We're all probably familiar with Amazon's new Capacity Manager that they rolled out earlier in the year.
One of the features of Capacity Manager was the ability to bid on more storage space. Sellers can bid in an auction-based system for more storage space. Amazon painted it as an ability for sellers to potentially get more storage space with no cost as long as they managed their inventory well. Skeptics looked at this as just another way for Amazon to milk sellers (see: Fuel Surcharges, Inflation Surcharge).
After four months of collecting data, we can now see where those fees are heading. Any guesses?
Amazon Storage Reservation Fees Are up 30%+ in Four Months
We looked at the average Amazon reservation fee for March 2023 to June 2023. The results aren't pretty.
For standard-size reservation fees, the average reservation fee went up from $1.75 per cubic foot in March 2023 to $2.35 for June 2023 (remember, you bid for this storage ahead of time, hence the forward-looking months). This is an increase of 30%.
For oversize, the average reservation fee went up 30% as well from $0.74 to $0.96.
Keep in mind, these rates are for the historically slower selling time of Spring. Almost undoubtedly, these fees will increase significantly the closer we get to the holidays. An increase may occur in time for Prime Day in July as well.
Amazon Offers “Performance Credits”
Amazon incentivizes sellers to bid on more storage space through the promise of potentially receiving Performance Credits that can offset some or all of the additional reservation fees.
“Performance credits are earned at a rate of $0.15 for every dollar of sales that you generate using the additional capacity.” How are the sales attributed to that additional capacity? That's where the math gets fairly confusing (see the official Amazon help article for more info).
Will Amazon Increasingly Pressure Sellers to Bid on Additional Storage Space?
When Amazon announced Capacity Manager and the removal of ASIN limits earlier in the year, many sellers were pleasantly surprised. In addition, the base storage capacity that most sellers have is generally more than they need and there has been little need to bid for more storage capacity.
However, one of the fears sellers have is that Amazon may reduce the base storage capacity of sellers and essentially force them to bid on additional storage capacity. Given the upward trend that storage limits have seen as well as CEO Andy Jassy's pledge to have more “healthy levels of profitability” is this a temptation Amazon will be able to resist? Time will tell.