An important part in managing any business is setting up reliable information-gathering channels in order to determine your financial health. Selling on Amazon can indeed be quite a profitable venture, but it can also come with some degree of risk. One way to circumvent the usual problems that comes with online retail businesses is through Amazon’s FBA fulfillment system.
However, online sellers that utilize this system have run through a variety of problems. These range from delays with logging in new items within the Amazon FBA system, a lackluster customer service program, and even products being swapped entirely.
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Inventory management is key when it comes to Amazon FBA Sellers, and nowhere is this more important than in managing the storage and fulfillment fees that Amazon charges. Those looking to expand their online retail businesses on Amazon and are making use of the FBA system must know how to manage these fees in order for them to turn a profit.
A Quick Rundown on Amazon FBA fees
Amazon FBA Sellers tend to be at a certain advantage as Amazon themselves take care of all matters regarding the shipping and handling of their products. Sellers may even keep their products within the online marketplace’s own warehouses, all for a select storage fee that is assessed on the 15th day of every month. These fees are then charged monthly on the 18th and 22nd day of the month, giving sellers only a few days to respond.
This is where beginner Amazon sellers utilizing FBA fulfillment start to incur their first startup costs. The larger your inventory stored with Amazon is, the higher the storage and fulfillment fees will be. The fees to be charged are on a basis of either unit volume or per unit stored, whichever of these are greater. Amazon charges $6.90 per cubic feet of inventory or $0.15 per unit stored with them.
More details on the structure of Long-term storage fees can be found on Amazon’s Seller Central.
Amazon’s Tools for Inventory Management
The online marketplace does offer some tools for sellers to manage their inventory and check in on their long-term storage fees. This comes in the form of the Manage Inventory Health report and Long-Term Storage Fee Report tools.
The former of these tools can filter your inventory according to the amount of time that it has been stored by amazon. The latter simply tallies your recent long-term storage fee charges, along with item details and whether Amazon based it on per-unit volume or per-unit stored.
They also have the Recommended Removal Report tool which allows sellers to identify which items in their inventory are most likely to incur storage fees. It also makes sure to calculate the number of items required to avoid these fees up to 30 days before the next inventory clean-up date.
Ideas to avoid Amazon FBA Storage Fees
Understanding the source of these Long-term storage fees is already half of the battle, but what more can you do to minimize these costs? Luckily, there are ways in order to get around storage charges which can reduce their impact on your finances:
Strategies on Pricing and Getting Inventory Moving
One way of avoiding these storage fees is to simply keep your inventory moving through constant sales. Competitive pricing allows you to not only keep your stock moving, but also allows you to grow your customer base through these reduced prices. However, keep in mind that you must strike a balance between how much of the price you’re willing to reduce and how much you need a specific product to get sold.
This dynamic pricing model also allows you to garner information on your competitor’s own strategies, furthering your own competitiveness on Amazon. The identification of slow-moving inventory is also important as you can adjust prices for these and make the necessary improvements to the product page. You could even go as far as setting up some advertising initiatives in order to clear this inventory before the 365-day mark where it will be charged long-term storage fees.
Planning Around the Inventory Cleanup Date
When you do figure out what items can be deemed as harder to unload, you may opt to send in more stock of these items after the Inventory Cleanup Date. As we’ve discussed, Amazon tallies long-term storage fees every 15th day of the month. You can then choose to send in items after this specific date in order to offset any potential costs to another timeframe, lending some flexibility to how you approach storage costs.
Looking for Duplicate or Similar Product Pages
Although Amazon is currently in the process of removing duplicate pages, you may find that sometimes it still occurs with your items. This can affect your business as slow-moving items could be hampered by these duplicate product pages as you may find your own listing at a lower sales rank. One way to potentially get through this is by shipping the item to yourself and reentering it back into the FBA Fulfillment Center for a new SKU and product page. You can then alter the price to your liking then potentially reinvest gained capital into new inventory.
Removal Promotions for FBA Sellers
There are times where Amazon will offer free removal of items from Fulfillment centers to FBA Sellers, waiving the usual removal order fees that comes with it. Whenever you do notice this promotion going on, make sure to take advantage of it in order to avoid storage fees. Take note though that items that are removed from FBA Centers can only be sent back after a certain amount of time, typically 3 to 6 months after the removal date.
Of course, this also means determining which items in your inventory will be removed. Think of whether paying the storage fee is more economical when compared to the expenses of having the item shipped back to you. Calculate what it would take for your business to have the item processed once again and shipped back to Amazon, as well as if the item in question can be sold before the next inventory cleanup date.
Making Use of Promotions and Seasonal Trends
In relation to the previous tip, let’s say that you are nearing the holiday season and you have items which you know are highly marketable during this season. Knowing this, you might want to consider a sale for items that helps in clearing your inventory up of these items. When doing this, however, it is important to keep track of how much you’re willing to discount products.
Awareness is also key in making this work. You may feel like you have the items that everyone wants, but it will just collect dust if customers don’t know that you have it on stock. Making your presence known to online buyers is just as important as keeping your inventory well-stocked. Ads and social media presence is great in this regard, as well as media that entices customers towards buying your product.
Amazon offers a Pay-per-click advertising campaign for sellers to drive sales towards their product. There are many considerations necessary to optimize your advertising bids, but a well-executed ad campaign can bring more sales and buyers to your online storefront. Not only that, but you’ll be also able to get rid of your excess stock before the storage fees start accumulating.
Larger items can also be moved through this method, which is important as Amazon charges their long-term storage fees according to volume and the time they are stored within their facilities. Make it so that these items have the highest probability to be sold so that you can avoid the astronomic fees that comes with them.
Inventory Management From The Start
Lastly, performing constant inventory management can be one of the best and most cost-effective ways to manage your long-term storage fees with Amazon. Plotting out the amount of inventory you plan to send to an inventory center is better as it also provides you with information on why certain items do end up subjected to these storage fees.
This method improves the longer you operate as an Amazon FBA Seller, but this may be harder to implement for those new to the online retail scene. For some, it may be a good idea to employ professional help in order to aid you in managing your inventory and saving you from astronomical startup costs.
One potential option is through the hiring of CPA firms that are specialized in dealing with Online Businesses and Retail Services. Their personnel tend to have the experience necessary in order to advice you on the optimal quantity of items to store, as well as help you analyze any faults that may be present in your business.
Whether it’s through issues with your own listing, potential pricing adjustments, or any number of potential factors at play, a professional CPA firm can help you to figure out the best way to maneuver your business towards growth while also saving you from avoidable operation costs.