Amazon sellers have begun prepping now in order to avoid or minimize FBA Long Term Storage fees (LTS). The next Amazon FBA twice-yearly “inventory cleanup” is scheduled for February 15, 2018. Units that have been in a US fulfillment center for over 6 months as of February 15, 2018 will incur a long-term storage fee of $11.25 per cubic foot on that date. Units that have been in a US fulfillment center for over a year will incur a fee of $22.50 per cubic foot.
The clock starts ticking when an item is received in the Fulfillment Center. Amazon accounts for inventory on a first-in, first-out (FIFO) basis when calculating the long-term storage fee, though it says in practice it optimizes inventory for cost and speed of delivery, not on a FIFO basis.
Amazon provides examples of LTS fees. For instance, one 11″ x 8″ x 2″ toy would incur a $1.15 Long Term Storage fee if it was in an Amazon Fulfillment center for over 6 months, and $2.29 if it was there for over 12 months. One 8″ x 6″ x 1″ book would incur a fee of 31 cents for sitting in an FC for over 6 months, and 63 cents if it was there for over 12 months. That can easily add up to hundreds of dollars for a seller with thousands of units that haven’t moved – or much more for high-volume sellers.
Why not just remove inventory prior to February 15th and send it back in March? Amazon charges “removal order fees,” and sellers can’t send in more units of the affected ASINs until July 1, 2018.
Amazon explains the reason for charging LTS fees: “Inventory that is overstocked or stored indefinitely in our fulfillment centers limits our ability to provide space for fast-selling products customers want. Long-term storage fees help ensure that we can continue to provide high levels of service to all sellers and provide customers with products that they want.”
It’s a good practice for merchants to evaluate why their commodity goods aren’t selling – but for certain types of items – unusual items or out-of-print books, for example – it can be costly for sellers and seem counter-intuitive since such items provide breadth to Amazon and give shoppers another reason to visit.
The bottom line is that twice a year, FBA sellers must sit down with spreadsheets and determine if they should do nothing and pay LTS fees; pay Amazon to return (or dispose) of slow-moving inventory; or have a fire sale and hope they can move the products at a reduced profit or even at a loss, depending on the math.