Is Amazon FBA Still Your Smartest Move?
Amazon is raising monthly inventory storage fees starting April 1, 2018, for those sellers who use FBA fulfillment. They announced the changes in efforts to improve inventory management so that products will be received and delivered to customers faster. The changes which include assessing Long-Term Storage fees monthly instead of biannually and the introduction of an Inventory Storage Overage fee are to improve overall efficiencies.
FBA is introducing the following changes:
- Monthly Inventory Storage Fees
- Long-Term Storage Fees
- Minimum Long-Term Storage Fees
Changes for Sellers with a Professional Selling Plan:
- Inventory Storage Overage Fees
Monthly Inventory Storage Fees
Starting April 1, 2018, monthly inventory storage fees will be increased by $0.05 per cubic foot for standard-size and oversize items. This change will first be reflected in May 2018 charges for storage that occurs in April 2018.
Long-Term Storage Fees
Starting September 15, 2018, long-term storage fees will be adjusted, and the assessment dates will be changed from a semi-annual basis to a monthly basis.
Minimum Long-Term Storage Fees
On August 15, 2018, they will introduce a minimum charge of $0.50 per unit per month for items in fulfillment centers for 365 days or more. The greater of the applicable total long-term storage fee or minimum long-term storage fee will be charged.
Storage Limits and Overage Fees
Amazon will be utilizing the Inventory Performance Index that was introduced last fall to help measure efficiency. The new policy imposes storage limits on sellers with a Professional seller plan who don’t manage their inventory properly. Starting July 1, 2018, Amazon may limit access to storage for sellers with an Inventory Performance Index below 350. Sellers who maintain an index score of 350 or greater will have unlimited storage for standard size and oversize items (monthly storage fees and long-term storage fees still apply).
Sellers with a Professional selling plan who do not maintain an Inventory Performance Index score of 350 or greater will be evaluated on a quarterly basis. Starting July 1, 2018, storage limits will be evaluated on a quarterly cycle. If your Inventory Performance Index is less than 350 six weeks before the start of the quarter, you will be notified. If your Inventory Performance Index score is less than 350 at the end of the quarter, those limits will apply for the next quarter. Under the FBA inventory storage limits policy, you will not be able to create a new shipment until your inventory level drops below your storage limits.
Viable Seller Recommendation
As Amazon consistently seeks efficiencies in their processes these methods are being passed down to sellers. However, there are viable options offered for your business such as Seller Fulfilled Prime where you can avoid long-term FBA inventory storage fees. Unlike FBA, Seller Fulfilled Prime allows you to control your inventory by using your existing warehouse fulfillment capabilities. Customers will purchase through Amazon Prime as usual, but you ship the items directly from your warehouse. With SFP you use the Amazon Prime brand name and shipping rules and must pick, pack and ship accordingly to your customers.
Amazon does have a list of requirements and an application process that you will be expected to meet to become an independent Prime seller via the Seller Fulfilled Prime program. At Channel Key, we offer guidance to our clients who would like to transition over to Seller Fulfilled Prime and may need assistance with the requirement process.
Another potential option is Amazon FBA Onsite, this is a warehouse management software that provides third-party sellers with faster and simpler shipping, plus delivery logistics at a cheaper cost. Currently, FBA Onsite is by invite only and still in beta testing so more to come as this service continues to roll out.
If you’re interested in learning more, please reach out to Channel Key at [email protected] today.