A New Nightmare for Sellers as Amazon Announces Storage Utilization Surcharges
Amazon just announced that it will be imposing a storage utilization surcharge for the monthly storage fee, which takes effect on April 1, 2023.
The surcharge, which is likely due to the company’s declining ecommerce growth rate per its Q4 2022 earnings report, will be based on your storage utilization ratio, or the ratio of your average daily inventory volume stored in cubic feet divided by the average daily shipped volume in cubic feet over the trailing 13 weeks.
Also Read: Amazon Storage Limits – How to Avoid Them [February 2023 Guide]
It will only apply to Professional sellers with a storage utilization ratio above 26 weeks. The storage utilization ratio will be calculated on the last day of the month, and the corresponding surcharges will be applied as part of the storage fee charges of the following month.
At the outset, the imposition of a storage utilization surcharge is likely a major concern for sellers with high storage utilization ratios. In the long run, this could necessitate working with a reliable third-party logistics company (3PL) in order to avoid the surcharges, which will potentially drive 3PL prices way up. In the short run, sellers will be forced to either quickly reduce their inventory levels stored in Amazon FBA or find quick ways to significantly increase sales velocity.
Based on the table provided, the surcharge will affect inventory stored inside Amazon FBA warehouses for over 6 months (charges apply beginning on the 181st day). This will likely impact many third-party sellers, as having 6 months' worth of inventory has been the rule of thumb for running a sustainable Amazon business for years.
This is not the first time that Amazon will force third-party marketplace sellers (from whom it apparently takes 50% cut from each sale) to absorb additional costs due to slow growth rate and inflation.
On February 1, 2023, it increased off-peak monthly inventory storage fees for standard and oversize products. Additionally, it will increase peak monthly inventory storage fees for oversized products starting October 1, 2023.
Also Read: 7 Great Ways to Liquidate Inventory
Many sellers who received the announcement via email or read it on Seller Central were frustrated that there was no prior notification before they actually sent in their inventory that is now likely to get slammed with the surcharges. Some also pointed out Amazon’s conflicting attitude of pushing additional storage and fulfillment costs to sellers while promoting its proprietary multi-channel fulfillment (MCF) services.
You can check out the complete details including a breakdown of how the charges are calculated and applied on the Amazon Seller Central page for the 2023 FBA monthly storage fee and aged inventory surcharge changes.
