Twice a year, online merchants who use Fulfillment By Amazon face the prospect of paying Long Term Storage fees for products that haven’t moved from Amazon’s warehouse in 6 months. But there are things you can do as an FBA seller to avoid a big hit to your wallet.
In today’s guest column, Lori Brigg-Vardi, Director of Customer Success at Feedvisor, shares tactics for avoiding these fees. Feedvisor offers algorithmic-repricing and revenue-intelligence solutions to provide merchants with actionable insights to maximize profitability and drive business growth. Brigg-Vardi leads the team responsible for working with high-volume sellers and building long-term relationships with these clients.
How to Avoid Paying Amazon FBA Long-Term Storage Fees
By Lori Brigg-Vardi
In less than 3 weeks’ time, on February 15th, 2016, Amazon will be conducting their biannual inventory cleanup. This means that Fulfillment by Amazon (FBA) sellers will be charged long-term storage fees for inventory units that have been in Amazon fulfillment centers between six and 12 months.
While this perhaps isn’t a big deal for those FBA sellers with a high turnover, who constantly replenish their inventory on a short-term basis, for those of you who do have stock languishing in an Amazon Fulfillment Center, these fees ($11.25 per cubic foot for 6-12 months, and $22.50 per cubic foot for 12+ months) are certainly a pain in the proverbial backside.
To avoid these fees, consider taking the following steps:
Review your Inventory Health report in Seller Central
The first step is to know exactly what’s going on with your inventory and understand how much you will have to pay in the next Long-Term Storage Fee cycle. The risk can be huge, even into the tens of thousands. But rest assured, it’s easy to manage!
The Inventory Health report provides detailed data about your sales, current sellable and unsellable quantities, inventory age, weeks of cover left and other useful information. Remember that not all items require action, and it’s also only the portion of items that have been in storage for over 6 months that will be charged.
Understand why an item isn’t selling
Understanding why something isn’t selling is key. There are a few main reasons this could be the case.
It could be that you’re simply not winning enough of the Buy Box. Your products are already in FBA so the fulfillment network isn’t the problem. Therefore, it’s most likely either a seller performance problem or you’re not competitive on price. If it’s price, it could be because your item might be priced too high and you need to review your strategy for pricing. If you’re using a repricer and/or revenue intelligence solution, you should be able to easily which items are winning the Buy Box. Feedvisor, for example, has an excess inventory report as well as visibility into your inventory, to show you which items of yours are winning the Buy Box.
If it’s not price, then it could be “Discoverability,” which is an internal Amazon term, meaning your products just aren’t being viewed by customers. The ASIN has no traffic. You can use the detail page sales and traffic report in Seller Central to identify which items aren’t getting traffic and then run Sponsored Products campaigns to try and solve for this problem.
If you’re winning the Buy Box and getting traffic then it’s a sales conversion problem, which can be caused by a bad detail page. You have the traffic to the page and the right price, so you just have to make sure you have a great detail page too. Ensure all of the information is there so customers can make an easy and educated purchase. Make sure all images are correct, bullet points are complete and informative descriptions are accurate and insightful.
Or it could be plain and simple conversion issues. Simply put, if your price is too high, then a potential customer who lands on your listing will be put off by the price and not buy the item.
Determine a strategy for avoiding the fees
After reviewing your inventory you’ll need to take action to determine a strategy for avoiding long-term storage fees. Here are options for you to consider.
You can ask Amazon to return the items to you, or to dispose of the items. Amazon charge a fee for removing items from their fulfillment centers. If you want the item returned to you, it will cost $0.5 for a Standard Size Unit and $0.6 for an Oversize Unit. If you want the item disposed of, it will cost $0.15 for a Standard Size Unit and $0.3 for an Oversize Unit.
You can sell the items. Selling the items is probably the best solution but clearly the hardest, since these items haven’t been selling which is generating the fees in the first place. A good strategy for selling the item is to put items on promotion instead of just reducing the price. You can put items on promotion by going through Seller Central. Create a promotion that shows the percentage off discount or a buy one get one. Doing this helps create a sense of urgency for the customer and can help drive sales.
If you decide to sell the item, utilizing an automatic repricer could do you wonders. With Feedvisor’s algorithmic repricer, for example, you can reprice by out-of-stock date. What this means is that you set the date by which you want to liquidate the stock, and the repricer will identify the pricing sweet spot that will ensure optimum profit, while meeting your target date.
Lori Brigg-Vardi is Director of Customer Success at Feedvisor.