Amazon’s Latest Long Term Storage Fee Policy Update

long-term-storageIf you have an account as an Amazon FBA seller, you received an email this week with this subject line: Free removal of selected FBA inventory through October 14, 2016.

Wow, that’s good news, right? But did you keep reading the email to find out what Amazon was really saying in this email?

This wasn’t an email about a random period of time with free removals of inventory. This email was to notify FBA sellers of a change to Amazon’s policy about long term storage fees.

On August 15 and February 15 of each year, Amazon charges long term storage fees for items at their FBA warehouses. If items have been at the warehouse for longer than 6 months as of the fee date, those items are charged $11.25 per cubic foot; items at the warehouse longer than 12 months are charged $22.50 per cubic foot.

In the past, Amazon has granted an exemption from the long term storage fee for one unit per ASIN. Basically, the long term storage fee only applied to items with multiple units at the warehouses. If your item was a one-off, there was no long term storage fee.

exemptionsThis is where the change comes in. Moving forward, Amazon will be charging long term storage fees for all items at FBA warehouses longer than 6 months as of the fee date, regardless of whether you only have one unit of that ASIN. No more exemptions for one-off items. (Note: Amazon is offering a free removal of one unit per ASIN from now until October 14, 2016, as a way to help sellers deal with these changes. For our video about how to create removal orders, click here.)

If you know me at all, you know that my approach to this change is not to panic. Getting freaked out over these types of changes really doesn’t help your business’ bottom line. Instead, here are a few points for you to consider about the changes in long term storage fees:

5 Points to Consider about Changes in Long Term Storage Fees:

  1. amazon-warehouseUnderstand that Amazon does not want to be your long term storage solution.

The above statement is nothing new. Amazon has been trying to tell sellers for the past few years that FBA warehouses cannot be their long term storage solution. When I first started selling on Amazon, there were no long term storage fees. More and more sellers began using the Amazon platform, and the warehouses started filling up. So Amazon instituted 12 month long term storage fees. The warehouses continued to fill up. So Amazon instituted 6 month long term storage fees. The warehouses are still filling up. So Amazon put in place steeper monthly storage fees during Q4, and now they’re removing the exemption for one unit per ASIN for long term fees.

Surely we should be getting the picture. Amazon wants us to send inventory to FBA warehouses that will sell relatively fast. Amazon doesn’t want to be a long term storage facility. To find out exactly what your long term storage fees will be, click here.

  1. keep-calm-change-can-be-goodThis change is an opportunity to improve your business model.

As with anything in life, mindset goes a long way towards determining our outcomes. Do you have a growth mindset or a fixed mindset about these policy changes? Do you see the fee changes as a huge blow to your business? Then it will be a huge blow to your business. Do you see the fee changes as a chance to tighten up your inventory and streamline your processes? Then your business will improve as a result.

If you sell a lot of books or shoes, these changes might impact you more because of the long-tail nature of selling in those categories. How can you approach these changes as an opportunity to adjust your business model and continue to achieve success in selling on Amazon? Look for the opportunities to grow and adapt, rather than feeling doomed because things will be different moving forward.

  1. 6-months-long-tail The term “long-tail” is being redefined.

Whether we like it or not, 6 months just became the new long-tail. In the past, long-tail might be as long as 2 or 3 years. But unless you can find items with such a massively high return on investment (ROI) that you can absorb the monthly storage fees and long term storage fees on one-off items, long-tail might need to be no more than 6 months moving forward.

Do we like these changes? Not really. Will it shut down our business? No, because we have a balanced inventory model that depends on fast nickels, slow dimes, and really slow quarters. Fast nickels make a lower ROI, but they do it relatively quickly. Slow dimes take a bit longer to sell, but we get higher ROI. Really slow quarters have fantastic ROI, but who knows how long it will take to sell. Moving forward, we have to make sourcing decisions based on whether or not storage fees will eat into the ROI too much on our slow quarters. For some sellers, this isn’t a huge deal; for others, you might want to redefine your parameters for what types of long-tail items you are willing to source.

  1. price-tag-267x300Now is the time to be more proactive about repricing.

Whether you choose to manually reprice as we do (see how we do it in this blog post) or subscribe to a repricer, now is the time to make sure your inventory is priced competitively.

Please do not hear me say, “Drop your prices! Sell it all NOW!” What I’m saying is that if you’ve been accustomed in the past to setting your prices when you send in inventory and then never looking at the prices again, you’re going to need to adapt and begin checking your prices on at least a semi-regular basis to make sure they’re still competitive. Be proactive in repricing throughout the year so that you don’t have to be reactive in repricing every August 14 or February 14 to avoid long term storage fees.

  1. sourcing-buy-yes-noConsider tightening your sourcing parameters for the future.

Moving forward you might need to change how you decide whether or not to buy an inventory item. You might need to look for items with a lower sales rank or with fewer competitors, in order to get a faster sales velocity. I highly recommend learning how to read CamelCamelCamel and Keepa graphs so you can make smarter sourcing decisions (click here for a Camel tutorial and here for a Keepa tutorial).

positivesUltimately, these changes to long term storage fees can have minimal negative effects and actually have positive effects on your Amazon FBA business if you handle them correctly. A few positives I see potentially happening as a result of these changes:

* We can improve our skills as sourcers.

By tightening our sourcing parameters and looking for faster moving inventory, we will expand our abilities as sourcers. It may seem slow going at first, but over time we will be able to find better inventory much faster.

Cut-Lead-Costs-in-Half-and-Increase-Sales-Revenue-by-105-Percent* These changes will likely weed out our competition.

New fees are a hurdle that many sellers won’t want to jump over. Many sellers are likely to give up when the going gets tough and move on to another venture. That’s less competition for us…so stick with it and don’t be one of the ones to move on!

* Finding faster turning inventory will improve your bottom line.

If you improve your sourcing skills and find better inventory, you will get more sales and make more profits. You will have higher disbursements that you can then reinvest more quickly into more inventory…again and again. Thank you, Amazon, for helping us get more sales in the long run!

If you want more from me on this topic, be sure to watch the video below. This blog post is full of the highlights, but in this video, I add even more thoughts, tips, and strategies to handle this recent change.

So how are you going to handle these changes? Are you going to have a growth mindset and leverage these fee changes into an opportunity to improve your business? That’s the course I recommend, along with taking advantage of the free removal of one unit per ASIN through October 14, 2016.

23 responses to “Amazon’s Latest Long Term Storage Fee Policy Update

  1. Spot on! We tightened what our expectations were for our products about 6-8 months ago. We still have a lot of our older inventory that the specs for buying those were different, but we feel we can “off-load” those this Christmas and move on making a little on them or breaking even. We also have invested into smaller items in different categories to understand how fast other products move (toys, Home, electronics) in relationship to our current offering. But, all in all if we were to walk away today (we won’t) we did really really good, hence our driver!

    Can you resend the categories of products and relationship to each other in terms of sales rank?

    Dan and Kacy

  2. Great way to maintain a positive mindset.

  3. Love your attitude Stephen! As always- excellent article. Thank you

  4. Exactly right! I agree with everything you said. Very nice article.

  5. I mainly agree with you Stephen, but I o think Amazon is making a big mistake here, and here it is: The mistake is not in having the fee for single units, which does make sense if their warehouses are getting overloaded, but the mistake is in having the fee even for books with only a single FBA offer.
    I have thousands of books in FBA, and many of them are long tail (2 years to sell), and many of them I am the ONLY FBA seller.
    I think Amazon should start by making a rule that the first 5 or 10 books in their warehouse are exempt, and after that people will be charged the fee.
    I honestly think this will be a negative for customers because there will be less available to them through Prime/free shipping.
    I sell books every day to Prime customers that were sent in to FBA in 2014 where I am the only FBA seller. With this new rule those customers are going to be disserved.

  6. Thanks Stephen – I loved your nickels, dimes, and quarters illustration. Thanks for sharing your insights and looking at both sides of the coin!

  7. David, in regards to books, if they are that slow moving the thought that there could be a run on them is always a possibility. But regardless of the category the items that are slow moving are pretty unlikely to move except at Christmas. So for your concern, you stated, some of your inventory has been there for up to two years, I use to do that as well. My home inventory has leveled off and decreased little this year. I believe your concern is with a minimal amount of inventory and to miss out on ONE sale is a still a betterment for Amazon and Amazons goal. Let eBay and the like handle the onesie-twosee items. This is about churning and hitting hotspots, as Amazon policy has started to dictate more and more. Makes us more nimble, makes them more nimble. I have items that have been there over a year and we eat the fee because it is such a small part of our turn over that it doesn’t even register in our yearly expenses but a double digit fraction.

  8. As a used-book seller, I find myself faced with an enormous number of items (1500-plus) that need to be reassessed now, all of a sudden. And to be prudent, I should obviously make these decisions by October 14th. I’m quite sure I’ll wind up having to simply use the free removal option on a ton of books: the ones I simply couldn’t get to by that date. But some percentage of those, I’ll surely want to relist and send back in, further on down the line, when I have time to properly consider them. So my question is, what is the minimum time that has to pass before a removal-order item can be relisted? I know I’ve seen it mentioned somewhere, but darned if I can find it. I’m not particularly thrilled with any of this; my business model just got trashed.

    • Amazon has not said (as far as I’ve been able to find out) how long until we can return those items to Amazon. But I would assume possibly after February 15, 2017… though do your own due diligence to make sure.

  9. Michelle Crawford

    Hi Stephen, I really like your blogs and appreciate your time in doing so. I received the email from Amazon and did not look into further until I got your post. Thanks a Million! By the way, I loved your “How to Keepa Camel” book and videos – I learned a ton.. And was able to source so so much better. I can view and understand how to read those graphs and feel so confident now. Almost like a pro.. Lolo

  10. When I look at my Inventory Age report it shows the estimated long term storage fees for all my single unit books as $0 even though they have been there over a year already. Does this mean I don’t have to worry about removing those units or is it a glitch?

    • Appears to be a glitch. The new policy is not yet reflected in this view. These are items that need to be removed.

      • Thank you Jonathan. I also am waiting for confirmation from Amazon on my question but that is what I thought.

      • I just heard from Amazon and they told me single unit ASINs will not be charged long term storage fees and that my report with $0 is correct! Not sure what to think now.

  11. I have been keeping more back and storing at home. I send items for seasonal sales just before the seaon begins and then take them bck if I have to…I usually don’t as I do not buy as much as I used to…amazon is making this too hard but I cannot blame them and I also believe it will out the bad vendors that do the program damage with shoddy practices and for me the ones that use repricers incorrectly and kill our profit margins to be the cheapest…to me they do far more harm than amazon.

  12. You talk about sourcing parameters. How many sellers in on a listing do you decide not to source that item if it is a good rank? just curious.

    • I’ll try to address in a future blog post as this question does not have a quick and easy answer. My short attempt to answer is that it really depends on how good the rank is… and I only consider the number of competitors that are competitively priced.

  13. Two excellent questions for we newbies..
    How long till we can relist removables?
    How many sellers in on a listing do you decide not to source that item if it is a good rank?

    • Amazon has not said (as far as I’ve been able to find out) how long until we can return those items to Amazon. But I would assume possibly after February 15, 2017… though do your own due diligence to make sure.

      The second question I’ll try to address in a future blog post as it’s not a quick and easy answer. My short attempt to answer is that it really depends on how good the rank is… and I only consider the number of competitors that are competitively priced.

  14. This will be the death of the “FBA Bookseller”. Virtually all books except for the small percentage of top-sellers are by their nature “long tail” items. Of course Amazon knew this when they began inviting booksellers to the FBA program. They have more information on anyone regarding how quickly different items sell. Judging from the Sales Rank figures, much of their own new book inventory likely gathers dust for years. The only FBA booksellers who will survive this will be the popular textbook sellers and the very high-end OOP sellers. I am one of the high-end sellers, so I will make it, but this will be an extra $1000/month expense.

    • I’m not so sure I agree. The 6 month long term storage fee for the average book is around $0.31 and only $0.62 for 12 months…. so if that eats into someone’s ROI of the sale, then their ROI is not high enough. Maybe book sellers can start to try and source faster selling books, and for books that take longer than 6-12 months, just work into your calculations the $0.31 or $0.62 fee.

  15. If I send in shipments in March and September do I actually have 11 months before long term storage fees kick in? It seems that way, but I can’t believe Amazon has actually left this loophole.

  16. Pingback: Average Commerce Weekly Roundup: October 9, 2016

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