Some New Challenges for Amazon Sellers

The two new challenges for Amazon FBA Sellers are Long Term Storage Fees, which affect all FBA Sellers.  The other challenge only affects media sellers and is potentially really bad for anyone who lives and ships from West of The Mississippi River.  Lets take that one first:

Amazon relocates media warehouse to Pennsylvania

Here is Amazon’s announcement from last June 28th.

Effective June 28, 2011, we will begin directing most new shipments of media Units to a fulfillment center in Breiningsville, PA. This fulfillment center focuses on media storage and fulfillment services and is positioned to provide a better buying experience by bringing the inventory closer to buying customers. At this time, we’re only planning to direct your new shipments of media Units to this fulfillment center.

What this means is that those of us who live out west will now incur much higher shipping fees to send our books and media products to Amazon FBA. The rates are quite a bit higher and really cut into margins.  However, this is good news for Amazon FBA Sellers on the East Coast as they will be much more competitive.

About the only thing Western sellers can do is build the extra costs into your selling price –but of course this makes you less competitive as Amazon always promotes the lowest price media item first.

Amazon’s New Long Term Storage Fees to Kick In Soon

This is from Chris Green’s Blog at FBAPower – reprinted with permission.

The FBA Long-Term Storage Fee will take effect on August 15, 2011, less than one week away.  Be sure to submit your removal request before midnight PDT on this date to avoid incurring Long-Term Storage Fees.

I received it TWICE; once on my books & media account, and again for my ‘everything else’ account where I sell toys, tools, and, well, everything else.

What is the Long Term Storage Fee?

FBA Long-Term Storage

The Long Term Storage Fee is $45/cubic foot that is charged on items stored in FBA warehouses for more than one year. This does not mean that every item that you send to FBA has to sell within 12 months. There is an exemption for single units of an ASIN. This means that Amazon still wants your Long Tail items (items that sell, they simply don’t sell very often), they just don’t want three copies of a book that sells once every three years. This would be nine years supply of inventory and it is not how Amazon envisioned the FBA program.

Item Dimensions 1 unit 2nd unit 10 units
Book 8″ X 6″ X 1″ $0.00 $1.10 $9.90
Toy 11″ X 8″ X 2″ $0.00 $4.58 $41.22

Believe me, Amazon does NOT want to charge you the Long Term Storage Fee. This is not a profit center for them. They want FBA warehouses humming with inventory coming in and orders going out. This is what they are good at. They do not want to be in the storage business.

Want to know my numbers? I’ll show you:

Books & Media:

As of August 8, 2011, you have 2,060 Units of inventory that will have been in our fulfillment centers for 365 days or more on August 15th for which you will be charged $2,384,unless you submit a request to remove them (or they sell) before that date.

Everything Else:

As of August 8, 2011, you have 181 Units of inventory that will have been in our fulfillment centers for 365 days or more on August 15th for which you will be charged $4,071,unless you submit a request to remove them (or they sell) before that date.

I’m pretty sure that most sellers are not looking at such high numbers. When I started with books, I’ll admit I was a dummy. I thought I was a genius and happily bought ex-library books on tape sets that were listed for $70+ on Amazon. Too bad I didn’t know the difference between ‘listed for’ and ‘selling for’ (I’m better now, thanks). Learned a few things about Sales Rank is the past three years as well. 🙂

From Amazon:

Return and Disposal of FBA Inventory – Fees

Through August 15, 2011 the per-unit fee to have inventory over 270 days old returned to you is $0.20 per-Unit including shipping ($0.40 including shipping for Oversize Units), or you can have Amazon dispose of the inventory Units for no charge.

After August 15, 2011, the per-unit fee to have inventory returned to you is $0.50 per-Unit including shipping ($0.60 including shipping for Oversize Units), or you can have Amazon dispose of the inventory for $0.15 per-Unit ($0.30 for Oversize Units).

I have some oversize items on my Everything Else account that is pushing the Long Term Storage Fees way up. I sent Amazon all of my oversize items because the monthly fees were so low. Amazon admits that they did not expect this behavior when they implemented the FBA program and defined the fee structure. This behavior (myself included) is in part what prompted the Long Term Storage Fees. This post has two parts; first, how to analyze and remove/dispose of your older inventory to avoid the Long Term Storage Fees, and second, what these rules are for and how to optimally send inventory to Amazon’s FBA warehouses.

Analyzing Your Aging Inventory

Log into your Amazon Seller Account: https://sellercentral.amazon.com/gp/homepage.html (seller account required)

Look under Reports, then click on Fulfillment.

Under Inventory, you’ll see two reports. One called Inventory Health, and the other called Recommended Removal.

Request both of these reports to be downloaded. Save, and open in Excel. Familiarize yourself with these reports; they are very helpful. Right now you want to look at the columns that relate to Inventory Age (270-365 days & 365+ days) as this will show you the items on which Amazon will charge you the Long Term Storage Fee.

Creating  a Removal Order

FBA Manual 6.4 Create Removal Orders

Amazon has actually made this process fairly easy. Here’s how I did it on my accounts:

Go to your Seller Account, Reports, Fulfillment, choose Recommended Removal, View Online, click on Generate Report.

You’ll now see the first 150 items from your Recommended Removal Report. These are all items that will be charged the Long Term Removal Fee or that have single quantities of inventory that have been in stock for 365+ days. Click on Begin Removal Process.

Most of these items you will want to remove or destroy. The ones to double check are the ones that have a Fulfillable Quantity of one and Available Quantity of one (even if at FBA for 365+ days). These may be Long Tail items that you want to keep in inventory. Remember, single inventory units per ASIN are exempt from the Long Term Storage Fee. I copied and pasted the ASIN into Amazon to check the prices and Sales Rank for these items to decide if I wanted to keep them at FBA or remove/destroy. If you want to keep them, check the box in the Delete column to remove the item from the removal order. Once you have reviewed the items, click the Continue button at the bottom of the screen and complete the process. If you have more than 150 items to review, repeat the process for the additional items.

You have to have your removal order PLACED by AUGUST 15, 2011 to avoid the Long Term Storage Fees. Don’t wait until the last minute.

Creating a Disposal Order

Follow the same steps as above for creating a Removal Order, but instead of clicking Ship To Address and entering an address, you’ll click on Destroy. Trust me, when Amazon says they will destroy the items, they will be destroyed.

What’s Really Going On?

As mentioned above, Amazon does NOT want to charge you the Long Term Storage Fee. If they did, they would not make so many reports available to you and make it easy to identify and dispose of this type of inventory. They even reduced the removal and disposal fees to help sellers adjust to this new rule. It’s only $0.20 to get Amazon to pick, pack, and SHIP an item back to you. I don’t know about you, but i can’t even buy a box for twenty cents, let alone pack and and ship it somewhere. And if your inventory is scrap or junk, Amazon will toss it for you FOR FREE.

This fee is designed to encourage FBA sellers to manage their FBA inventory better and to not simply use FBA warehouses as a cheap storage unit for all of their inventory. The FBA storage fees were so low that many sellers (myself included) simply sent Amazon everything because it was so cheap to store it at FBA that it made sense.

Who remembers fourth quarter last year (2010) when Amazon halted inbound FBA shipments because FBA warehouses were full? I sure do. This fee will prevent this from happening again. Amazon wanted nothing but to receive inbound shipments and get stuff listed and sold, but too many sellers filled up the warehouses with slow moving inventory. The new Long Term Storage Fee will discourage this practice and keep FBA warehouses able to receive products without any delays.

Summary:

Think of it this way: only send Amazon a maximum of ONE YEAR SUPPLY of any product and you will never be charged the Long Term Storage Fee. Single quantity items are excluded to you can still send in Long Tail items without worry. Periodically check the Inventory Health Report and the Recommended Removal Report. Most FBA sellers who sell books and media items with quantity of one will be largely unaffected by this new fee. If you need any help having your inventory returned to you or disposed of, please contact Amazon’s Seller Support team using the Contact Us link in your Seller Account.

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3 Comments

  1. As a relatively new FBA seller (last 3 months) I don’t need to worry about Long Term Fees for a good while. However this article has provided me with some excellent advice about maintaining and managing stock levels in order to avoid / reduce Fees.
    Once again Skip you have shared your knowledge with your readers – Thank you.

  2. I’ve been reading about the long term fee being for multiple qualities of items, however I have been billed for several “single” items.. very confusing

  3. You really make it seem really easy with your presentation however I in finding this matter to be really something that
    I believe I’d never understand. It seems too complicated and
    extremely broad for me. I’m taking a look forward in your next publish,
    I will attempt to get the cling of it!

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