Understanding FBA Storage Fees: What You Need to Know

If you’re an Amazon seller who uses their Fulfilled by Amazon (FBA) service, then it’s essential to have a good understanding of their storage fees. FBA storage fees are a part of Amazon’s fee structure, which consists of various fees that sellers have to pay to use their services. Storage fees are fees that Amazon charges for storing your products in their warehouses. In this article, we’ll discuss what FBA storage fees are, how they work, the different types of storage fees, and how to reduce them.

What are FBA Storage Fees and How Do They Work?

Amazon charges storage fees for the products that sellers store in their warehouses. The FBA storage fees are calculated based on the volume (in cubic feet) that the product takes up in Amazon’s warehouses. The fees for standard-sized items are based on the calendar month and are calculated daily, based on the volume of space that the product takes up in the warehouse. On the other hand, oversize items are charged a higher storage fee, and the fees are based on the daily average volume of space occupied by the product in the warehouse.

The storage fees increase during the peak season, which is in October, November and December, commonly referred to as holiday season. During the peak season, Amazon charges an additional long-term storage fee (LTSF) for products that sit in their warehouse for more than 365 days. You can reduce this fee by withdrawing your inventory before the deadline.

It is important to note that FBA storage fees are not the only fees that sellers incur when using Amazon’s fulfillment services. Other fees include referral fees, fulfillment fees, and removal fees. Referral fees are a percentage of the item’s sale price and are charged for each item sold on Amazon. Fulfillment fees are charged for each item that is picked, packed, and shipped by Amazon. Removal fees are charged when sellers request to have their inventory returned or disposed of from Amazon’s warehouses. It is important for sellers to understand all of the fees associated with FBA to accurately calculate their profits and expenses.

The Different Types of FBA Storage Fees You Need to Know About

There are two main types of storage fees that Amazon charges sellers: monthly inventory storage fees and long-term storage fees.

Monthly Inventory Storage Fees

Monthly Inventory Storage Fees are calculated based on the daily average volume (in cubic feet) of space that a seller’s inventory occupies in Amazon’s warehouses during the month. These fees are charged on a monthly basis and are calculated separately for standard-size and oversize items. They are also charged differently during the peak season and non-peak season.

Long-term Storage Fees

Long-term Storage Fees are charged on a bi-annual basis to inventory that has been in Amazon’s warehouses for more than 365 days in a single storage cycle. These fees are charged per item, and the fee amount is dependent on the size of the item and how long it has been in Amazon’s warehouse. The LTSF rates are higher than the monthly storage fees, so it’s essential to make sure you withdraw inventory before 365 days.

It’s important to note that Amazon also charges removal fees for items that are returned or disposed of. Removal fees are charged per item and vary depending on the size and weight of the item. If you have inventory that is not selling or is not worth the storage fees, it may be more cost-effective to remove it from Amazon’s warehouses rather than continue to pay storage fees and potential long-term storage fees.

How to Calculate Your FBA Storage Fees: A Step-by-Step Guide

Amazon has outlined an easy-to-follow process for calculating your FBA storage fees. Here’s how it works:

Step 1 – Log into Your Amazon FBA Dashboard

The first step is to log into your Amazon FBA dashboard. Go to Amazon Seller Central, click on “Inventory” and then “Manage Inventory.”

Step 2 – Choose the Inventory You Want to Check

Select the inventory you want to check, and then click on “Actions.”

Step 3 – Select “Estimate Fees”

Under “Actions,” choose “Estimate Fees.”

Step 4 – Review Your Estimated Fees

Once you’ve selected “Estimate Fees,” Amazon will show you the estimated FBA storage fees you’ll be charged based on your inventory’s size and how long it’s been in their warehouse.

It’s important to note that FBA storage fees are calculated on a monthly basis. This means that if your inventory has been in Amazon’s warehouse for more than 30 days, you’ll be charged a monthly storage fee. Additionally, if your inventory has been in their warehouse for more than 365 days, you’ll be charged a long-term storage fee.

It’s also worth mentioning that Amazon offers a storage fee calculator that can help you estimate your fees before you even log into your FBA dashboard. This can be a helpful tool for planning and budgeting your inventory storage costs.

Tips for Reducing Your FBA Storage Fees and Maximizing Profit

Reducing your FBA storage fees can help you maximize your profits. Here are a few tips to help you minimize your storage fees:

Manage Your Inventory Closely

Make sure to keep a close eye on your inventory levels and only store products that you know will sell quickly and efficiently. Having excess inventory will lead to higher storage fees, so avoid storing items that don’t sell quickly.

Use Amazon’s Storage Tools

Amazon’s storage tools can help you manage your inventory, reduce your storage fees, and avoid long-term storage fees. These tools will help you gauge the ideal inventory level for the products you want to sell.

Use FBA for Seasonal Products

Using FBA for seasonal products will help you avoid peak-season prices that third-party logistic warehouses charge due to the high demand during the holiday season. FBA fees may reduce costs in comparison.

Another way to reduce your FBA storage fees is to consider using Amazon’s Multi-Channel Fulfillment (MCF) service. This service allows you to fulfill orders from other sales channels, such as your own website or other marketplaces, using your FBA inventory. By doing so, you can avoid the need to store duplicate inventory in multiple locations, which can lead to higher storage fees. Additionally, MCF can help you streamline your fulfillment process and improve your overall customer experience.

The Impact of FBA Storage Fees on Your Amazon Business

If not managed correctly, FBA storage fees can have a significant impact on your Amazon business. High storage fees can eat into your profits and make it challenging to price your products competitively. Efficient management of your inventory and storage fees plays an important role in developing a successful Amazon business strategy.

One way to manage FBA storage fees is to regularly review your inventory and identify slow-moving or non-selling products. By removing these products from your inventory, you can reduce the amount of storage space you need and lower your storage fees. Additionally, consider using Amazon’s Inventory Performance Index (IPI) to monitor your inventory health and identify areas for improvement. By taking proactive steps to manage your FBA storage fees, you can optimize your Amazon business and increase your profitability.

Understanding the Long-Term Storage Fee and How to Avoid It

The Long-Term Storage Fee is charged when sellers store products in Amazon’s warehouses for more than 365 days in a single storage cycle. This fee is charged per item and can be quite high. To avoid these fees, make sure you’re monitoring your inventory levels and have a strategy in place to move inventory out of Amazon’s warehouses before the deadline.

It’s important to note that the Long-Term Storage Fee is in addition to the regular monthly storage fees that sellers already pay. This means that if you have a large amount of inventory that is not selling quickly, you could end up paying a significant amount in storage fees alone.

One way to avoid the Long-Term Storage Fee is to use Amazon’s FBA (Fulfillment by Amazon) service to fulfill orders. With FBA, Amazon takes care of the storage and shipping of your products, and you only pay for the storage and shipping fees when an order is placed. This can be a cost-effective solution for sellers who have a lot of inventory to manage.

Why it’s Important to Monitor Your FBA Inventory Levels and Storage Costs

Monitoring your FBA inventory levels and storage fees is essential in running a profitable Amazon business. It helps you know when to reorder products, which items to discontinue, and when to remove excess inventory. This will reduce both, storage fees and the likelihood of having to pay long-term storage fees.

In addition to reducing storage fees, monitoring your FBA inventory levels can also help you avoid stockouts. Running out of stock can lead to lost sales and a decrease in your Amazon search ranking. By keeping a close eye on your inventory levels, you can ensure that you always have enough stock to meet customer demand.

Another reason to monitor your FBA inventory levels and storage costs is to identify which products are the most profitable. By analyzing your sales data and storage fees, you can determine which products are generating the most revenue and which ones may not be worth the cost of storage. This information can help you make informed decisions about which products to focus on and which ones to discontinue.

Common Mistakes Sellers Make with FBA Storage Fees and How to Avoid Them

Common mistakes made by sellers with FBA storage fees include; storing excess inventory, failing to monitor inventory levels, and paying for storage of unsalable products. To avoid these mistakes, make sure you develop a sound inventory management strategy that includes regular monitoring of your inventory levels and only store products that sell quickly and efficiently.

Another common mistake that sellers make with FBA storage fees is not taking advantage of Amazon’s long-term storage fee waiver program. This program allows sellers to avoid paying long-term storage fees for products that have been in Amazon’s fulfillment centers for more than 365 days, as long as they meet certain criteria. To take advantage of this program, make sure you regularly review your inventory and either remove or dispose of products that are not selling well before they become subject to long-term storage fees.

What Happens if You Don’t Pay Your FBA Storage Fees on Time?

If you don’t pay your FBA storage fees on time, Amazon will charge you a late fee and temporarily suspend your Amazon account. If you still don’t pay after 30 days, your inventory will be disposed of, and you’ll be required to pay the fee, including a disposal fee.

Conclusion

Understanding FBA storage fees is crucial in running a successful Amazon business. To maximize your profits, make sure to develop a good inventory management strategy, use Amazon’s storage tools, and monitor your inventory levels and storage fees closely.