Amazon is raising fees for sellers who use FBA fulfillment and introduced a new policy in an effort to optimize space in its warehouse. Sellers already know not to take a “send it and forget it” approach to using Amazon fulfillment centers, since Amazon assesses Long Term Storage fees every 6 months in addition to regular monthly storage fees.
Now Amazon is making additional changes to push sellers to improve the efficiency of their inventory and listings – including assessing LTS fees monthly instead of biannually, and the introduction of an Inventory Storage Overage fee.
Amazon sent an email to sellers on Thursday informing them of the changes meant to “encourage improved inventory management, which will help your products be received and delivered to customers more quickly.”
Amazon Raises FBA Fees
Amazon is raising monthly inventory storage fees and is changing how it assesses long-term storage fees, including the addition of a minimum 50-cent minimum per unit fee. (Other FBA fees went into effect on February 22, 2018.)
Monthly Inventory Storage Fees: Starting April 1, 2018, monthly inventory storage fees will be increased by $0.05 per cubic foot for standard-size and oversize items. This change will first be reflected in May 2018 charges for storage that occurs in April 2018.
Long-Term Storage Fees – Assessed monthly instead of twice a year: Starting September 15, 2018, long-term storage fees will be adjusted and the assessment dates will be changed from a semi-annual basis to a monthly basis.
Minimum Long-Term Storage Fees: On August 15, 2018, Amazon will introduce a minimum charge of $0.50 per unit per month for items in fulfillment centers for 365 days or more. The greater of the applicable total long-term storage fee or minimum long-term storage fee will be charged.
Storage Limits and Overage Fees
Amazon is implementing a policy in which it will impose storage limits on sellers who don’t efficiently manage their inventory stored in Amazon fulfillment centers. Amazon will use the “Inventory Performance Index,” which was introduced last fall, to measure sellers’ efficiency.
Beginning July 1, 2018, Amazon said it may limit access to storage for sellers with an Inventory Performance Index below 350 (IPI scores range from 0 to 1,000). Sellers who maintain an index score of 350 or greater will have unlimited storage for standard‑size and oversize items.
About 10% of sellers are expected to be impacted by the new storage limit.
Amazon stated in its letter to sellers: “While we continue to invest in our fulfillment network to better serve your business, at times we experience physical constraints on inventory capacity during key shopping seasons. To help minimize these constraints, we want to continue to allow the most efficiently managed inventory to flow through the network, while limiting less efficiently managed inventory.”
The Nitty-Gritty of Amazon FBA Storage Limits
Here’s what Amazon wrote in its letter to sellers:
Changes for sellers with a Professional selling plan who do not maintain an Inventory Performance Index score of 350 or greater:
Starting July 1, 2018, storage limits will be evaluated every three months on a quarterly cycle. If your Inventory Performance Index is less than 350 six weeks before the start of a quarter, you will be notified of your potential storage limits. If your Inventory Performance Index score is still less than 350 at the end of that quarter, those limits will apply for the next quarter. See the table below and FBA Storage Limits Changes for more details and examples.
Under the FBA inventory storage limits policy, you will not be able to create a new shipment to Amazon until your inventory level drops below your storage limits.
If your existing inventory exceeds your storage limits for a given month, we will also charge an Inventory Storage Overage Fee on the portion of your inventory that exceeds your storage limits, in addition to monthly inventory storage fees and, if applicable, long-term storage fees. The overage fee will be charged monthly at $10.00 per cubic foot, based on the daily average volume of inventory that exceeded your storage limits throughout the month. We will be updating our tools to reflect cubic feet of storage instead of the number of units that we currently show.
Amazon Provides Recommendations
Amazon provides sellers with their Inventory Performance Index score and offers recommendations to sellers on how to improve their scores in three main areas – here’s a sense of the kind of information Amazon provides:
– Out of stock inventory
Amazon provides recommendations on what to restock and when. While staying in stock with the right ASIN can help increase a seller’s IPI, there is no penalty for not restocking a discontinued or non-replenishable item.
– Excess inventory
Amazon offers a “Manage Excess Inventory” tool that helps sellers identify listings that may have excess inventory levels and provides data to help them get a better return on their investment. The tool highlights factors that may be limiting sales, suggests actions that initiate faster sales, and suggests a recommended sale price. It also gives recommendations like improving keywords, editing listings, and reducing costs through removals.
– Stranded inventory
This is inventory in FCs that don’t have an associated active offer – so stranded inventory doesn’t mean products Amazon can’t find; it means products that are sitting on warehouse shelves but cannot be sold because they aren’t associated with any offers on the Amazon website. See more information on this page.
To bottom-line it with regard to storage limits: Sellers with an IPI score below 350 will receive a notification six weeks before the next quarter so they can make adjustments and avoid potential storage limits. The first quarter will begin on July 1, 2018, which means sellers with an IPI score below 350 will receive a notification May 19, 2018.
A spokesperson told EcommerceBytes, “In 2017, Fulfillment by Amazon stored, picked, packed, and shipped billions of items to customers around the world on behalf of sellers. As we continue to grow and support more sellers that desire to make their products Prime-eligible, we are introducing changes that will help us more efficiently receive inventory and deliver products to customers.”
Amazon has a reputation for seeking efficiencies in all aspects of its operations, and it has increasing sought ways to pass that approach along to sellers. Today’s announcement may prove to be a wakeup call to some sellers.
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