HOW TO MANAGE LONG TERM STORAGE FEES WHEN SELLING VIA AMAZON FBA

HOW TO MANAGE LONG TERM STORAGE FEES WHEN SELLING VIA AMAZON FBA

By Ryan Grant

In today’s post I am going to be sharing my process for managing long term storage fees.  These fees occur on August 15th and February 15th every year.  On these dates, Amazon charges FBA sellers for items that have been in stock for 6 months or greater as of those dates.

First, I will go over the details of long term storage fees, and then I will dive into the strategies that I use to minimize the long term storage (LTS) fees I pay.

You can read all of the details about LTS fees direct from Amazon HERE.  A few noteworthy takeaways if you don’t want to read through the full page:

1. One unit of each ASIN is exempt from LTS fees each time storage fees are initiated.
2. Units in stock for 6 to 12 months as of the LTS fee date will be charged $11.25 per cubic foot
3. Units in stock for 365 days or more as of the LTS fee date will be charged $22.50 per cubic foot

Now, I will go over how to determine which items will be impacted by long term storage fees.  Here’s my process:

1. Login to your seller account
2. Hover over reports and select Fulfillment
3. On the left hand side of the screen under the Inventory heading, click show more
4. Select Inventory Health
5. Click the Download tab and click Request Download
6. Download the report as it becomes available
7. Open the text file that downloads
8. Click anywhere in the text file and select all.  This can be done by right clicking and then clicking select all, or can be done by holding the control key and pressing the letter A (Ctrl + A).
9. Copy the data you have selected
10. Paste this data into either Excel or Google sheets
11. Select the top row, click the data tab, and select filter
12. Then you will want to sort the columns with the heading “projected-ltsf-12-mo” and “projected-ltsf-6-mo” from high to low.  For me these are columns AN and AU, respectively.  Make sure to sort one column at a time.

Note: A similar report that will work for this instead of steps 1 through 5 is to go to Inventory > Manage Inventory > Inventory Dashboard > Inventory Age > Download Report 

If you go through the above steps, you now have the info needed to analyze which items you will be charged storage fees on.  The report you downloaded will let you know exactly how much will be charged in fees for each item as well.

Now, I will go over some of the strategies I use to make sure I don’t pay more in long term storage fees than I need to.

Pricing Strategies 

About a month before a long term storage fee date, I will go through my inventory and begin to get more aggressive on pricing for items that will be charged fees.  My first option is to get items sold so that I don’t have to pay an extra fee, and I don’t have to get the item sent back to me.

Use Amazon Promotions & Sponsored Product Ads

Another strategy I use about a month before is to run promotions and ads for items that will be charged fees.  These items have fees coming either way, so it’s worth spending a little, or offering a discount to get them sold.  If there is interest I will consider diving more into this topic in a future blog post.

Take Advantage of Free Removals 

This year from August 4th through 14th Amazon is offering FBA sellers free removal orders to help clear some space in their warehouses.  They have done this the past few times right before long term storage fees were initiated.  It’s not a guarantee that this offer will be available again in the future, but it’s reasonably likely.

If you are reading this the day it is published, you still have 4 days to take advantage of free removals before long term storage fees are charged.  There is one catch with these removal orders, and that is that you will be unable to send in additional units of the ASINs you remove for a period of time.  For the August long term storage fees, items of the same ASIN cannot be sent in again until January 1, 2017.

Manage In Stock Levels from the start 

One of the best ways to avoid long term storage fees is to manage the amount of inventory that you send in to FBA warehouses in the first place.  If you only send in quantities that are likely to sell in 6 months or less then you should have minimal long term storage fees to worry about.

Time When You Send in Inventory 

One other thing that can be done is timing when you send in your inventory to FBA warehouses.  For example, on August 15th you will be charged a long term storage fee for items that have been in stock for exactly 6 months.  However, you will not be charged for items that have been in stock for 5 months and 29 days.  So if you have items hit the warehouse on say August 20th, you have nearly a full year before you will be charged LTS fees.  This is as opposed to having an item hit the warehouse on August 14th, then you will only have 6 months and a day before a LTS fee will be charged.

Essentially, you can save some exposure from fees by strategically timing when items are sent to FBA warehouses.

Determining Which Items to Remove 

Most likely when it comes up to the day before long term storage fees, you will still have some items that you were not able to sell.  That means it is time to figure if you should pay the long term storage fee or if you should have the item sent back to you.  I generally go through this process as close as possible to the date of long term storage fees.  Generally this is 1 or 2 days beforehand.

The first step that I take in this process is determining what my costs are for having an item sent back to my location.  I want to calculate the time it will take me or someone on my team to go through an item, store it for 3 to 4 months, the time to process it again to be sent back in, and the cost of inbound shipping & supplies to send it back in.  This gives me a baseline to see what level of fee it makes sense to pay.

When there is a free removal promotion available, I typically will pay a LTS fee on any item where the fee is $1 or less.  If there is not a free removal promotion available, I will typically pay the LTS fee on any item where the fee is $1.50 or less.

I say typically, as there are exceptions to this.  For example if I have a toy that sells for $100 that is very likely to sell in December, I would be likely to pay a much higher storage fee in August.  If I was to remove it, I would lose the opportunity to have the item sell as I wouldn’t be able to send it back in right away.

On the flip side, if I have an item that will sell for $5 or less, I generally won’t pay any fee, and will just have the item returned to me if free removals are available.  Then I will donate or liquidate it.

On the items where the LTS fee is higher than my aforementioned threshold, I will evaluate each product individually to determine if a removal or paying the LTS fee makes more sense.  I look at things like current selling price, competition, what season the product is most likely to sell in, how the product is currently selling, among other factors.  Most of these items I will end up removing, and then either store in my warehouse to be sent back at a later date, or liquidate via other means.

By removing the items, I avoid the LTS fee and help to lower this particular expense.

One last note, as I am going through all of the items that are subject to long term storage fees, I am reviewing to see if there are ways I could improve my inventory mix to avoid these fees in the future.  This is a very important step, as generally speaking, I don’t want to have more than a few months supply in stock at a given point in time.

We’ll wrap it up there for today.  That’s my strategy for dealing with long term storage fees. Do you have any additional strategies you would recommend? any questions on this post? Let me know in the comments below

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