Let’s face it, Jeff Bezos didn’t become one of the world’s richest people without skimming a bit off the top of every Amazon sale.
And for Amazon FBA sellers, the constantly-changing fees can add up fast.
Consequently, one of the prime reasons Amazon FBA sellers fail to churn profits is simply not factoring in these various fees.
And to be blunt, calling this a “common pitfall” doesn’t quite give the problem justice.
A more accurate description would be, “an astoundingly common business-ruining error that most new sellers somehow overlook.”
Of course, there are many costs to account for outside Amazon, including international shipping, purchasing samples, forming an LLC, and registering a Trademark, which can add up fast.
But sellers often get caught off guard by Amazon storage fees. And for good reason; they change throughout the year.
So in this article, I’ll break down all you need to know about Amazon storage fees so you’ll keep profits high and merchandise on the move.
Before We Begin…
You can find a list of all the types of Amazon fees on their official website here.
Since Amazon storage fees are one type of many, there are countless others to take into consideration when calculating profit margins.
And honestly speaking, it can be alot to take in.
I highly recommend taking the time to become acquainted with the ins and outs of Amazon Seller Central prior to selling.
Candidly speaking, a lot of sellers are surprised at how cumbersome the whole process is. It’s a business, afterall.
Therefore, the more time you spend beforehand learning about fees, procedures, policies, etc, the less hurdles you’ll encounter after you’ve gotten started.
Make sure to head over to my YouTube channel, where I provide detailed tutorials to streamline success on Amazon without paying for all the costly mistakes.
Canadian sellers can find a list of fees here.
Why Does Amazon FBA Charge Storage Fees?
Think of an Amazon FBA warehouse as a personal storage unit.
You own the product, and you need a place to store it. As such, Amazon charges you a fee for using their space after your product has arrived at their warehouse.
The larger your product or order size (volume), the more space you’ll require to store your products. This equals larger storage fees.
Fees change seasonally and are based on inventory volume. This means that Amazon doesn’t offer “flat” fees. Rather, your storage fees will vary month to month based on the amount of inventory on the shelf.
How Much Does Amazon Charge for Storage Fees?
In the U.S., Amazon’s storage fees are based on cubic feet.
Confused yet?
Don’t be! This just means that storage fees are based on size (volume) and not weight. This is unlike Amazon’s shipping fees, which are based on weight and dimensions.
This means that, hypothetically speaking, a feather-filled shoebox and a brick-filled shoebox of the same size would have the same storage fee. Otherwise said, weight doesn’t matter.
In Canada, pricing is done by cubic metre.
Why Are Fees Higher in October, November, and December?
Shelf space around the holidays is in higher demand, so Amazon charges a higher premium for space around the end of the year.
Note that all of Amazon’s fees are higher during these months, not just storage fees. Sellers absorb these costs, but sales are generally higher around this time.
Amazon states the increased fees are to absorb higher production costs during the holiday season.
What is Amazon’s Aged Inventory Surcharge?
Let’s say you’ve got stored merchandise that you just can’t move. It’s been sitting for months, and there’s no sales in sight.
Well brace for another slap in the face.
Amazon’s going to start charging for your space-wasting merchandise.
Once called the “long term storage fee,” the newly dubbed “Aged inventory surcharge” adds a fee of $1.50 per cubic foot for every item stored between 271 and 365 days in an Amazon FBA warehouse. After 365 days, fees increase again. This is in addition to the standard storage fees mentioned above.
Since excess inventory could be replaced with more profitable products, this is Amazon’s way of saying “shit or get off the pot.”
One way of avoiding excess inventory and quickly move product is through Amazon Pay-Per-Click ads (PPC) detailed in my free field manual here.
| What is Amazon FBA Restock Limit? Amazon’s restock limit puts restrictions on the amount of units a seller can send into an FBA warehouse. Not to be confused with the storage limit, which regulates the amount of warehouse space your product can use and is based on a seller’s IPI score. |
How Can I Keep Storage Fees Low?
You’ll often hear the term “inventory management” when selling on Amazon.
But what exactly does it mean?
It’s an umbrella term that translates to staying on top of the amount of inventory moving in and out of an Amazon fulfillment center. This is key to keeping storage fees low.
It’s important because excess inventory can have massive impacts on margins due to storage costs and resulting decreases in a seller’s IPI score. Whereas running out of stock can lead customers to competitor’s listings and decimate organic rankings.
Managing inventory will be different for every seller, but typical factors are:
- Product demand
- Lead time
- Product origin
- Time of year
- Cash flow
To reduce storage fees. You’ll need to find the optimal balance between the amount of stock in a fulfillment center and product demand.
Balancing these two factors can be difficult, and require some trial and error. As it’s vital to not run out of stock, I recommend being liberal with the amount of units stored, even if it means paying higher storage fees, especially if your plan is to grow rapidly or your peak season is coming up.
The most efficient way to avoid fees and run learn is by trickling in inventory from a 3rd party warehouse (or home) in the country you’re selling in.
| What is an Amazon IPI Score? IPI Scores measure a seller’s inventory health. The score’s based on excess inventory, in-stock inventory, stranded inventory, and sell-through rate. The sell through rate is calculated by dividing the amount of units sold/shipped versus the amount of units in-stock in the last 90 days. It’s measured with a 0-1000 ranking. Amazon states that scores above 450 are considered healthy. Lower IPI scores results in higher storage fees and restricted storage limits. Stranded inventory is when a seller is actively paying storage fees, but not selling any product. |
Can I Store Excess Inventory in Private Storage?
Yes! Although sometimes tricky, this is possible.
Imagine this scenario.
You launch a product. Sales are up. It’s time to place another order!
But there’s a problem. Shipping from China takes eight weeks, and you’re due to run out of product in three.
To avoid this, it’s possible for sellers to order large quantities of product, send a portion to Amazon’s warehouse, and store the rest in public or private storage, or warehouse.
You’ll sleep better knowing:
- Your product has made it safely to domestic soil (with no trouble at customs)
- There won’t be months of wait time between shipments
- You’re reducing the likelihood of your IPI score being impacted by poorly managed inventory
Luckily, Amazon offers partnered carriers that can move products from private locations, or third party logistic warehouses (3PL), into an Amazon warehouse.
Amazon’s partnered carriers allow for shipments via UPS in the United States and Canada, and through DHL in Mexico.
You can find options for Amazon Partnered shipments through the “Prepare Shipment” page on Amazon Seller Central.
Be specific when communicating with partnered carriers. Not every truck or carrier will be properly equipped to haul certain items.
For example, I once had a truck show up with no lift gate, thus creating issues getting the product from the pavement into the truck.
Experienced third party warehouses will often be able to help with such issues.
Note that sourcing overseas is not a prerequisite for using partnered carriers. Sellers that source domestically can also use this service.
When shipping from abroad, I recommend using freight forwarders to get products from the manufacturer to the international port, then from the destination port to storage (either to an Amazon warehouse or elsewhere). Learn about that process and reasons behind it on my YouTube tutorial here.
Ready to start your Amazon FBA Business?
My Amazon Wealth Accelerator (AWA) mentorship guides you through the entire Amazon FBA process and provides a community of support with others on the exact same journey.
AWA gives you a much-needed safeguard from costly mistakes, dead ends, and failed product investments.
So whether it’s solving issues with your Seller Central account, creative approaches to product research, scaling to new markets and niches, validating product ideas, customer service issues, and more, we’ve got you covered.
Learn more about it here.
