As more customers flood the world of eCommerce, Amazon sellers are constantly revising their business strategies to keep profit margins high and expenditures low.
As they say, time is money. Your time is precious as an Amazon seller, and in order to become successful, you need to delegate that time wisely.
That is why 73% of all Amazon sellers use Fulfillment by Amazon (FBA) services.
Although the time-saving benefits of employing a storage company to ship your inventory speak for themselves, there are still other costs beyond your product's sales tax that you must evaluate in order to make a well-informed decision about the storage facilities you choose. This is where OA Cheddar comes in.
OA Cheddar doesn't just specialize in providing your inbox with profitable Amazon FBA product leads daily - we also specialize in providing you with the best prep centers to cater to all of your shipping needs so you can spend more time focusing on your customers' satisfaction.
Within our informative guide, we shall cover how much storage units cost and the factors that will determine how much you pay for storing your inventory with storage unit companies.
Most importantly, we will guide you through the types of storage that best suit your business's goals, as well as ways you can keep additional costs low.
What are Amazon FBA Storage Costs?
If you are an Amazon FBA seller, you know that your products are stored in Amazon’s fulfillment centers.
By occupying the space within these fulfillment centers, you must pay fees to enable Amazon to manage your inventory.
How Does Amazon Calculate FBA Fees?
Inventory storage costs are charged based on the daily average volume (measured in cubic feet) for the space your inventory takes up within a storage facility.
Source: Barrons.com
Additionally, this volume measurement is based on unit size only when the product has been adequately prepped and packaged, ready for shipping.
Types of FBA Storage Fees
Now that you know how Amazon calculates its storage costs, it is vital to know the different fee structures that Amazon offers because - depending on how you use their storage units - this can significantly impact your profit margins.
Monthly Storage Costs
The Amazon FBA monthly fee is, as previously mentioned, the specific fee a merchant pays to their storage facility for the storage space they occupy.
You’ll need to pay a monthly commission to the storage facilities you use between the 7th and 15th of every month.
Several factors determine your monthly storage unit cost. Storage unit prices depend on the following criteria:
Product Size Tier
The size tier that your products fall under affects the monthly costs of your storage unit. Your products are classified as either standard-size items or oversized items. From these categories, your products will fall into one of six subcategories.
Standard-sized: small and large.
Oversized: small, medium, large and special.
To determine which size tier your stored items are in, you need to calculate unit weight, product dimensions and the dimensional weight of a packaged product.
Seasonality
Storage unit prices increase during the peak season (October to December) because more products are likely to be in high demand.
For example, in the months leading up to holidays like Christmas or New Year's Day, your fees will rise to compensate for the increased workload of the storage unit companies you work with.
Interestingly, during seasonal periods, it is cheaper to store oversized products in comparison to standard-sized products.
Volume Per Unit
This metric provides the volume per unit, which is measured in cubic feet. This applies to packaged products that adhere to Amazon FBA regulations.
Average Daily Units
Check your Monthly Storage Fees Report to determine the average daily units that your fulfillment center stores per month.
Dangerous Goods
One of the other factors that has a significant impact on storage costs is if Amazon classifies your product as a dangerous item.
You may immediately assume your product wouldn't fall into this category, but items such as smartphones, household cleaners and perfumes are classed as dangerous goods. Acquaint yourself with Amazon's Dangerous Goods list.
Source:Hazmat Labels
It’s crucial to know the classifications of your items because, without proper classification, your products will not be eligible to sell.
How to Calculate Monthly Storage Unit Costs
Below, we have provided the formula for the monthly rent of your storage unit.
Fee per product = Average Daily Units x Volume Per Unit x Applicable Rate
The applicable rate includes seasonality, the tier of product sizes, and whether the products are classified as dangerous goods or not.
Long-Term Storage Costs
It’s not just storage unit size that affects costs: how long you’re using it for will also affect fees.
Amazon charges long-term storage unit prices twice a year, on February 15th and August 15th.
Here are some other factors to help you calculate the overall cost of long-term storage units:
The Volume of Your Inventory
The volume of your stock plays a part in how much you'll be charged.
Source: Amazon latest news
You must calculate the volume of your inventory in cubic feet. Once you have done that for every respective unit, add up the total for all units, and you will have gained accurate insights into how much you are likely to pay.
The Age of Your Inventory
Find your Inventory Dashboard in your Seller Central account and check the dates that Amazon received your units.
Remember that the longer that your products are sitting in storage, the more you will get charged whilst losing profits.
Fee Schedule
Just like monthly storage costs, the time of year plays a role in the final cost of your storage unit.
How to Calculate Long-Term Storage Costs
To summarize, below is the formula that will help you determine a long-term storage unit cost.
Long-term fees = Volume of All Units x Applicable Rate x Inactivity Fees (if applicable)
Note: long-term storage fees are in addition to the standard monthly costs charged by Amazon.
Why Amazon FBA Fulfilment Centers are the Superior Choice for Your Inventory
As an Amazon seller, you are no stranger to managing large quantities of stock and, furthermore, are no stranger to looking for ways to minimize costs.
Although there are cheaper alternatives to Amazon’s fulfilment centers, we will explore why - in this case - the extra costs are worth it!
Extra Space: Storage For Large Inventories
10-by-10 feet of square space is the most common and popular storage unit size. Inside Amazon's storage units, this is a mere fraction of the accessible space.
Although a self-storage unit costs less, it’s not the best choice for sellers who have extensive inventories or large products within said inventories.
With an Amazon Fulfilment Center, you can gain up to 1,000 feet of square of storage space.
Versatility: A Range of Storage Solutions
You may get access to portable containers when you utilize self-storage units, but what an FBA center can offer you is much more versatile.
Amazon’s storage units employ cutting-edge technology to optimize the storage and shipping process. Assisted by intelligent robots, Amazon’s storage process has never been more efficient and safe.
Source: Amazon news
Amazon’s robots speed up the storage process with expert precision, having the ability to transport 1,250 pounds of stock at a time, which is made possible by our mobile shelving.
Accompanied by a multi-tiered racking system, mezzanine flooring, and wire partitions, it is easy to see why online retailers employ Amazon’s fulfilment centers.
Climate Control: Storage That Caters For Every Item
Climate-controlled storage facilities protect products from adverse weather conditions by regulating the temperature and humidity within their warehouses.
Amazon’s fulfilment centers cater to products that require such regulations.
Surveillance: Secure Stock
Like public storage, Amazon’s fulfilment centers are under 24/7 surveillance. You can rest easy knowing that your inventory is safe and secure. So, why not opt for public storage?
With public storage, you must adhere to strict operational timings, meaning that your accessibility is limited. You may also be requested to retrieve your items from your space if it's needed for government components.
How to Reduce Your Storage Expenditures
- Bundle products and reduce packaging. Small packages mean that you are using up less space and are, thus, saving money.
- Monitor your inventory regularly and avoid overstocking. We recommend that you maintain enough inventory to last between 60-90 days.
- Use Amazon's Removal Order service to remove the slow-moving products from your inventory to avoid incurring long-term fees.
- Launch special promotions or discounts to draw new customers to your slow-moving items.
- Work with Proven Prep Center.
Proven Prep Center
The Proven Prep Center's first-rate service stems from the expertise of former private-label brand owners and was founded with the aim of revolutionizing fulfilment services.
Working with the Proven Prep Center means that you will have access to 10,000 square feet of space, faultless attentiveness and communication from a professional support team, and an easy-to-follow tiered pricing system.
You can rest easy knowing that a team of experts is dedicated to the delay-free, rapid shipping of your inventory, following the prerequisites that you have full autonomy over.
Regardless of the classification of the goods you are selling, you will have access to every step of the shipping process and complete confidence in the profitability and ASIN verifiability of your products.
Get Started with OA Cheddar
Now that you can effectively navigate Amazon's storage FBA fees, it is time to consider other methods of boosting profits and reducing unnecessary costs.
Source: https://oacheddar.com
This is OA Cheddar's specialty. After you have joined our VIP list and have witnessed an incredible boost in your profits from our daily delivery of profitable OA Leads, don’t hesitate to check out our other resources!
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