A recent study highlighted how much sellers paid in Amazon FBA Long Term Storage fees, known as LTS fees, which Amazon assesses twice a year. Feedvisor found that clients it works with paid an average of $4,000 in such fees in the most recent cycle assessed in February.
In April, Amazon is raising monthly inventory storage fees and is changing how it assesses long-term storage fees, moving from a twice yearly LTS fee assessment to monthly. (See details in the March 1st issue of EcommerceBytes Newsflash.)
We checked in with Feedvisor CEO Victor Rosenman to see how this would impact sellers who use Amazon fulfillment services. The bad news: it’s harder to control inventory velocity and maintain certain stock levels on a monthly basis compared to twice a year, he said. Selling on Amazon is already complicated, and now sellers will need to stay on top of their inventory on an even more granular level.
That’s significant given the fees Feedvisor’s 500+ sellers pay in long term storage fees. It broke down the fees for clients by size for the most recent assessment:
Small sellers (between $100k-$150k per month): an average of $1,000 in LTS fees;
Large sellers (between $400k-$1.5M per month): an average of $7,000 in LTS fees;
That said, there were some small sellers in the sample who paid up to $13,000 and large sellers who paid up to $115,000 in long term storage fees.
Rosenman said inventory levels are influenced by numerous factors including changes in demand, competition, pricing, and ad spend. “This change will make it more challenging for sellers to optimize their fee structure on a regular basis. To create a remedy for this they would need to find a way to constantly monitor demand and competition changes in the market, assess their impact on inventory velocity and respond to a changing market conditions with appropriate pricing actions.”
Feedvisor offers custom inventory-management recommendations to sellers – we asked Rosenman what kinds of recommendations could help sellers reduce their LTS costs.
“For each item, we provide guidance on what sellers need to do from a repricing perspective to avoid the fee (or reduce it drastically),” he said.
That makes sense, given that one tactic sellers use to avoid LTS fees is to adjust product pricing in response to changing level of demand. (In other words, you can lower your prices to move stalled inventory.)
Another tactic sellers employ to avoid long term storage costs is to jettison slow-moving inventory. “We show the per-item cost if the seller decides to have Amazon dispose of the stale inventory or return it back. The report details if an action is needed, what we recommend as a next step, and the profit that you can make after taking the cost of disposal and returns into consideration.”
Rosenman said as a result of such targeted recommendations, Feedvisor clients were able to save up to 63% in LTS fees.
The bottom line: if you use FBA, don’t be caught off guard by Amazon’s new policies and fees.