out to us at [email protected].

Ben Mathew, Amazon Expert

Ben Mathew is a co-founder at Superfuel, a sales assistant for Amazon sellers. In the past, Ben and his team of e-commerce specialists and software engineers have launched 40+ new brands on Amazon, taking them from zero to bestsellers. In his free time, he is either learning from other top sellers or encouraging his 3 daughters in their love for reading. He is reachable at ben [at] superfuel.io.

FAQs

What are the new Amazon long-term storage fees for 2024?
- For items stored 271 to 365 days: $1.50 per cubic foot.
- For items stored over 365 days: $6.90 per cubic foot or $0.15 per unit, whichever is greater.
How often are long-term storage fees assessed?
- Fees are assessed monthly on the 15th.
Can I avoid long-term storage fees?
- Yes, by monitoring inventory age, adjusting pricing, running promotions, creating removal orders, and optimizing inventory levels.
What happens if I ignore long-term storage fees?
- Ignoring fees can erode profits, lower your IPI score, and strain your cash flow.
What tools can help manage these fees?
- Use Amazon's Inventory Age Report, Inventory Performance Dashboard, FBA Fee Preview Report, and Automate Pricing Tool.