Amazon long-term storage fees: Strategies for Sellers

May 8, 2024 amazon long term storage fees 2024 changes updated

Are you an Amazon seller, watching your profits slowly dwindle in a storage canyon?  Managing inventory on Amazon can feel like a constant battle. 

While it is crucial to maintain adequate inventory to satisfy consumer demand, the owner gets anxious when they cannot avoid paying long-term storage costs. These long-term fees, designed to keep warehouses from overflowing with stagnant products, can quickly turn a healthy profit margin into a red zone.

But fear not, fellow entrepreneurs! This guide will be your roadmap to navigating Amazon’s storage complexities.

It will provide you with the specifics of long-term storage fees and equip you with powerful strategies to keep them at bay.

From automating inventory removal to identifying and dealing with slow-moving products, we’ll provide the tools and knowledge you need to reclaim control and keep your Amazon business flourishing.

Before delving into strategies for reducing long-term storage fees, it is imperative to gain a comprehensive understanding of what exactly these fees entail and how they are calculated. 

Amazon’s long-term storage fees (LTSF)

Selling on Amazon with FBA (Fulfillment by Amazon) is great because they store your products for you. But if your stuff sits there for too long (more than a year), Amazon charges a fee to keep it. This fee is called a long-term storage fee, and they charge it twice a year. 

The more space your stuff takes up and the longer it sits, the more you’ll pay. Basically, Amazon wants to keep their warehouses tidy and not cluttered with things nobody’s buying!

Size tierShipping weight1024fulfillment fee (uary 15,2024to February 4,2024)$3.401024fulfillment fee Size tier $3.401024fulfillment fee Shipping weight 2oz or to Gaz $3.402024fulfillment fee (February 5,2024to April 14,2024)53.22$5.51$3.40$3.402024fulfillment fee (Starting April 152024)53.06$3.1553.24$3.40
6+to 8z
SmallSmall10$145
standard8+to 12oz$5.58standard10+to 12$3.68$3.55
02
53.7712+14$3.77
$5.82
4ozor less$3.86az or less$3.86$3.69
$4.08.
8+to 12or$4.24to 12$4.52$415
+to 16$47512+16$475$455
02lb$5.19$4.99
1+15$5.401.25+
1516
Large1.5+to 2lb55.69Large1.75lb$5.75$5.52
standardstandard1.75+to 2$6.0055.77
lb$6.10$5.87
2+to 2.5lb56.102+225
256$6.2856.05
2.5+to$6.21
253$692.75lb
2.75+3$6.856.62
lb
3+lb to 20lb$7.17$0.16par half -lb interval above3+lb to 20lb$7.25=50.05per 4az interval above first$6.92$0.04az Interval above first
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Long-term storage fees calculation (LTSF)

Follow the below steps to calculate the LTSF

Step 1: Calculate your Inventory Volume

To determine the total volume of your inventory in cubic feet, a straightforward calculation can be employed. 

For each unit, multiply the length, width, and height of the item. 

To determine the total cubic footage of your entire inventory, add up the volume of each unit.

Step 2: Know your Inventory Age

To access information regarding the age of your stored items within Amazon fulfillment centers, navigate to your Seller Central account. 

Within the “Inventory tab, locate and select the “Inventory Age” option. This will display a comprehensive report detailing the length of time each item has been stored.

Step 3: Pinpoint Surcharged Inventory

To reduce the impact of surcharges for aged inventory, sellers must implement effective strategies for products that have been in Amazon’s fulfillment centers for over 181 days. 

These strategies may involve liquidation, price reductions, or promotional campaigns to boost sales of the affected inventory.

Proactively addressing slow-moving stock will help sellers minimize storage fees and sustain a healthy profit margin.

Step 4: Long-term fee calculation

Based on the cubic footage of your inventory times the specified fee rate per cubic foot, Amazon calculates the long-term storage fee. This fee only applies to inventory stored in fulfillment centers for a year or more. 

For example, if your inventory occupies 1,000 cubic feet and the current long-term storage fee is $6.90 per cubic foot, you would face a monthly charge of $6,900. It’s important to note that long-term storage fees are in addition to the standard monthly storage fees imposed by Amazon. 

To protect your bottom line, it’s crucial to consistently monitor and manage your inventory levels to avoid accumulating excessive long-term storage fees.

Step 5: Track your stock closely

Additionally, implementing a robust inventory management system is essential. Reviewing your stock levels regularly helps you make proactive decisions, so you can avoid extra costs for holding old inventory and the financial burden of having too many items in stock.

Here are the 8 best ways to optimize your long term storage fees on Amazon 

1. Plan your Inventory Smartly

The key to avoiding long-term storage fees is starting smart with your inventory levels. Don’t order a ton of products upfront! Track your stock regularly and use Amazon’s tools like the IPI (Inventory Performance Index) to see what’s selling well and what’s not. 

This way, you can adjust your ordering to avoid having too much stuff sitting around in Amazon’s warehouses for more than a year (that’s when the fees kick in). 

By keeping a close eye on your inventory and ordering strategically, you can keep those fees at bay and maximize your profits on Amazon.

2. Leverage Removal Storage

Another weapon in your arsenal against long-term storage fees is Amazon’s Recommended Removal Report. This report identifies products nearing the fee threshold based on factors like inventory levels and sales history.  

You can view this report by following a few simple steps: 

  • Go to Seller Central Reports  
  • Click on Fulfillment
  • Click on Inventory
  • Recommended Removals is displayed

By regularly reviewing this report, you can take proactive steps to remove slow-moving items before incurring storage charges. These options include removing the inventory for storage elsewhere or disposing of it altogether if it’s no longer sellable. 

Utilizing this report allows you to make informed decisions and potentially save money on storage fees.

3. Dig deep: Analyze Unsold Products and its reasons

Know the reasons behind slow-moving inventory! 

Analyzing unsold products allows you to address the root cause and boost sales velocity. This proactive approach can significantly reduce your risk of incurring long-term storage fees.

Investigating the root causes behind sluggish product sales is crucial to mitigating long-term storage fees. 

Here are some key areas for examination:

  • Pricing Strategy

 Are your products competitively priced compared to similar offerings? Overinflated prices can deter potential buyers. Consider price adjustments to align with the market.

  • Customer Reviews

Negative reviews can significantly hinder your sales momentum. Regularly monitor customer reviews and address any concerns raised to rebuild trust and encourage purchases.

  • Product Listing Optimization

Are your product listings optimized for discoverability? Utilize relevant keywords, high-quality images, and detailed descriptions to ensure your products stand out in search results.

  • Seasonal Fluctuations

Certain products may experience seasonal sales variations. Adjust your inventory levels accordingly to avoid overstocking during periods of lower demand.

  • Competitive Landscape

Is there excessive competition for your specific products? Consider diversifying your offerings or targeting niches with less competition to increase your chances of success.

By proactively addressing these potential roadblocks, you can significantly enhance your sales velocity and minimize the risk of incurring long-term storage fees.  Furthermore, consistent monitoring of your sales performance allows for early identification of slow-moving inventory, enabling you to take timely action and avoid storage fee accrual.

4. Lower your prices

    Consider implementing strategic price adjustments to combat the threat of long-term storage fees. 

    Offering enticing discounts or lowering your price points can act as a powerful sales catalyst. This approach can incentivize customers to choose your products, ultimately propelling your sales velocity and mitigating the risk of storage fee accrual. 

    Remember, competitive pricing is key in today’s dynamic marketplace. By offering attractive pricing structures, you can significantly enhance your product’s appeal and ensure it doesn’t languish on warehouse shelves.

    5. Consider Amazon Outlet Sales for aging Inventory

      Amazon Outlet presents a valuable avenue for offloading aging inventory and mitigating long-term storage fees. 

      Here’s how to leverage this feature effectively:

      • Pinpoint Seasoned Stock

      Utilize Amazon’s Inventory Age report to identify products nearing the long-term storage threshold.

      • Discounted Listings

      Create listings for these products at reduced prices and leverage the dedicated Amazon Outlet section for increased exposure.

      • Targeted Marketing (if profitable)

      Consider employing Amazon’s marketing tools like sponsored product and display ads, or deals, to promote your discounted listings and reach a wider audience. However, ensure that the profit margin remains favorable after factoring in advertising costs.

      • Performance Monitoring

      Regularly monitor the performance of your outlet listings to gauge their effectiveness in generating sales and clearing out stagnant inventory.

      By strategically utilizing Amazon Outlet, you can effectively clear out aging inventory, minimize long-term storage fees, and optimize your overall inventory management on the platform.

      6. Boost Sales: Using Ads and Promotions

        Building upon the concept of strategic pricing, consider implementing targeted promotions and advertising campaigns to further incentivize customer purchases of slow-moving inventory. 

        Sponsored product ads or limited-time discounts can prove to be effective tools in this regard. While the sale price itself may be lower than your initial profit margin, the increased sales velocity can ultimately generate greater overall profit compared to incurring long-term storage fees. 

        Explore various advertising options offered by Amazon, such as sponsored product or sponsored brand ads, to strategically target potential customers and revitalize sales for stagnant inventory.

        7. Restock Timing: Plan Your Shipment

          Sellers can employ a strategic approach to inventory restocking to minimize long-term storage fees. 

          By timing your resupply shipments to arrive after the February 15th and August 15th deadlines, you ensure any unsold products will have been in storage for less than six months by the next assessment. 

          This approach effectively reduces the risk of incurring long-term storage fees and optimizes your utilization of Amazon’s warehouse space.

          8. Go for Automatic Removals

            To streamline the process and free yourself from the burden of constant monitoring, Amazon offers automated removal settings for non-selling inventory. These settings empower you to configure automatic removal of all items susceptible to long-term storage fees, or you can choose to target specific price ranges for removal. 

            By leveraging this feature, you eliminate the need for manual inventory checks every 14th of the month. 

            This automation not only saves your valuable time but also ensures compliance with Amazon’s storage policies, ultimately safeguarding you from unnecessary fees and streamlining your overall inventory management experience.

            DID YOU KNOW?

            While Long-Term storage fees exist, it’s important to understand that Amazon’s fulfillment centers operate on a systematic inventory management basis, not a “first-in, first-out” approach.

            This means their accounting prioritizes the oldest item in their system when a sale occurs, regardless of the physical order items were received in the warehouse.

            Amazon does a storage clean-up twice a year, on February 15th and August 15th. If you have any items that have been sitting in their warehouses for more than a year (365 days) on those dates, you’ll get charged a long-term storage fee.

            Amazon gives sellers a heads-up before the clean-up dates (February 15th and August 15th) with a letter listing items at risk of long-term storage fees. 

            They also offer two reports to help you avoid these fees:

            Recommended Removal Report: This report tells you which items are nearing the 1-year mark and suggests removing them from storage to avoid fees. You’ll get this report about 6 weeks before the clean-up.

            Inventory Health Report: This report gives you a general overview of your inventory health, including items approaching the long-term storage threshold.By using these reports and removing items before the clean-up, you can avoid those pesky storage fees!

            Final Words

            Mastering Amazon’s storage landscape is essential for any seller’s success. 

            The strategies outlined here, from automated removals to pinpointing slow-moving products and optimizing restocking, equip you to navigate long-term storage fees effectively. 

            With a proactive approach and these valuable tools at your disposal, you can ensure your profits remain healthy and your Amazon business flourishes. 

            So, take control today and put these tips into action to keep storage fees at bay and propel your business forward.

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