Minimizing Amazon Long Term Storage Fees in 2024

As an Amazon seller, one of your biggest costs can be long term storage (LTS) fees for keeping inventory in Amazon‘s fulfillment centers. For 2023, here‘s a comprehensive guide to understanding these fees and avoiding them through smarter inventory management.

Breaking Down Amazon‘s LTS Fee Structure

Amazon charges LTS fees to encourage fast inventory turnover and make room for new products coming in. Here are the key things to understand:

• Fees kick in at 12 months. So on month 13, LTS fees apply.
• $6.90 per cubic foot/month is charged, or
• $0.15 per unit/month, whichever is higher.
• It‘s $0.15 per unit no matter what after month 12.

For example:
Seller Jane has 100 widgets stored with Amazon for over a year. Each widget takes up 0.2 cubic feet.

• Volume-based LTS Fee: 100 widgets x 0.2 cubic ft x $6.90 = $138
• Per unit LTS Fee: 100 widgets x $0.15 = $15

Jane pays $15, the higher of the two.

Why Benchmarking Inventory Turnover Matters

According to Amazon experts like Dan Vas, average turnover for top FBA sellers is around 6-8x annually. This means selling all inventory on hand every 3-4 months.

For categories like beauty, turnover is often 12-15x per year. But larger products like furniture see slower rates of just 3-4x per year.

By benchmarking your inventory turnover:

• You can set category-specific goals
• Spot slower products not meeting targets
• Focus on promotions to speed up selling

Doing this diligently helps minimize the risk of inventory hitting the 12 month mark!

LTS Fees in 2022: A Look at the Data

In 2022, LTS fees have become a pain point for many sellers according to data from forums and seller communities. Particularly with supply chain issues creating more inventory buildup.

Here‘s a breakdown of average monthly LTS fees paid in 2022 based on Amazon categories:

As you can see, categories like Home & Kitchen tend to accumulate higher LTS fees given large product sizes and lower turnover rates.

Careful Pricing Strategies to Liquidate Faster

One of the fastest ways to sell off slower inventory? Strategic price adjustments.

When trying to liquidate products approaching a year in storage, here are pricing best practices:

• Research competitor pricing – Match the lowest comparable listing even at smaller margins
• Price promotions – Discount 10-20%, run lightning deals, advertise on product
• Prioritize margins 2nd – Recouping some money is better than fees
• Avoid race to the bottom – Don‘t destroy listing health long term

Example:
Sally sells a flatscreen TV for $500 (retail price $600). Data shows only 2 units selling per month. Gets close to LTS fee timeframe.

• Competitor Price: $450
• Promo Price: Lower to $400 temporarily while advertising deal
• Result: Sells extra 5 units that month, avoids LTS fees

Following a structured pricing ladder, Sally cleared aged inventory while minimizing losses on product margins.

Expert Tips: Running Promotions for LTS Avoidance

Beyond pricing adjustments, promotions are a secret weapon used by top Amazon sellers.

The key is timing promotions for maximum impact as your goods approach the 12 month mark.

Types of Deals to Run

1. Discounts – Straight % off during low sales periods

2. BOGOs – Buy One Get One Free offers, work well for consumables

3. Bundles – Pair slow products with faster selling items

4. Giveaways – Deep discount or free in exchange for review

5. Lightning Deals – Amazon‘s ultra-discounted deals for ~6 hours

Prime Day, Prime Early Access

Amazon‘s annual sales events are perfect for moving aged inventory with stellar promotions. Just be sure to prepare 3-6 months out.

Inventory Placement Services

Tools like Teikametrics can help run reports on exactly where your slower items are located. Allowing targeted promotions by warehouse.

When Does Multi-Channel Fulfillment Make Sense?

Amazon‘s MCF program lets you keep selling on Amazon while storing current inventory elsewhere. No LTS fees and less overhead.

But there are tradeoffs around logistics that depend on your product specifics.

MCF Pros

• Avoid LTS fees
• Lower storage costs overall
• Keep selling on Amazon‘s marketplace

MCF Cons

• Manual order processing/shipping yourself
• Complex for perishable/oversized items
• Potential problems managing B2B/B2C channels

As you can see, MCF is better suited to non-perishable, easy to ship products if you want to avoid LTS fees but have inventory still sellable.

Leveraging External Storage as an LTS Alternative

In addition to MCF which requires shipping orders yourself, 3rd party storage can fully take over inventory:

Popular Options:

• ShipMonk
• ShipBob
• Flowspace

Benefits Include:

• Typically cheaper $/cubic foot than Amazon
• Faster access to inventory (1-2 days)
• Handle B2B wholesale as well as Amazon orders
• Integrated with 3PL services later

The cons of external storage revolve around some added shipping time and logistics coordination. But for truly long tail items, it wins for avoiding LTS without sales channel disruption.

Here‘s a comparison of average storage costs:

2023 LTS Policy Changes: What May Be Ahead

Reviewing Amazon‘s public Q4 earnings call transcripts and seller forum rumors, experts predict potential LTS changes:

• Lowering cubic feet threshold to kick-in LTS fees faster
• Small increases in LTS fees following 2022‘s jump
• Faster inventory alerts/flags for items approaching 12 months

By staying on top of inventory age per our recommendations in this guide, you should be able to plan ahead for 2024‘s policy updates when officially announced.

Avoiding long term storage fees on Amazon requires diligent inventory management. Follow the guideline in this article around benchmarking turnover rates, strategic pricing tactics, targeted promotions, and leveraging external fulfillment.

With a carefully crafted game plan, minimizing Amazon LTS fees in 2024 and keeping inventory moving is very achievable!