Why and How To Keep Your Amazon Inventory Fresh
- November 9, 2015 | Marcus DeHart
When I do the math, it’s pretty clear that the Fulfillment by Amazon (FBA) monthly storage fees for most inventory are pretty cheap. I mean where else can you store a book for pennies a month? With such attractive pricing, sometimes it’s tempting to just clear out your shelves and send everything you’ve got to Amazon for safekeeping with the thought that if it sells, that’s even better.
Well, if Amazon’s core product was storage, that might be a good option. But since they are more interested in selling stuff than letting it gather dust on a shelf, you can bet that they want to make sure there’s room on their shelves for the latest and greatest products to hit the market. While there’s probably someone out there still interested in buying blockbuster movies on VHS, the old cassettes can’t compete with the new Blu-ray releases. That’s why a few years ago, Amazon introduced the long-term storage fee.
The Costs of Long-Term Storage
Twice a year, Amazon performs an inventory cleanup in their fulfillment centers to make room for new inventory. Out of consideration for the holidays, they bookend the biggest selling season of the year by conducting these cleanups in February and August, on the 15th of each month. At that time if you have stale inventory in their warehouses, you could get hit by a hefty long-term storage fee.
For inventory that’s been there for 6 to 12 months, you’ll be charged $11.25 per cubic foot. If anything’s been there for more than 12 months, the fee doubles to $22.50. Suddenly, that book that only cost $0.02 per month to store suddenly costs you about $0.66. And if you add the 2¢ for each of the 12 previous months and the 33¢ for the 6-to-12 month fee levied six months before, you're looking at approximately $1.23 in storage for one year of storage. For one book that still might not sound overwhelming. But if you have hundreds or thousands of products in the fulfillment centers, you can see how the storage fees will shrink your adjusted gross margin.
How To Manage Removals
The good news is that Amazon would actually not have to charge you for long-term storage. Think about it: Will the money they make on all that stale inventory provide enough revenue to build additional fulfillment centers to store the new stuff that’s coming in? I think not. So they make it easy for you to remove your inventory just prior to the inventory-cleanup events.
Here are a few tools to help you manage your inventory and ensure prompt removal of the stuff that's getting stale.
Automated Long-Term Storage Removals
The easiest way to avoid long-term storage is by enabling Automated Long-Term Storage Removals. With this option you can set it and forget it. You do have some options in how you configure your removals. For instance, you can choose to have them ship it back to you or dispose of it. You can also set price limits for whether you return or dispose of the inventory. Keep in mind that your settings only apply to the next inventory clean up event. After that, you’ll need to reset them for the following event.
Recommended Removal Report
If you want to be a little more hands-on with your removal decisions, head for the Recommended Removal Report for a list of your inventory that could potentially be hit with the long-term storage fee at the next inventory cleanup. The report comes with a handy button to begin the removal process. Click it and you’ll be set up with a removal report for the products identified in the report. You’ll have a chance to remove or add products to the list and you can change the quantity of each product you want returned or disposed of. One limitation of this report is that it can only show 150 products at a time. If there are more than 150 products, you’ll need to advance to the next page and create another removal request.
While the previous two methods for managing stale inventory are easy to use, they only address stale inventory reactively twice a year. When you’re talking about high volumes of inventory, every penny spent on storage for every product every month continues to chip away at your adjusted gross margin. I recommend reviewing the Inventory Dashboard on a regular basis. The more inventory you have, the more frequently you should review it. The dashboard provides a snapshot of your inventory, placing it in different buckets based on how long it’s been in the fulfillment centers. Your tolerance for stale inventory will guide you to an acceptable time limit for storing your products in the fulfillment centers.
Develop a Plan
In "4 Ways FBA Sellers Can Avoid Amazon’s Long-Term Storage Fees," I discuss not only removing stale inventory, but also the options for lowering prices, creating sales promotions, and advertising clearance product through Amazon Sponsored Products.
You might consider a tiered approach. Perhaps after 90 days, you adjust the price to make it more inviting. At 180 days, create a promotion. For inventory 270 days old, you could add them to a Sponsored Products clearance campaign. And when it comes down to the wire in February and August, have your automated long-term storage removals in place in case there’s anything left that could be hit with a long-term storage fee.