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What are Long Term Storage Fees?
Amazon charges its third party Prime / FBA sellers if their stock doesn't turn over quickly enough. There's no need to fret. From the time you send any individual unit to their fulfilment centre, you have a minimum of six months to sell each product.
Long term storage fees exist because Amazon's fulfilment centres are there to help despatch orders quickly, and not house non-selling stock.
When Will You Get Charged Long Term Storage Fees?
On 1st August every year,
Fees apply on a first in, first out basis. It isn't based on SKUs, but the actual units of SKUs. You may have a constant supply of a replenishable, strong-selling grocery item. If you always top up your stock before you sell out, you won't be charged for the fact you've had the product in stock for over 12 months. In theory, the first unit you sent in should be the first one they despatch.
How Much are Long Term Storage Fees?
To those that have sold on Amazon for some time, you will be aware that long-term storage fees have changed over time. Now they've been simplified. Rather than a 6-month fee and a 12-month fee, just the latter still stands, and is as follows:
12 months: £4.30 per cubic foot
How Can You Avoid Long Term Storage Fees?
Amazon is up front about its long term storage fees. They give just over a month's notice before they are due to take place, giving you plenty of time to work out what to do with slow selling stock.
The inventory management section of SellerCentral gives you all of the information you need to work out what products are in danger of incurring fees.
The best way to avoid long term storage fees is to source better-selling items. Go for products with low competition and low sales ranks. It's the same advice I would give to anyone trying to scale their business up quickly. If your business is gaining momentum, the chances are that you're doing this already.
What Should You Do If You're Going to Incur Long Term Storage Fees?
When we get mad with our sourcing criteria, we can make bad buys. Even if we nail most of our purchases, some slow sellers will slip through the cracks and head towards long term storage fee territory.
In the lead up to the annual stock refresh, you should.
- Weigh up fees vs profit potential and compare that to the likelihood of a sale
- Consider other marketplaces and whether it's better to destroy stock or get it sent back to you
- Lower your prices and don't be afraid to take a small loss on a few SKUs
Afterwards, if you haven't already, create systems to avoid this in the future. Everyone wants to sell all of their stock as soon as it hits the inventory.
Volume sellers often state that they only buy stock to cover the month ahead. Doing the same seems like a smart move. (Also bearing the monthly storage fees too). Obviously, prepare for seasonal trends in advanced, but there's no need to send in Christmas stock (for example) until there's a market demand for those kinds of products.
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