Amazon announced new fees and storage charges effective from 22 February 2018, that will have a significant effect on Amazon sellers.
The announcement starts with a small $0.05 increase in monthly storage charges, at which point most people stop reading on the basis that it is nothing.
But there is much more that you need to pay attention to.
Inventory Performance Index
The Inventory Performance Index appeared on your Seller Central dashboard in February and it is something that you need to pay close attention to.
They don’t provide the exact formula but advise that it is a function of:
- Excess Inventory
- In Stock Inventory
- Stranded Inventory.
The important factor is if you are below 350, then Amazon will limit or reduce your storage limits
Each quarter, 6 weeks before quarter end (ie. 19 May), they will send a warning if your Inventory Performance Index is below 350.
Then if at the end of quarter (ie. 30 June) and you are still below 350, then Amazon will limit or reduce your storage limits.
If you have your storage limited, then
- You will not be able to send in more inventory to FBA until you are below your new limit.
- Charge you $10 cu ft per month for any stock over limit.
- The limit will apply to end of next quarter.
This will have a major impact on sellers hoping to send in new stock for 4th quarter.
Once the rest of the market starts to realise the effect of the Inventory Performance Index and the May 19 notices are sent, there will:
- Be a rush for Removal Orders. It is not clear whether a removal order not yet completed will reduce your Index.
- Be price discounting, as sellers work to reduce the excess inventory. Discounting will increase as it gets closer to 30 June.
- PPC costs will increase.
You should be aware of the potential reason for discounting and it will probably be better to ride it out rather than follow the market down.
We did a quick survey of our clients of their Inventory Performance Index:
- 14% below 350
- 41% between 350 and 500
- 45% over 500
So 14% of sellers are at risk now and they need to do something about it now.
41% of sellers need to actively monitor their Index, whether it is moving up or down. Remember Amazon can change the rules or the formula, so your index may move quickly with no major changes to your business.
45% are over 500 – they are probably ok but will need to aware of changes and consider how future shipments will affect the index.
New Strategy for FBA
Get a warehouse in USA, that will store your cartons and fulfill FBA as needed. For example, send 3,000 units to warehouse from China and then replenish FBA with 500 units at a time when needed.
This will give you flexibility to send stock to other markets if required (UK, Europe, Canada) and reduce your monthly storage costs.
Long Term Storage Charges
- 84% increase in long term storage costs (over 181 days)
- Charged monthly not semi-annual
- 181-365 days = $3.45 per month per cubic foot
- 365+ days = $6.90 per month per cubic foot.
If you got a $10,000 bill for long term storage, you will now get a $3,000 bill each month.
FBA Fulfillment Fees
There has been increases in FBA Fulfillment Fees of up to 13%.
I would pay attention to whether your products are Large Standard size under 1lb and whether you are charged $3.19 or $4.71.