Amazon FBA sellers who have been with Amazon for a while should already know that the company has a history of charging more for warehouse storage during November and December. This makes sense, as increased sales volumes during the holidays could tempt sellers to keep more inventory on hand than usual, crowding even Amazon’s vast warehouses beyond capacity. However, this year is a little different.
Surge Pricing Surges Higher – In past years, seasonal surge pricing increased 10 to 20 cents per square foot of storage for October through December, depending on whether you were storing standard or oversized products. This year, storage fees will be double to triple the usual rates. Yes, you read that right: storage costs will be two to three times the usual rates.
Amazon isn’t just raising the storage rates without regard for its sellers, though. October rates will not be raised at all, as opposed to past years where the rate jumped on October first. This gives sellers more time to get their inventory under control to minimize their costs in the next two months. Additionally, weight handling fees are slightly reduced in November and December to help offset storage costs. For more information on exactly how storage and handling fees will be changing, read Amazon’s fee change announcement.
Minimizes Your Losses – It seems inevitable that there will be some struggle to make up the difference with a price surge that high, but with some planning ahead, you can minimize the impact it will have on your business. Below are some of the steps you may consider as we get closer to the holiday season storage price hike.
- Pass the costs on: If you plan on passing these increased costs on to your customers, you may want to consider incremental price increases between now and November.
- Inventory reduction: This is, of course, the end goal of Amazon’s price surge. Reducing your inventory and managing it closely to meet demand may be the best way to prevent paying too much in excess storage fees. This price surge is to prevent a lot of inventory from the holidays sitting in the warehouse for months into 2017, which saves both Amazon and FBA sellers money in the long run.
- Consider your products: With such a large price hike coming up, this is a great time to look at your product sales to make sure each product is worth keeping in stock. If any of your products don’t sell in high volume and you don’t anticipate a huge increase over the holidays, it may be time to cut it loose — at least temporarily.
If your profit margins are high enough, you can probably just absorb the price hike as part of operational costs, but why lose income when you don’t have to? Take the time to consider the options above, and try one or more of them to help reduce the fees you’ll be paying — at least until January, when fees go back to normal.