Avoid Expensive FBA Storage Fees by Liquidating Stagnant Inventory
by November 1, 2020
The biannual FBA long-term storage fee is close at hand. If you have inventory that’s been sitting in FBA for longer than six months, you’ll end up paying Amazon a premium on August 15, 2016. In order to avoid expensive FBA storage fees we recommend you liquidate stagnant inventory. At the very least, you’ll cut your losses. But you might actually make a little money and boost your product reviews and conversions at the same time.
Be aware of FBA storage fees
If you sell multiple SKUs on Amazon, you’re likely aware of your winners and losers. And if you use Fulfillment by Amazon (FBA) your losers will likely end up costing you money with storage fees. Just to be clear, Amazon will charge FBA sellers a long-term storage fee on August 15, 2016. Sellers will be charged $11.25/sq ft for items that have been in FBA 6-12 months, and $22.50/sq ft for items that have been in FBA more than 365 days—this doesn’t included monthly storage fees for the holiday season this year. As you can see, these costs will add up quickly if you have stagnant inventory lying around.
Start a liquidation promotion
Before you start any sort of liquidation promotion, understand what your stagnant products are. Once you’ve pinned down the product or products you want to liquidate, figure out how much storage space they are occupying in FBA and how long they have been there. Now take your storage fees and subtract them from the wholesale inventory value of the products you want to liquidate. This will give you a baseline evaluation of your products’ value if they don’t sell before August 15.
Once you have a number showing your potential losses, work backwards to figure out how much of a discount you need to sell your products at in order to break even or make a small profit.
Example:
Let’s say you sell soccer balls and you have 100 that haven’t sold in seven months. Each ball takes up 1 sq ft of FBA space. This will cost you $1,125 in long-term FBA fees if none of them sell before the FBA storage-fee deadline. Your wholesale cost of each ball is $5 and the retail value is $20. Theoretically, if you sold all 100 balls before the deadline you would earn $2,000 or $1,500 in profit (excluding Amazon fees).
In order to avoid a $1,125 FBA bill, you could run a sales promotion to liquidate your inventory and cut your losses. If you sold each ball for $10 with a promotional fee of $4 per ball, you would make $1 on each ball. At the end of your promotion you would end up with $100 profit (compared to $1,500 in a perfect world) but you would avoid a $1,125 bill.
I understand this is a gross over simplification but the logic is what I’m trying to communicate—cut your losses and move on.
Start your liquidation promotion
Now that you know what your losing products are, you can decide what your break-even or minimum profit needs to be. But where can you run a liquidation promotion of this size? Snagshout.com is the premier Amazon deals site to run promotions on your products. It has more than 150,000 shoppers, and every transaction happens on Amazon. You just need to create one-time use promo codes through Amazon then upload them into your Snagshout campaign. Select a quantity and discount price, then choose a daily limit. For liquidation purposes, we recommend setting your daily limit equal to the quantity you’re trying to liquidate. Make sure to upload photos and a description and you’ll be ready to go!
Not only will Snagshout help you liquidate your stagnant inventory, but it will help increase your conversion rate on Amazon as well as your product reviews. Snagshout shoppers must leave an honest review in order to purchase more products on the site.
For more information on how Snagshout can help your Amazon business, download our case study to learn how one seller was able to get 200 5-star reviews using Snagshout to launch a product.
Seller Labs provides Amazon sellers tools for improving seller feedback and product reviews, product research solutions, intuitive seller metrics, and product marketing. Join Snagshout today and get 5 free promotions—a $25 value!
About the Author
Cory Checketts does the heavy lifting for Seller Labs’s content creation. He has experience writing and creating awareness for various public organizations, as well as doing freelance writing and graphic design for public and private organizations. He holds a B.S. degree in journalism from Utah State University.
