After a big sales event like Christmas or Prime Day, third-party sellers on Amazon should pay immediate attention to their unsold merchandise at fulfilment centres.
Inventory that’s been stored for six months or more should be cleared out or sellers risk spending their profits on high long-term storage fees.
If you’re an online seller on the said marketplace but haven’t heard of this yet, an inventory cleanup is held biannually wherein overstaying stocks are automatically charged LTS fees.
Let’s say your goods have been in an Amazon warehouse between six and 12 months, you will be subjected to a fee of $11.25 per cubic foot. However, if the items have already exceeded a year, you’ll be charged $22.50 per cubic foot.
The calculation of your fees depends on the space your inventory occupies and the length of time that it has been in storage.
For example, a toy which measures 11″ x 8″ x 2″ was stored for more than six months but less than a year, so it would incur an LTS fee of $1.15. Now, if 10 units of the item were stored for over a year in a fulfilment centre, then that would be equivalent to $22.92 in fees.
If you are able to sell your stock before the inventory cleanup date, then you will not incur additional fees apart from the monthly fee.
Why long-term storage fees are imposed
Note that LTS fees are different from monthly storage fees and only apply to overstaying inventory.
Amazon wants to provide space for fast-selling products as this will make them money. However, they can’t do that if a large volume of products which don’t sell are eating so much space in their fulfilment centres.
Despite the expansion of their distribution centres, the company is still short of storage space, considering the large number of products that are sent to them by the minute.
Charging extra fees helps them discourage third-party sellers from storing inventory for an indefinite period of time, hence they are able to make room for products that guarantee them a higher revenue.
How to steer clear of LTS fees
Since long-term storage fees only kick in during inventory cleanup dates, which are on the 15th of February and the 15th of August, you have more than enough time to plan the goods which you send to a fulfilment centre.
Only send in items which you are confident will sell within six months’ time, and better do it a month or two after the scheduled cleanup date.
That way, even if the next one rolls in, your unsold merchandise won’t be subjected to additional fees because they haven’t reached the six-month period yet.
As a third-party seller on Amazon, you need to not only follow the rules that govern the marketplace but also work a strategy around them so that you don’t pay more than you have to.
What plan of action have you put in place to avoid long-term storage fees?