Amazon recently announced that it will start imposing a storage utilization surcharge for all professional sellers effective April 1st. This change will impact those with a storage utilization ratio of 26 weeks. The surcharge aims to compensate for the decline in eCommerce growth rate during the last quarter of 2022. This is not the first time that Amazon charges third party sellers to compensate for inflation.
In addition to the surcharges, Amazon will charge peak monthly inventory storage fees starting October until December 2023. This will be an increase of $0.20 per cubic foot for oversize products. Sellers will experience the charges starting November 2023. Standard-size products will not be affected by this increase.
What to Expect
Third party sellers complain that this recent move by Amazon is abrupt. There were no announcements or emails about this recent update. Most sellers have already requested their inventory for the second quarter so this will surely have an impact on their budget. Amazon requires that sellers need to have ample inventory for up to 60 days, and for those who have oversize products, this will greatly impact their business.
In addition, this is a conflicting change as Amazon also promotes Multi-Channel Fulfillment. This means that third party sellers who use Amazon FBA will also get affected even though they don’t sell on Amazon.
Based on the table below, here’s a comparison of the increase in storage fees based on Amazon’s 2023 FBA monthly storage fee and aged inventory surcharge changes.
* This excludes items listed under the clothing, shoes, bags, jewelry, and watches categories
How to Mitigate the Impact of Amazon’s Storage Utilization Surcharge
Majority of sellers will certainly be impacted by this recent update. In fact, most of the sellers have already planned and requested their inventory so there is no turning back. This change also aims to help sellers effectively plan their storage. However, it is also conflicting since Amazon requires sellers to have stocks in their inventory for up to 6 months.
As a seller, perhaps the best way to face this is to hire a third party logistics company which can help you with storage. But, the solution does not end there. Sellers still have to face the challenge of finding a reliable 3PL company who can handle there sales and ship out the orders as fast as Amazon FBA does.
Here is a list of guide questions when finding the best 3PL:
- Guaranteed handling times? What happens if they’re late?
- Do they hire more staff around busy shipping times, i.e. Black Friday and Christmas?
- Can they label items?
- Can they inspect returns?
- Can they place inserts in boxes?
- Is there a surcharge to place packing slips in boxes?
- Is there a setup fee?
- Can they handle mail and/or mail forwarding/scanning?
- Can they handle custom packaging (i.e. your branded shipping boxes) and, if so, is there a surcharge for it?
- Do they provide insurance on your inventory or do you need to buy/provide it?
- Can you come to the warehouse any time and view your products?
- Can they offer a space for photography or other staging?
- Can they integrate with your ecommerce platform?
- Are they familiar with Amazon FBA?
- Can they handle a small number of orders? (if you’re a smaller merchant)
- Can they create pallets for you?
- If you’re handling food products can they handle food grade requirements?
You have to admit that when it comes to reliability, Amazon FBA is still the best 3PL. The only downside is the skyrocketing fees. Most sellers hire a 3PL to store their inventory then have them shipped out to the Amazon Fulfillment Centers as needed. This takes care of the exorbitant storage fees that may be charged if your stocks go beyond 6 months.
Selling on Amazon is becoming a headache for most third party sellers due to the fees and surcharges that they impose. Most sellers mitigate these difficulties by having their own website and even resorting to FBM.
If you need help in deciding how to start selling on Amazon, give us a call and we’d be glad to help you out.
“Selling on Amazon is like running a marathon. It requires patience, persistence, and a lot of hard work.”— Unknown