What do Amazon’s New Long-Term Storage Fees Mean?

In Growth Strategy Consulting, Supply Chain Management by Chris Gray

Amazon’s long-term storage fees were updated on August 15th, increasing charges on the minimum monthly charge for items that are in storage for longer periods of time. The increased fees are dependent on the number of units and the amount of space they are occupying.

The way that Amazon has historically assessed long-term storage is by monitoring items on the marketplace twice a year. Any item that has been stored on Amazon for more than 6 months, with an inventory age of 181 or 270 days has been charged an additional long-term storage fee of a certain dollar amount per cubic foot. This charge has typically been a single charge, one-time payment that reverts back to regular monthly storage and account fulfillment fees once paid. The newly implemented long-term storage fee has not only increased the fee that is paid per cubic foot on long-term storage items, but it also accrues additional monthly charges the longer the fee remains unpaid.

In essence, the update has transformed long-term storage from a bi-annual expense to a monthly payment if not handled immediately after 181 days. By implementing this update, Amazon is making a push toward ensuring people turn their inventory more quickly within the span of six months.

The fee has already taken effect on the 15th of August and will be assessed for this year on September 15th.

Moving Forward

Run AMZ is working with clients in a few different ways for products that typically stay within storage longer. If the product is more of an expensive item, bring it back and pursue other sales channels to sell it to or manage it from. If the item is inexpensive or likely to be discontinued, there’s a cost analysis of whether it would be worth reselling or destroying the item depending on how many units the brand has, how often they sell, and additional costs associated with the item. For example, if a brand is only selling three units a month, it’s not difficult to forecast how far the company is in the red. From there, because you’ve likely already lost money on the product, it then becomes a matter of deciding whether or not to liquidate or donate the product. If there isn’t a channel to move it, it’s best to write it off and stop the growing expense related to that item so you can invest and profit in other products likely to find success.

Of course, everything varies dependent on each product. If your product is relatively small, doesn’t sell as frequently, but yields higher profits, it may be worth paying the additional fee on a unit basis.

Run AMZ recommends conducting a cost-benefit analysis for a more accurate and cost-effective solution. If you have multiple products being affected, reach out to the team at Run AMZ. They work with you to find solutions specific to your brand and product and target between a four and eight week inventory storage strategy.