AMAZON CHANGES SELLERS’ LONG-TERM STORAGE FEES IN AUGUST 2019. WHAT WILL IT MEAN?
Amazon Fulfilment (FBA) moves long-term storage fees to a monthly basis.
Semi-annual February and August dates to go by the wayside.
The sceptic Amazon Seller may say, ‘why are they changing long-term storage fees again, is it a way for them to make more money?’
We must look at the economics at what Amazon, as a business, would say about long-term storage. Can you imagine how many more warehouses Amazon would need if FBA sellers just left inventory that was not selling, and just paid the nominal £0.65p (off peak) per cubic foot or even the £0.91p (peak) per cubic foot (in the UK) for storage fees? Well Amazon would turn into one of those public storage companies where people store their ‘treasures’ for a month… and 3 years later their ‘treasures’, aka ‘junk’ to most people, is being auctioned off so the storage company can recoup months of non-payment because the owner has abandoned their ‘treasures’.
At E-commerce Direct we believe Amazon is right to ‘remove’ their slow or non-selling items for two reasons. First, Amazon sees its buyers as important, and Amazon wants to provide the best products and service at a reasonable cost. If Amazon has to invest in additional warehousing for items that are not selling, then additional systems and people to manage those facilities, customer prices would inevitably go up, not making Amazon’s prices competitive. Secondly, you would have to expect that Amazon Sellers would end up brunting those extra costs in fees. In essence, the long-term fees help to encourage poor performing products to pull away, making room for better selling products where Amazon makes far more money per month with items it is fulfilling for Amazon Sellers and customers alike!
August 2019 Seller Fees Change
Starting from 1st August 2019 in Europe… Yes that still includes the UK… Amazon will no longer charge a long-term storage fee for inventory aged 181 to 265 days. That was the previous 6-month long-term storage fee. Good news so far.
So let’s look at how much Amazon is charging for an ‘off peak’ (January to September) ‘standard sized’ storage prior to the August 2019 change. It is £0.65p per cubic foot/€26 per cubic metre, and after 1st August It will be £0.65p per cubic foot/€26 per cubic metre. That’s right, they are the same, so not bad news! How about ‘oversized storage’ (greater than 45cm x 34xm x 26 cm)? Well, prior to the 1st August 2019 change it is £0.65p per cubic foot/€26 per cubic metre, and after 1st August It will be £0.45p per cubic foot/€18 per cubic metre. Wait a moment …. Yes, the price has come down! Very good news!
For a ‘peak’ (October to December) ‘standard sized’ storage pre and post 1st August 2019, the cost is the same £0.91p per cubic foot/€36 per cubic metre, again okay news. However, there is still more good news. ‘Oversize’ storage for the ‘peak time’ is £0.91p per cubic foot/€36 per cubic metre prior to 1st August 2019 and will go down to £0.63p per cubic foot/€25 per cubic metre after 1st August 2019.
On top of all that good news, Amazon FBA waived the long-term storage fee for inventory aged 181 to 465 days during the 15 February 2019 assessment.
Wait, there is more good news for ‘standard sized items’ in the ‘apparel and shoes’ categories including accessories (e.g. belts, wallets, handbags and sunglasses). From 1st April 2019, monthly storage fees will be reduced by 40% for such items!
Is it all good news?
So what is the catch? Starting 1st August 2019, Amazon will charge for inventory aged more than 365 days. They will be charging long-term storage fees on a monthly basis instead of semi-annually, which should make it more palatable for most sellers, so not bad news. Note the long-term storage fee is in addition to the monthly inventory storage fee.
Here is the big change. Prior to 1st August 2019, items in Amazon’s FBA centres from 181 days to 365 days is charged £12.50 per cubic foot/€500 per cubic metre, and items stored for more than 365 days is charged £25 per cubic foot/€1,000 per cubic metre. That has been changed to £4.30 per cubic foot/€170 per cubic metre with a minimum of £0.10/€0.10 per unit starting 1st August 2019.
Product size does matter …
This sounds good, right? Well yes and no. If you have a product that is 28cm x 20.2cm x 5cm and 10 of them are going to be assessed with long-term storage fees, the cost would be £4.30/€4.81, so this is a saving over the previous 1st August 2019 costing model. The disadvantage comes when a seller has small items. For example if you had 10 books at a size of 21cm x 15cm x 1.5cm, based on the volume, it would now be £0.72/€0.80. However the new minimum of £0.10/€0.10 per unit kicks in for the 10 books because the volume charge is less than the minimum of £1.00/€1.00 for the books. However, the new rates are better for most sellers, especially if you are going to have smaller quantities of products going to be assessed for long-term storage fees. But remember, you will still be paying your ‘normal’ storage fees and long-term storage for products aged over 365 days. Amazon indicates ‘inventory clean-up will take place on the 15th of each month, hence any products aged 365 days will be assessed monthly!
Check the margins!
If it all sounds complicated… Well it is, but savings can be made. However, make sure you check your monthly charges from Amazon to ensure your cost margins for your products are appropriate and adjust your sales prices accordingly. Good luck!
For questions or help with e-commerce warehousing/storage and fulfilment, get in touch with E-commerce Direct at email@example.com or call our UK office +44 (0) 2381 920 246, or if you are based in the US, call us toll free ++1 (888) 567-0464.