The sky is not falling: Why Amazon sellers panicked about FBA long term storage fees are wrong.
In this article:
- My extensive math-based case for why so many sellers are wrong about new FBA long term storage fees.
- How to liquidate your old inventory for quick cash.
Amazon makes a new change or adds a new fee. Thousands of FBA sellers freak out on social media. Everyone screams that the sky is falling. And 3 months later, no FBA seller even remembers what the drama was about.
Sound familiar? It happens a couple times a year. And it’s happening again.
Another FBA-mageddon: Amazon announces new FBA long term storage fees
The new fees are very simple.
Every six months, Amazon charges a fee for every item that has been at a Fulfillment by Amazon warehouse for more than 6 months.
Until now, the fees have been waived for the first unit of every SKU. You can have any random copy of Mushroom Picking for Dummies in an FBA warehouse for a thousand years, and as long as you don’t have two of them, you wouldn’t get the long term storage fee.
Starting on February 15th, that will change. The FBA fees (which I’ll detail in a moment) will apply to all books (and everything else).
Breaking news: Freaking out is a choice
When there is any new FBA fee announced, I won’t even open the emails. Amazon is never going to make the platform it spent billions developing unprofitable for us, and alienate the third-party sellers (especially FBA sellers) who make up 40% of their revenue.
I’ll admit that this time, I raised an eyebrow. The new long term storage fees appeared more significant than FBA fee changes in the past.
I decided I had three options here:
- Outsource my brain to people declaring FBA doomday on the internet, who have only a cursory understanding of the new fees (or none at all), and make emotional, non-numbers-based declarations.
- Develop my own cursory and mostly emotional opinion, and make my own uninformed, public declaration.
- Actually run the numbers and let them speak for themselves.
I chose number three.
What I will prove in this article
- Why it’s wrong to panic about new FBA storage fees.
- What the results of the new fees will be in the Amazon selling world (mostly good, some bad).
- What FBA sellers should be doing differently from this point.
- What FBA sellers who don’t believe me and want to get out of the business should do next (Hint: Sell the rest of us your inventory)
So what are the new fees exactly?
Amazon charges items in FBA warehouses long term storage fees by the cubic foot. Here they are:
- Charge for items at Amazon longer than six months: $11.25 per cubic foot.
- Charge for items at Amazon longer than twelve months: $22.50 per cubic foot.
So how many books fit in a cubic foot?
About 36 average books.
About 11.6 large textbooks (really large ones).
“Just give me the numbers: How much will I get charged after 6 months?”
Average book: 31 cents
Large textbook: 97 cents
Remember this only applies to books in inventory longer than 6 months. This should be well under 50% of your books.
And how much will I get charged after 12 months?
Average book: 63 cents
Large textbook: 1.94 cents
Again this only applies to books in inventory longer than 12 months. This should be well under 20% of your books.
“This doesn’t sound too bad. Why is everyone freaking out?”
The answer is very simple:
Because FBA long term storage fees are imposed twice annually in one lump sum, everyone is focused on the lump sum.
“Amazon will charge me $1,734 in February.”
That sounds about 1000x worse than this:
“Amazon will charge me an extra 31 cents per book but only for the 30% of my books that don’t sell within six months.”
The entire freak out is based on bad math and poor framing
It can’t be stressed enough how much of an impact framing has on this discussion.
There are three ways to look at the new FBA long term storage fees:
- The lump sum.
- Added cost per book subject to long term storage fees.
- Added cost per book, when fees are diffused across your entire inventory.
I’ll explain what I mean
Let’s say you have 5,000 books in your inventory, and 1,000 have been there for 6 months.
In February, Amazon will charge you (on average) $310. This shouldn’t be a dealbreaking number, but this big lump sum number is the one everyone is freaking out about.
These are the three ways to look at this number (the lump sum way, and two more), each of which dramatically change how your brain processes it:
- 31 cents for every book subject to long term storage fees.
- 6 cents for every book you ship in.
We’ll look at each of these individually and what they mean…
- Lump sum
The number easily excitable sellers are freaking out about. For seller with larger inventories and lots of slow-selling books, long term storage fees can hit the four-figures and up.
2. Cost per slow-selling book
This is the amount charged for every book subject to Amazon’s long term storage fees. It’s infinitely less menacing than the previous number when you consider average long term storage fees are only 31 cents for the average book, and 97 cents for a larger textbook (double this amount for books stored longer than one year).
3. Cost diffused across all books
This is where you look at long term storage fees as a “per book tax” assigned to all books, based on the percentage of books that will be in inventory longer than 6 months (and subject to long term storage fees). This should amount to significantly less than 50% of you inventory, and hopefully less than 30%.
How is this calculated? I’m not a fan of math, so I don’t blame you if you skip this, but here’s how we’d calculate this:
Long term storage fees per book.
Number of books expected to not sell after 6 months.
Total number of books you ship to Amazon.
Average fee per book.
This way, we can factor long term storage fees into the profit calculation for every book, and buffer against the chance it might get hit with a fee.
A real world example of what long term storage fees will actually cost you per book
Let’s use round numbers and assume you’re a new seller and you’ve shipped in the following:
Total: 1,000 books.
30% of inventory is subject to the 6 month fee.
10% is subject to the 12 month fee.
Average charge per book subject to six month FBA storage fee: 31 cents
Average charge per book subject to twelve month FBA storage fee: 63 cents
This means you will be charged $166.23 in February.
It still makes you wonder why everyone is freaking out, but that’s the number people are fixated on.
But what if instead we just said “Ok, I don’t know if any particular book will be subject to a fee, but I’ll diffuse the charges across my FBA inventory based on the percentage of books I expect will be subject to this fee.”
In other words, we just take that big number and divide it by the number of books in our FBA inventory.
Remember, this is the average impact new storage fees will have on our profit from each book. Personally, this is the only number I care about.
So using these (conservative) figures, what’s the average FBA fee per book?
17 cents per book.
All the drama, the panic, the people running for their lives, getting out of the Fulfillment by Amazon business, and screaming that the sky is almost literally falling is over 17 cents.
Tell me again why we should care about the “lump sum” figure when it translates to only 17 cents per book?
Anyone who is put out of business by a 17 cent decrease in profits has no business being in business.
Overselling the point: What does this mean in terms of percentages?
Now lets upset the “sky is falling” people even more by looking at this in terms of percentages.
What’s your average FBA payout per book? Mine is around $15.50.
What’s your average cost per book? Only you can answer that, but let’s aim high and say its $2.
Now let’s round down and say that leaves us with a $13 net profit per book.
So now we take that 17 cent figure, and divide it into $13. This brings us the exact percentage decrease new FBA long term storage fees will cause to our net profits.
And the number is…. <drum roll>
(That’s one point three percent).
There you go everybody.
All the doomsday hype is over 1.3%.
If this isn’t the end of bookselling, then is it the end of poorly-ranked books?
Hopefully I’ve made the case this barely puts a dent in your Amazon bookselling business.
But a lot of people are saying they won’t ship in books ranked worse than 1 million anymore. So is this the end of selling poorly ranked books via Fulfillment by Amazon?
Hopefully I’ve made this case as well, but I’ll repeat the math:
Average FBA fee per book in inventory longer than 6 months: 31 cents.
Average FBA fee per book in inventory longer than 12 months: 63 cents.
Bringing the total average per-year FBA long term storage fee to: 94 cents.
What percentage of your books are in inventory longer than one year? It should be a small percentage. Less than 20%, for sure. Hopefully closer to 10%.
So in the absolute worst case scenario of an average-sized book in inventory longer than one year, the additional cost to you with the new FBA long term storage fees is 94 cents a year.
94 cents should not be a dealbreaking amount for any book.
Remember my average payout is around $15.50. And I’d prefer to not give Amazon the extra dollar. However…
The point of this article is not to celebrate FBA long term storage fees, it’s to prove with hard math these new fees don’t matter that much.
How badly to you have to be pricing before an extra $1 puts you in the red? A $5 book gets you roughly a $1 FBA payout. If your average cost per book is $2, then you’re still breaking even around a $6.50 sale. (And remember we’re only talking about the small percentage of books that don’t sell after twelve months).
But you shouldn’t be listing your FBA books for $6 (at least not very often). If you are, you’re running your Fulfillment by Amazon business totally wrong and your problems are much bigger than long term storage fees.
And 94 cents a year is the worst case scenario. That shouldn’t even happen very often. Remember its only 31 cents for the February six month fee.
Remember, we’re talking about an average impact of 17 cents per book
If 17 cents is a dealbreaking amount that makes any book unprofitable, that’s a book you never should have shipped in to Amazon.
If 17 cents is a dealbreaker for you, you aren’t doing Amazon right.
How long does the average book have to be in your FBA inventory before you actually start losing money?
If, after reading this far, you’re one of those booksellers still committed to freaking out, I have more bad news.
Remember our figure that an average book will incur a 31 cent fee after sitting in inventory for six months. Then 63 cents every six months after that ($1.26 per year).
Now consider you buy a book with such low demand, that it sits in your inventory for several years. This doesn’t happen very often, but let’s pretend.
Now let’s assume my average FBA payout of $15.50 is fairly normal, then round way down and assume an average $13 net profit per book.
Now the question is: How long will an average book have to sit in an FBA warehouse before you lose money?
Another drum roll please…
Over 10 years.
Your book will need to be at an FBA warehouse more than 10 years before you lose money.
Sorry doomsday people. Those are just the numbers.
So this should be our simple challenge to people spreading doomsday scenarios on the internet:
If an average 31 cent fee in February makes a book unprofitable, why did you ship that book to Amazon?
If an average 97 cent fee after a year makes a book unprofitable, why did you ship that book to Amazon?
If an across the board average of 17 cents a year for each book makes your bookselling business unprofitable, why are you in business at all?
How Fulfillment by Amazon sellers will respond
I predict three things:
1. Some skittish sellers will run for it and get out of the FBA business.
My take: Good. When its herd-thinning time, the weak are the first to go. More for us.
2. Some skittish sellers will stop sending in poorly ranked books.
My take: Also good. The numbers don’t support this move at all, but it will happen, and it will also mean prices of lower-demand titles may increase.
That’s one possibility. Another is…
3. Some skittish sellers who don’t know their numbers will drop prices on lower demand books.
My take: Shortsighted and not good for us, but hopefully their numbers will be small enough that our profits on long-tail books are not significantly impacted.
How to adapt for the future
- If you’re concerned, set aside 17 cents per book sold to cover new long term storage fees.
- Be more diligent about repricing.
With #1, set aside a little like you already do for taxes. Not a big deal.
With #2, if FBA long term storage fees mean anything at all, it means there are (small) penalties to not being diligent about repricing. Ignoring repricing used to be somewhat of a luxury. Now there are (small) consequences.
So give new emphasis to monitoring the prices of low-demand Fulfillment by Amazon inventory.
What you can do to correct misinformation among sellers
If you’re in a Facebook group or online forum where FBA sellers are upset about about these new fees (and I know you are), do something right now:
Post this article there. Then ask them to refute the numbers, and defend their position with numbers of their own.
- My prediction: In one year we’ll all wonder what we were freaking out about.
- If the new storage fees make bookselling unprofitable, you weren’t doing it right anyway.
Kim Coghlan says
As a shoe seller I regularly hear people freak out about 10-15% return rates, but I look at it like you do. If I ran the numbers on ONE pair of shoes, I lost money. If I run the numbers on my inventory and sales as a whole, the cost of returns is just part of doing business in a highly profitable model. Not a problem.
Peter Valley says
FBA sellers also forget that it is perfectly normal with average businesses to actually lose money or break even on a large part of your inventory, then make it up on the rest.
Holly McKee says
FYI I tried to open a case yesterday because I am seeing charges for the items I have removed (and as you stated, it’s supposed to be free). The rep told me to wait until the 14th, that they couldn’t help me now. I am interpreting that as ‘you should be reimbursed for your removal fees’, but I honestly don’t know. Do you have any insight?
Peter Valley says
Haven’t head of this, but I would keep pressing them for an answer.
They will charge you and then reimburse you after the 14th
Russell Ernst says
yes..had the same problem..over $500 charged to me for removable items..took 6 days to finally get the right person..this is what she said..after we are charged and the books are shipped in 14 days they reimburse the cost to our account…so monday is 14 days for me..stay tuned
Aileen Drill says
I started an Amazon blog on this. Apparently, they charge you now and refund later.
Jill Stone says
Hi, Peter. I have a question. For 2 years, I’ve been a one-at-a-time seller on FBA (mostly stuffed animals & toys) so have never been charged a lot in LTSF. I looked at my inventory health & on one item, it looks as if Amazon is going to charge me $45 LTSF on a stuffed animal I have listed for $60. Is that an accurate depiction of what is going to happen? I look forward to your response. Thank you.
Peter Valley says
All I can say is: That must be a big stuffed animal.
Yes, Peter, some of the stuffed animals are large, but there are others I have at a warehouse that aren’t large at all & looking at what I’m going to be charged (if I’m looking at it correctly), it will cost me more in LTSF than I will make on it after the other Amazon fees. If I sold just books, I wouldn’t be as concerned since they don’t take up a lot of space but my question is, since I don’t sell very many books, am I understanding Amazon’s new policy correctly? And I’m going to get charged a LOT of money on my one-at-a-time items, yes? Thank you for your response.
Retro treasures WV says
Your statement of “you can pull all inventory out for free” is incorrect. Amazon is allowing you to pull a single item per sku for free that is already 6 months old.
The fact is that people have been sending in 4q shipments like mad and Amazon waited until after the 6 month deadline had passed for the feb fee to say a word. Basically anything you already sent in as of the date Amazon sent out the email will be subject to the long term storage fee once February rolls around. If Amazon would have said something a month earlier, folks could have started reassessing what they sent in.
So yes, amazon’s timing on this major change was extremely ill advised and folks have a right to be very upset.
Peter Valley says
I updated the article to make it more accurate.
So Retro Treasures WV’s comment makes me wonder about LTSF even more especially since I’ve never had to before. I am really trying to wrap my head around this: even if an item that has been there for awhile sells during Q4, we’re still paying whatever LTSF Amazon wants even though it’s no longer there on Feb 15? Because that’s a different rule than the way they’ve been charging LTSF. Please clarify. Thank you.
Robert B Hughes Jr says
In my humble opinion, you are “spot on” across the board in your analysis. Going into my 3rd year as a FBA seller and I am more pumped than ever for many reasons.
Keep up the good work and continued success to us both.
Peter Valley says
Love it when Amazon sellers get more excited as the years go on…
Thanks Peter, Good analysis.
For me, it might be a little worse, as I still have a lot of junk from when I started about 18 months ago, but I am getting rid of it quickly, so maybe not. My question is:what % do you have that is over 1 year? I know you recommended above <20% or even better, <10%. I am way above that, so as I tend to (try to) pattern myself after you, I would like to know what to shoot for. BTW, love your average payout….I just checked Inventory Lab, and I am at about 12.00 payout per item, but it looks like that will go down as I reprice agressively to get rid of my 1 yr and 6mos + inventory. Thanks again.
Peter Valley says
I’m sure there’s a quick way to determine this. The Amazon business reports dashboard is pretty baffling but if you point me in the right direction I can share those numbers.
Peter, its in Az Seller Central ….Inventory tab, then “Inventory Planning’ on dropdown. Middle of page has Inventory Age. (0-3 mos, 3-6 mos. 6- 9mos, 9mos-12mos and over 1 yr.) I still have over 20% of inventory over 1 year. Plan on waiting thru Jan. and then maybe dispose of a bunch at 15 cents per, if not sold by then. Also have another 25% more than 6 mos, so I am trying to price more agressively, but dammit, I regularly sell older inventory for good prices (12-15-25 or more).
Great article Peter, thanks for the numbers. I have to admit I was a little despondent when I considered the rent AMZ was going to charge me. It’s just a logical cost of business. We’ve had a free ride and AMZ needs to make space for items that sell. Simple.
$15.50 payout per book? That’s excellent. I need some of that. What I am going to do different is sourcing. I am going to take more time per unit to make sure the profit is there. My average per book is around $9.00 per unit. All I have to do to adapt to this new LTSF is raise that number by sourcing better/more carefully.
Peter Valley says
I have probably 10% of really high value books that pull that number way up. With a small change to my inventory or pricing practices, I would probably be closer to $10.
Nice article Peter. I do think this is a fundamental turning point in the FBA books business. I think a lot of the ones at the bottom will go out of business. Amazon has been trying for a while to discourage the business model of scan, scan, scan, scan and send in, send in, send in, send in without regard to rank, profit and other factors. First they started limiting how many books new sellers could have in inventory. A few months ago they stopped accepting some books that they already have hundreds and even thousands in the warehouse. The reaction was loud and immediate and AZ backed off. This is the replacement for that strategy IMO. I doubt they back off this.
Personally, I am ecstatic about this new policy. My business model is just about 100% onliine flips with no books under $35 price point and in a year or two it will be $45 or so. I rarely buy a book that does not have a 90 day sales rank average of 500,000 or less. In a year or two that will be a 350,000. IMO these changes will drive the marginal players out and leave more for the ones with a sustainable, credible business models. With the marginal players gone more books will fall to the mega sellers like BookByte, Hippo, Better World, etc. I have learned those sellers will not let a book sit in their warehouse over a week or two. Since I have identified dozens of books that get as low as a dollar or less at times while going up to $35 during textbook season, I am anticipating more opportunities to buy these books for as low as $4 with shipping included.
I could be wrong about the effects but I strongly believe the market will change in some ways. The stronger players will figure it out and adjust. We’ll see how it shakes out.
Peter Valley says
I do see a lot of megasellers getting out of the low-demand book business now, which is great for us. Another upside.
I don’t agree with your article. Amazon built its original business in books by being the biggest bookstore in the world and telling buyers that they could always find the books they want on Amazon. They did this by having enough warehouse space to sell long tail items like books. Now they have changed their strategy and are eliminating most long tail items from inventory. In my mind they are doing this to provide warehouse space for their fastest growing market segment, Chinese manufacturers. They have every right to do this but I think a lot of FBA sellers are going to be shocked by the inventory bill they get from Amazon in February.
Peter Valley says
I’m 100% cool with any disagreements about my analysis, but they have to be based on the math. Let me know what figures here you disagree with. Amazon is not eliminating long tail books.
Can’t speak for OP but I am a seller of long tail books only, and I’m looking at $5000 in fees come February. All of my books are the kind of books you talk about on your blog. I sell a lot, but not all my books are $75 of pure profit. A lot of long tails are limited and with all the newFBA competition the prices are way down, some books only sell for $7 or so FBA. If it takes 3 years, that’s a $4 FBA sale which is pennies profit. Meanwhile, thousands of new fees a year. That’s a lot of money, much more than my two-week payout.
If people haven’t pulled out their old stuff, this is going to put a lot of sellers out of business – or worse.
Peter Valley says
With that average cost of 94 cents a year in mind, the only thing that would change is doing a cheap removal or disposal order for any long tail book that dips below $8 (or whatever). Pretty simple and not terribly disruptive, as I see it.
We need a discussion of what is a long tail
My thinking 1 year best, 2 max. High rank dont mean slow sellers, I constantly sell 3-8 million rank books in a week with no FBA competition.
Going forward the long tail means fast flips within 6-12 months – only send in FBA with no or little competition, and price REALISTICALLY. MF and others selling for $99, price yours $50-75. Don’t list $150, and wait, and wait, and wait.
You are paying $10 or less most likely, so a sell of $50+ is GREAT ROI!
Peter Valley says
Again, I understand the concern but the numbers don’t really justify changing pricing practices this dramatically. There is no reason to drop prices 50% or more when the average impact per long-tail book is 94 cents annually.
The same thing happened on eBay. The money is is in Chinese sellers and just like in manufacturing and retail Americans get screwed.
David Meyer says
I think you have explained things well. I am not on the freak-out team, BUT… I do think there is a mistake in what Amazon is doing here. In the main, you have it nailed… and this is not that big a deal. Books that have been profitable should still be worth it with these added fees.
But let me outline where I think the mistake is being made on Amazons part. Over the years of my FBA book business, somewhere around 10% of what I source are in a weird category: these are high-ish ranked books selling a few a year only, and they are only slightly profitable books on the lower side of my sourcing criteria (I will only profit 3 or 4 bucks on these books), but there are no FBA offers for these, so overall, they have been worth sending in a copy, even if they are a bulky textbook. On average (and yes I have crunched my own inventory numbers on this) these books sell between 18 and 24 months after being sent in, and on average, I sell a few a day of these books, making them a healthy part of my inventory, and well worth my trouble to source and send in.
paying a 6 month and a 12 month fee for these books brings their value to me down far to much, as my profit evaporates. Here is where Amazons mistake comes in… they should exempt one or two of these books (for everyone, not per seller) from the long term fees in their warehouse. So the FBA seller with the copy of the book that has been at the warehouse the longest would get an exemption. I think we all know better than most how much of a benefit it is to customers to get their book FBA. And lets be real, it is a benefit to Amazon as well by providing profit, but also in making Prime membership all the more valuable. I SERIOUSLY cant see one of each copy of books of this type taking up even an entire warehouse. But even if it did, I really think it is well worth Amazons time to consider doing this. I really think they missed an opportunity here. I am about to dispose of THOUSANDS of books for which I am the only FBA seller. I cant see any reason why Amazon would want me to do that… but here we are, they are making me do it.
Peter Valley says
This is a fantastic suggestion, and one I could easily see Amazon not having thought of themselves. Fingers crossed they read this.
They won’t. These decisions aren’t made by a low-level employee who has only worked there for 3 days.
They don’t see value in offering all these millions of different books in Prime. I too see that as a mistake, not only as an FBA bookseller but as a customer. As a result. I’m letting my Prime drop. I’m shopping elsewhere for things. As we all know as sellers, Amazon is NOT the cheapest place to go for things. It was always convenient, but this was a knife in the gut both to us sellers and to book loving buyers. That should not be tolerated. I’ll look on eBay and BookFinder.com for my books.
We might say this is positive because with all the people getting out there’s less competition, but the actual marketplace is shrinking. Last year I made about $40k in my Amazon business. It was a little above my goals. I was happy. But a lot of my books were definitely lower profit – I made $3-8 on an FBA sale of a lot of books. I simply can’t take the risk on those books anymore. Amazon just made it impossible. Sure, I can still sell my $100 FBA books, but I made the bulk of my money on books priced much lower. My average profit was $12. How can anyone say that adding a few dollars a year in fees for each book isn’t going to be bad? This is a direct attack on FBA bookselling. Face it, they don’t want us.
Amazon is probably moving away from physical product, and the first victim of that shift is books. Meanwhile Amazon will be like Wal-Mart. Get your Chinese made housewares and electronics there, and if you want old books go to ABE – also owned by Amazon.
Also, for every $100 FBA book I sell, I might have 20 books at $100 that have been sitting there for 2 years.
20x3x2 = 120
In other words, those 21 super long tail weird books, including one that I DID sell for A HUNDRED BUCKS, will now COST me $20 + other Amazon fees to sell.
Bart Simpson says
EVERYONE IS WRONG? Wow, I think you have a Peter complex!
Only ones freaking out are the marginal low ASP sellers $10 and below. Not sure how they survive myself, but to each their butter.
Your ASP is $20+, keep up the good work. $30+, wow. $50+ – um, FU…..
Peter Valley says
I took a harsh tone with this one, but I’ve gotten so many emails from people freaking out I had to implement some “tough love.”
Russell Ernst says
i’ve been getting cases of books i brought back from amazon…the damage rate and miserable packing are off the chart..100’s of new to like new books are now good to very good..over a hundred so far are ripped, tore or crushed just unacceptable to sell..when the cases stop coming to me i will be putting forth a bill to amazon…they did this last time also and i got reimbursed for damaged books sent back to me..
I have been saying the same thing, Peter, but perhaps I shouldn’t. Quite frankly, this will drive out much of the competition, who will either stop selling books out of Storage-Fee-Panic, or switch to FBM and eBay sales (which is fine with me). This will have the biggest impact on those who have sent in every book they get their hands on, regardless of sales rank (and are thus major contributors to the warehouse storage problem), and who INSIST they have to be able to let a book sit for three to five years to sell at its “true value”, then complain on Amazon’s Seller Forum that they have 20,000,000 books in inventory but only sell one a week.
The root cause of the panic is not only poor mathematical skill, but something even more basic – many book resellers are really, really, REALLY cheap. As you have written in the past, many (maybe even a majority) of book sellers will pass over a book that costs $5 but can be quickly flipped for $125 because, as they proudly say, they will never pay over a dollar for a book, and preferably only a quarter. You can see the same phenomenon on many sellers fora as people claim that Amazon has now made it impossible for them to make any money in the book business with the LTSF increases, that it doesn’t fit their “business model”, and that they are either getting out of booksellling entirely or plan to find a safe harbor in the FBM market, where they probably will sell 1 book a week..
I would predict that a lot of sellers (me included) will drop the prices on books in the >12 months and the 6-12 month range that have dropped in value, or the sales rank has risen so high, to the point where they unlikely to sell except at firesale prices, to try to eke out a little profit before October 15’s removal date, when they will remove them.That will send down prices on such titles for sellers who use repricing software (especially if they don’t have their parameters properly set) from now until February.
There are probably a lot of other sellers who will hang on, hoping for another free removal date in February before the LTSFs are assessed, with the plan to remove any titles that remain. After that, a lot of sellers who don’t know much about the market, or who are primarily thrift-store flippers who will grab books as well as tchotchkes, will jump out of the market…possibly (one hopes) including some of the big mega-sellers who are invested in FBA inventory and consistently undersell everyone else, driving prices down. (Some of those will convert to a part FBA, part FBM strategy, I think).
I’ll further predict that, after February, this will lead to a general increase in the lowest sales price for FBA books, as the decreased supply and reduced number of sellers in the FBA marketplace will increase demand and prices. For those who stay in the FBA market and make intelligent sourcing decisions, I think this is tremendous good news. For sellers who complain about penny sellers and the spiral down to $3.99 FBA prices on many titles….this is actually great.
I would suggest the best way to look at this is, given the average cost increase of $0.17 per book….would you be willing to pay that much to drive out many of your competitors, increase the value of your inventory, and generate greater revenue?
Peter Valley says
Esp. in how cheap Amazon booksellers are. Read those forums to be reminded how few sellers know what they’re doing.
Cindy Young says
Thank you Peter. I look forward to your articles every month!
Good article and I agree completely in so far as books, and other similar size items. We sell grocery, mostly canned, health and beauty, and toys and games and puzzles. A stray book here and there.
We are going to have mostly the same results as you in everything except the toys and games puzzles.
We have always kept accurate track of our cubic space and we will have to adjust a good bit of our toys and games, puzzle strategy as we do a goody amount of collectibles and the cubic foot print is fairly large and significantly larger than a few hundred dollars. I foresee that we will do much more FBM of many of the larger items.
I like it when the emotional and irrational sellers go out of business. It makes the market better for the rest of us. It also weeds out the a-holes who are out there selling books for $.01 each.
Unfortunately, the penny guys won’t be affected because they are MF, not FBA.
Jordan Malik says
I love the freaking out because it clears the deck. The haphazard sellers leave in droves and the more serious sellers stay and life becomes a bit easier. I wrote about this last February: http://jordanmalik.com/blog/please-quit-now/
Peter Valley says
Great minds think alike.
(Everyone should read Jordan’s article).
Jenny Smid says
Great article. Thanks for doing the math for me. The announcement didn’t bother me a bit. I think Amazon is smart to charge the fee. Sellers need to make sure what they are sending in is valuable and sells, otherwise store it yourself. And. ..it should help clear out the warehouse of stuff that isn’t going to ever sell anyway.
Carl Acosta says
Thank you Peter for this well thought out and well written piece. I appreciate your effort and clarity.
So my question is one of strategy. I have some items in the warehouse that have been there since around June of 2015. I started selling in July of 2014 and have since sold through those items or removed them. Now I have went and repriced my older items several times which had resulted in nearly immediate sales as a result.
When the new fees where announced I went again and sorted my inventory by date and then aggressively priced things so I was the lowest price in many instances. I am wondering since the new fees will not be due until February, if it can be considered an effective strategy to keep those older items in inventory and aggressively price them and whatever does not sell in Q4 or in January then I can place a removal order and pay that fee before the much higher storage fee hits.
I am at this point thinking that some of that older inventory was a “mistake” attributed to the learning curve and I can mitigate my future losses while also maximizing my chances of selling and making back some of my costs. Since much of what I sell was purchased very inexpensively and my ROI’s tend to be at least 5 times I still have some profit potential.
Does this sound like a good strategy or am I missing out on some piece of information regarding the new fees?
Best regards, C
Russell Ernst says
i also repriced 6 months and up..only removed stuff over 1 1/2years..i will be leaving those books thru
1st week in Jan..then pull
Peter Valley says
If I’m understanding right, I think the math here is: “Does the potential profit earned from keeping low demand books in inventory through January offset the savings in having free removal on this inventory now?”
I think the answer is definitely yes. A couple big sales during Christmas can cover all your long term storage fees, depending.
Mary Lou says
Cannot remember how much nonbook inventory you do? If you have mixed inventory including larger lightweight items like grocery and health and beauty items, these numbers will be significantly higher right? Please respond Peter with more than “that’s why I stick with books!”
Peter Valley says
It’s all done by cubic foot, so the bigger the item the bigger the fees, no matter the category. Make sense?
Hi Peter, I had purchased your book sourcing videos about a year ago, and you stated and demonstrated throughout that as long as your ROI in a book was at least 3x your purchase price (which you stated was usually $1 maybe $2) that it met your minimal criteria. You stated in this article that your average net profit is $15.50 for most of your books. Have you changed your sourcing criteria since those videos?
Peter Valley says
No, nothing has changed. I keep to a 3x minimum.
If it keeps the bulk sellers from clogging up Amazon with 3.99 FBA books, then I’m all for it. But if Amazon cuts them a special deal to allow them to keep their garbage in the warehouses… that’s bad.
The merchant fulfilled Prime sellers are the $3.99 guys and they won’t be affected by this. They don’t pay storage fees.
I see many FBA bulk sellers with prices right at $4.00, give or take, so I also wondered if they were working out a special deal with Amazon on LTSF. Maybe their books don’t stay long in the warehouse at those prices so they don’t have to deal with the new fees. Would be nice if the FBA penny sellers would have to increase their prices or just go MF. I did panic when I first heard the news because I have a lot of duds from when I first started. I have those at firesale prices and if they don’t sell I decided to just pay the .15 to dispose, that is the cheap way to avoid LTSF. I am willing to pay the fee for my high dollar books. Now, I am sourcing better books and not too worried about the new fees.
Jennifer Ervin says
I love coming to read your stuff- you always back up my gut feeling and explain it so well. Really looking forward to reading your repricing stuff- sadly I rarely get to that and need to. Thanks for being so brilliant and sharing your knowledge with us.
Kristy Kirkland says
What is the highest Amazon seller rank you will send in FBA?
Peter Valley says
No limit if the money is good.
M Scott says
So, I have never paid attention to the LTSF previously, and I get that they are assessed twice a year – February and August…
A couple of things not entirely clear to me:
1) Are you OK to wait until a few days before the actual LTSF assessment date to review inventory and do your disposal / return requests “Just-in-time”? Will those requested items then not be included in fees even if the order is not completed?
2) The 6 month and 12+month LTSFs get levied on both the February and August dates, correct? Not just one in February and the other August…
Excellent discussion and thanks to Peter for fleshing this issue out and addressing detractors with decorum and class. See y’all in Feb 2017!
Peter Valley says
Actually, I felt my decorum was very questionable in this one, but thank you.
I have to disagree. Depending on the area you live in, these new fees may actually mean the end of the FBA book-selling opportunity. Sourcing in my area has gotten competitive to the point that to make a living, you’d have to start picking up increasingly higher ranked items with thinner profit margins, or else the pickings are too thin. I guess you could always say “SOURCE BETTER!!!” but that’s the grey area. Peter, I get that you have a vested interest in convincing everyone that FBA books will last forever, FOR EVERYONE, but as areas become saturated with new booksellers who hear about an easy-money opportunity from FREAKIN’ NPR, and Jeff Bezos gets more ambitious, there IS a point at which the locally-sourced book business model becomes no longer profitable.
Well, I came back and read this post because I was, slightly, freaking out. Not so much because of LTSF costs, but because it feels like I am getting killed especially with Zen sourced OA, as the prices are dropping a bunch. So, after reading thru here, yes I am gonna get rid of quite a bit at lower prices, but I am gonna keep a substantial amount of textbooks, and let them ride till August. On the other hand, this whole thing has caused me to finally understand the value of moving inventory more quickly, and I am now selling a much higher percentage of the stuff I have sourced recently. So from here forward, I see a very positive aspect, but damn I still hate taking a loss on mistakes, especially more expensive Zen mistakes. Live and learn,
Here’s an interesting dilemma: First, it is said that the chances that your book will sell are much greater if you are on the first page of Prime/Used listings. Second, it is better for each individual seller–and the FBA marketplace as a whole–to avoid getting caught up in the “race to the bottom” where no one makes any money. However, it seems that these two points are oftentimes mutually exclusive. If a book is well priced somewhere in the top half of the first page, it only takes a few price plungers to move your listing to the bottom of the first page and then on to the second page. This appears to be a no win situation. Either you have to keep matching or staying in the mix of lower and lower prices in order to keep your listing on that all-important first page; or, you leave your price at an amount which will generate a good profit (the purpose of being in business in the first place), and watch your listing go to page two, three, etc. This doesn’t necessarily always mean FBA penny sellers, either. I’ve listed books for about $40 or more which were at the mid range of the first page, only to find in a few days a plethora of $10-20 offers appear and fill up that first page, while mine had moved to the second page. I hope Amazon keeps doing whatever is necessary to drive all these low-ballers–individuals as well as mega sellers–totally out of the game.
Rachel V says
I can’t disagree with this article enough.
You say that most books will only be charged an extra 31 cents. That’s plain wrong. Many of my LTSF charges per book are over $2.
You also say that the 12 month or older inventory should be “well under” 20% of your books.
That means that most of your inventory should be very fresh, like from within the last few months.
But — that contradicts everything you’ve been recommending on this blog for years!
The whole point of being an Amazon FBA bookseller was to make money at long tail items, not to sell the #1 bestseller in three seconds after it checks into the warehouse.
In fact, I don’t even bother with the most popular books — they tend to be very low profit, and they sink down to penny books too fast.
I always specialized in long tail. A lot of my books are high priced. My average sale is $22. That said, I am facing a bill of $2,000 next week.
Where this is going to be a problem is this: while many of these long tails do sell for $49 or $99 after 6 months or a year or three years, there are many that don’t. Eventually, if I want to clear out old stock, I’ll lower them down to $9.99.
But this new change ends that. If I’ve paid $2 a year extra to keep it in the warehouse, after 2-3 years I can’t sell it for less than $14 if I want to make even a minimal profit.
Frankly, I’m disappointed that you have chosen to take the view that Amazon hasn’t done anything to kill the FBA bookseller with this new move.
William Anderson says
Thanks for taking the time to clarift long term storage fees. I’m new to this, in the UK and hoping to make a good go of selling used books via FBA. I,ve dabbled with some success and I’m sure your resource will prove invaluable to me.
once again, THANKS!!
Navya Agarwal says
so, i started selling in Amazon US last year, unfortunately I did not get good sales and have a lot of my inventory stuck there. I have around 5 items per SKU and around 35SKUs. Could you please suggest how I could sell these at the cheapest possible prices?
My store link –