Amazon's Low Inventory Fee Explained: Everything You Need to Know
Are you grappling with Amazon's upcoming Low Inventory Fee set for implementation on April 1, 2024? This new fee is introduced to encourage you to align your inventory levels with customer demand, aiming to enhance the efficiency of Amazon's distribution network and improve delivery speeds. In this guide, we'll dive into what the Low Inventory Fee means for you, including its calculation, fee structure, which products are affected, and how you can minimize or avoid these fees.
What Is the Low Inventory Fee, and Why Is Amazon Introducing It?
The Low Inventory Fee is designed to address the challenges that arise from consistently low inventory levels relative to customer demand for standard-size products. By introducing this fee, Amazon aims to motivate you to keep your inventory in better alignment with demand, ensuring that products are readily available for distribution and delivery. This initiative is about improving the customer experience by reducing delivery times and optimizing Amazon's shipping operations.
Why Should You Care About This New Fee?
This fee is critical for you because it directly impacts your operational costs and pricing strategies. Keeping an adequate inventory becomes not just a matter of avoiding stockouts but also an essential practice to sidestep additional fees.
How Is the Low Inventory Fee Calculated?
Understanding how Amazon calculates this fee is key to managing your inventory effectively. The calculation is based on the "historical days of supply" metric, which looks at both your recent (last 30 days) and more extended (last 90 days) inventory levels against customer demand. You'll face this fee only if both metrics fall below a 28-day threshold, underscoring the importance of consistent inventory management. We’ve build a comprehensive Amazon Fee Calculator to help you understand their impact on your business - get your free copy by clicking here.
What's the Fee Structure?
Knowing how the Low Inventory Fee is structured helps you anticipate additional costs and adjust your budget accordingly. This fee is added to the FBA fulfillment fee for every shipped unit of products that fall under the low inventory category. It's calculated per unit and varies based on factors like size tier, shipping weight, and your historical days of supply. The fee kicks in at the moment of shipping an order, adding a critical cost element to your shipping process.
Which Products Are Eligible for the Low Inventory Level Fee?
Not all products in your inventory will be subject to this fee. It specifically targets standard-sized products with a historical days of supply less than 28 days. However, there are exemptions to be aware of:
- If you're a New Professional seller, you get a 365-day grace period from your first inventory-received date.
- New-to-FBA parent products enjoy a 180-day exemption, provided you're enrolled in the FBA New Selection program.
- Products auto-replenished by Amazon Warehousing and Distribution are exempt from this fee.
How Can You Minimize or Avoid the Low Inventory Fee?
Minimizing or completely avoiding the Low Inventory Fee is crucial for maintaining your profit margins and competitive edge. Regular monitoring of your historical days of supply through the FBA Inventory page on Seller Central is essential. Strive to keep your inventory above the 28-day threshold, especially for products that consistently see high demand. Take full advantage of the exemptions offered to strategically plan your inventory without immediate concern for fees. Tracking the various fees Amazon charges takes time and can be quite complex. If you wish to get automated recommendations to lower your Amazon fees, start your free 3fin trial now. Not only will 3fin allow you to keep an eye all the hidden fees Amazon takes from you, it will also give you inform you when you’re being charged too much or when it sees an optimization potential.
In Conclusion
As Amazon introduces the Low Inventory Fee, it's more important than ever for you to stay on top of your inventory management. By understanding the nuances of this fee, including how it's calculated, its structure, and eligibility criteria, you can make informed decisions to keep your business profitable and competitive on Amazon's platform. Employing strategic inventory management not only helps you avoid unnecessary fees but also enhances your customers' experience, potentially driving more sales and improving the overall health of your business.
