Amazon's New “Low Inventory” Fee ExplaineD
As part of their ongoing effort to optimize the fulfillment process, Amazon has introduced a new fee that directly affects FBA Sellers. This fee, known as the Low inventory level fee, is designed to encourage sellers to maintain sufficient stock levels to facilitate efficient distribution and enhance customer service. Here, we cover the specifics of this fee, including its implications, how much it costs, and the response from the seller community.
What is the Low Inventory Fee?
The low inventory level fee is a new charge implemented by Amazon for FBA sellers who maintain inventory levels that are consistently low relative to their sales volume. Officially announced in December 2023 and in effect since April 1, 2024, this fee targets products with a historical days of supply below 28 days. Amazon’s rationale for this fee is to prevent stock shortages that could delay shipping times and impact customer satisfaction.
Who does it affect?
This fee impacts all sellers using Amazon's FBA service who do not maintain adequate inventory levels as per Amazon's specified criteria. It is particularly significant for sellers with fluctuating sales volumes or those who struggle with Amazon inventory forecasting. The fee encourages sellers to assess their inventory management strategies and ensure they meet the minimum required days of supply to avoid extra charges.
What is considered “Low Inventory”?
During the initial transition period in April 2024, sellers will be charged the low inventory level fee but will subsequently receive a credit for these charges in May. This approach allows sellers to experience the impact of the fee, while providing them with a clearer understanding of how their inventory management might need to adapt. From May 1, 2024, onward, the fee will be enforced strictly without credits, pushing sellers to maintain either a long-term (last 90 days) or short-term (last 30 days) historical days of supply above 28 days.
What products are affected by the Low Inventory Fee?
The fee targets standard-sized products with insufficient stock levels as defined above. It excludes new FBA sellers for the first year, products new to FBA for the first 180 days, and items enrolled in Amazon's auto-replenishment program.
Where can I find information on a product’s historical days of supply?
To check your product's historical days of supply, visit the FBA Inventory page in Seller Central. Here, you'll find a column labeled "Historical days of supply" where the system automatically calculates and displays this metric for each product. This figure reflects the greater value between the short-term (last 30 days) and long-term (last 90 days) supply metrics, providing a clear view of your inventory status.
For each product listed in the FBA inventory with a historical days of supply exceeding 28 days, the low-inventory-level fee will be waived. To understand how this figure is calculated for each item, sellers can hover over the "details" link next to the displayed days of supply on the FBA Inventory page. This provides a clear breakdown of the calculations used, aiding sellers in managing their inventory more effectively.
On the FBA Inventory page, you can search your inventory by specific SKUs or ASINs to check the historical days of supply for each item. Utilize the historical days of supply column to sort your inventory either in ascending or descending order, allowing you to quickly pinpoint which products might be subject to the fee. This feature simplifies the process of identifying items that require immediate attention to avoid the low-inventory-level fee.
How can you avoid this fee?
To avoid the low inventory level fee, sellers should focus on improving their inventory management:
Timely Replenishment: Regularly sending additional units to FBA to ensure that short-term supply exceeds 28 days.
Enrollment in Auto-Replenishment: Products managed under Amazon's auto-replenishment program are exempt from this fee, providing a reliable way to maintain adequate inventory levels.
How have Sellers been reacting to this new fee?
Feedback from the Amazon seller community has been predominantly negative. Sellers express frustration over the difficulty of finding a balance between avoiding long-term storage fees and now the low inventory level fees, especially given the operational delays at FBA fulfillment centers, which can take 2-3 months to process shipments. This situation complicates Amazon inventory management, making it challenging for sellers to maintain the required stock levels without facing additional costs.
Many sellers feel that this new fee is yet another financial burden imposed by Amazon, complicating the logistics of managing inventory that can fluctuate with seasonal trends and consumer demand. The criticism points towards a perceived lack of consideration from Amazon regarding the logistical and financial realities that sellers face, particularly those with smaller operations or less predictable sales patterns.
Strategic Inventory Management for Improved Profitability
Effective inventory management is crucial not just for avoiding fees but for enhancing overall profitability. By maintaining optimal stock levels, you can ensure faster delivery times, better customer satisfaction, and increased sales—all integral to success when selling on Amazon.
While the low inventory level fee presents new challenges for FBA sellers, understanding its mechanisms and proactively managing inventory can mitigate its impact. Leveraging the tools and information provided by Amazon and considering enrollment in automatic replenishment programs can help Sellers navigate these changes strategically in order to avoid excess fees.
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