Amazon recently updated its FBA fees, specifically related to the storage utilization and low level inventory. Calculating the new fees and understanding when they are applied is challenging for many sellers, especially when added to the other responsibilities of managing a seller central account. It’s important for sellers to understand these fee updates in order to make necessary changes and reduce costs. This article will outline the 2024 Amazon storage fee updates, focusing on the changes to the storage utilization surcharge and the low level inventory penalties. Learn about how these inventory fees are calculated and what sellers can do to be proactive and avoid additional costs. This article will also summarize best practices for inventory management and answer frequently asked questions. For a complete summary of the FBA updates, see this blog post about 2024 FBA fee changes.
Amazon FBA Storage Utilization Surcharge
The storage utilization surcharge is an additional inventory fee that is separate from the base monthly storage fees. This charge is based on the storage utilization ratio which is calculated by dividing the average daily inventory volume by the average daily shipped volume over the past 13 weeks. This ratio is calculated for each product size tier. This storage surcharge will be applied if a seller meets the following criteria:
You have a Professional selling account
Your first shipment to Amazon fulfillment center in US was more than 365 days ago
Your average daily inventory volume for the product size tier is at or above 25 cubic feet
Your storage utilization ratio for the product size tier is above 26 weeks
If a seller meets this criteria, all FBA inventory that is aged above 30 days will have the additional storage utilization surcharge added to the base monthly storage fee. By understanding what aspects of FBA inventory management impact these fees, sellers can be proactive and take action to avoid additional costs. Sellers that are concerned about high levels of aged inventory can also consider liquidating.
The table below outlines the storage utilization ratio and associated fees. For more information, see this Amazon help page about monthly inventory storage fees.
Amazon FBA Low-Level Inventory Fees
The low-level-inventory fee can sound intimidating and sometimes discourages sellers from sending in small quantities of products that don’t have high sell-through rates. Sellers should understand the criteria a product needs to meet in order for the low level inventory fee to be applied. This fee will occur when a product:
Has consistently low inventory compared to customer demand
Is standard-sized
Has a sell-through rate higher than 20 units in the past 7 days
Amazon shoppers expect products to be the lowest available price with fast shipping. When a product is frequently out of stock, Amazon shoppers begin to look elsewhere to find what they need. In an effort to prevent out-of-stock issues, Amazon launched the low-inventory-level fee. This fee is only applied if a product’s inventory level is low relative to its historical demand. Inventory is considered low if it is below 28 days of historical supply. The fee looks at both short-term (last 30 days) and long-term (last 90 days) historical supply when determining if inventory is low. The low level inventory fee is only applied when both the short and long term historical supply are below 28 days.
It’s important to clarify that this fee does not get charged for all SKUs. Products need to have a certain level of sales or sell-through to generate the historic demand. Amazon’s policy states, “Products that have sold less than 20 units in the past 7 days will not have this fee applied.” New products or SKUs with a low sell-through will likely not be charged this fee since there isn’t a historic demand available to determine the fee. This is critical for sellers to understand so that they aren’t discouraged from stocking low sell-through items in small FBA quantities.
Amazon FBA Inventory Management Best Practices
Mitigating costs and avoiding unnecessary fees are important for helping Amazon sellers achieve the highest profits. Stock-outs impact the customer experience on Amazon and also cause missed sales. We recommend following the tips below to prevent stock-outs, missed revenue, and additional expenses.
Track inventory each day and review sales trends on a weekly basis. Keeping a close watch on inventory and monitoring sales patterns can help sellers anticipate future demand.
Send small, more frequent FBA shipments. Sometimes FBA shipments take longer to process which can cause products to go out of stock. We recommend sending FBA shipments more frequently in smaller quantities to avoid inventory delays and shortages.
Ensure all labels are correctly applied to prevent problems with shipments. Shipment problems can take weeks to resolve, preventing inventory from being available. To avoid this, check that all labels are applied to the correct packages before sending in an FBA shipment.
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Increase sell-through rate by investing more in advertising and coupons. Products that are promoted more are less likely to sit in Amazon warehouses for extended periods.
Use AWD to increase FBA inbound readiness and reduce the time it takes to replenish inventory.
Sellers that are concerned about high levels of aged inventory can also consider liquidating. This is a great option for large amounts of inventory that have a low sell-through rate.
Amazon FBA Storage Utilization Surcharge and Low Inventory Fees - Frequently Asked Questions
What is the FBA low-level-inventory fee?
The FBA low-level-inventory fee is an additional fee that gets applied to products that consistently have low stock compared to customer demand.
How much is the FBA low-level-inventory fee?
The low-level-inventory fee is determined by the product size tier and the supply level. This Amazon help page includes a table with the fees for each size tier and inventory level.
What are the 2024 Amazon FBA fee changes?
Multiple updates were made to the FBA fees in 2024, including the addition of the low-level-inventory fee and the storage utilization surcharge. For more information, see the Amazon help page for FBA fee updates.
How much are FBA fees?
FBA fees vary by a products size and weight. There are multiple factors used to calculate the FBA fees for a product. To figure out a product’s FBA fees, measure the package’s dimensions and weight and follow the steps outlined in this article about FBA fees
Conclusion
Understanding the 2024 FBA fee changes is important for sellers to be successful. Stock shortages and long-term inventory storage fees can be costly if sellers aren’t diligent with inventory management. With the new fees, there is a greater penalty for not carrying sufficient stock for top-selling products. Storing inventory for slow-selling, oversized inventory has also become more expensive. Sellers that take the time to review these updates and make proactive adjustments will avoid paying additional fees. By following the best practices above, they will also have products with a higher sell-through rate, better customer experiences, and fewer issues on their account health. For more information about Amazon’s FBA fees, contact Goat Consulting with any questions.
About the Author - Stella Nelson
This post was written by Stella Nelson, an Account Manager at Goat Consulting. Stella helps her clients sell on Amazon by increasing sales, mitigating risk, reducing costs, and solving problems. Stella has experience and expertise in FBA planning and forecasting that align with the overall Amazon selling strategy and goals for her Goat Consulting clients. If you want help with understanding FBA fees and forecasting demand, or assistance with other aspects of selling on Amazon, Stella is happy to lead your account.