admin_fortress | Feb 12, 2022
Published in The Marketplace Playbook
As an Amazon seller, one of the decisions you will need to make is how you want your orders managed and fulfilled. One of the most popular ways to sell on Amazon is through FBA, or Fulfillment by Amazon. In fact, over 70% of Amazon sellers use FBA to manage their orders, inventory, shipping, and delivery. In this article, we’ll break down what FBA is, the storage fees associated with FBA, as well as alternatives for warehouse storage and distribution.
FBA Overview
When you use Amazon FBA, you get access to the various advantages offered with the distribution model. These include the ability to sell using Amazon Prime, which is most commonly known and favored for its lightning-fast shipping and delivery. Additionally, Amazon sellers who use FBA don’t have to store their own inventory or ship their orders. This tends to make life easier for Amazon sellers, as Amazon handles everything including storing inventory in their warehouses, or fulfillment centers, packing orders, shipping and delivering items, and even responding to any customer inquiries regarding orders.
Although the mostly hands-off approach of FBA is appealing to most of Amazon’s sellers, it still requires some costs to the seller. If you’re thinking about selling on Amazon and going with FBA as your distribution option, there are fees associated with it that you would want to consider before deciding what is right for you.
Storage & Warehouse Fees
The biggest costs for an FBA seller are the Amazon storage fees. The Amazon monthly storage fee is the fee sellers pay to Amazon in order to utilize Amazon’s fulfillment centers and store their inventory there. Amazon FBA storage fees are primarily based on the inventory volume and the size of items by the cubic square foot, as well as the time of year the items are being stored. When inventory is stored between October and December, storage fees tend to be costlier due to the increase in the volume of inventory given the busier holiday season. Some fulfillment centers reach max capacity during these busier times. During January through September, storage fees tend to be a bit lower.
Keep in mind that Amazon FBA storage fees can fluctuate during the year. So what’s the best way to calculate FBA storage fees? One of the easiest ways to determine your costs as an Amazon FBA seller is to use Amazon’s free cost calculator tool. By providing your anticipated fulfillment costs, you’re able to see real-time cost estimates for the products you are planning to sell on Amazon.
Dangerous Goods & Long-Term Storage Fees
There are different storage costs when dealing with what Amazon deems “dangerous goods.” The storage costs are higher for dangerous goods because they require specific handling requirements, including hazmat storage. These items are, according to Amazon, “substances or materials that may pose a risk during storing, handling, or transporting because they contain flammable, pressurized, corrosive, or otherwise harmful substances.”
Products like mobile phones, battery chargers, power banks, cameras, and various electronic items that contain lithium batteries are deemed dangerous goods. Other items like headphones, tools, and speakers are also categorized as dangerous by Amazon. In order to sell these items as an Amazon seller, you must adhere to Amazon’s hazmat guide. For a full list of dangerous items and a guide for safety and packaging, you can visit Amazon’s guide here.
A long-term storage fee is exactly what it sounds like. Amazon’s long-term storage fees are charged for any inventory that is stored at a fulfillment center longer than 365 days. To learn more about long-term storage fees, visit Amazon’s fee guide here.
Distribution Alternatives
If you’re an Amazon seller and you don’t feel like FBA is right for you, there are other options you can consider to sell items on the marketplace. When you use an alternative method to FBA, it is considered Fulfillment by Merchant, or FBM. What this means is that you, the merchant, are solely responsible for managing and fulfilling your orders, managing your inventory, and shipping and delivering your items to customers. You do not need to use one of Amazon’s warehouses to store your items, therefore you do not need to pay Amazon storage fees. It should be known that most FBM orders are not eligible for Amazon Prime.
Another alternative is Seller Fulfilled Prime, or SFP. This program lets sellers ship to domestic Prime customers from their own storage. This lets sellers use the Prime badge on their listings, ensuring that any order placed will be delivered within the two-day delivery window that Prime promises.
An additional alternative to all of these is using a third-party fulfillment provider. By sourcing an agency that provides this service, you will be paying a cost to the third-party provider to handle all the logistics of the warehouse storage and fulfillment of your Amazon orders.
For Amazon’s full guide to FBA, including fee breakdowns and benefits of the program, please click here.
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