Complete guide to surviving Amazon FBA fees

In-depth look at FBA selling and storage fees, how to stay profitable, why increasing fees don’t matter, fee examples for books, and a bulletproof buying formula that guarantees you can’t lose money selling books.

Amazon FBA fees go up every year

There’s no sugar coating this: The increases in FBA fees over the years have been severe.

The biggest impact has been (and continues to be) on these two categories of used media:

1. Low-end sales (esp. items $10 and under).
2. Long-tail products (slow selling items hit by new long term storage fees).

Why new Amazon FBA fees don’t matter (much)

Despite the choir to the contrary, the numbers don’t lie: Increased FBA fees do not put us out of business. Yet they do remove our wiggle room (aka our “luxury of being lazy.”)

Today, Amazon sellers have to know our numbers and have a formula that guarantees we won’t lose money. Once you have a formula down, the profit goes on autopilot.

Remember: You don’t have to be smart if you have a formula that makes failure impossible.

What separates the amateurs from the pros when it comes to surviving new Amazon FBA fees? It’s how you understand these four things…

Surviving FBA fees with the four corners of buying criteria

Here are the four rules Amazon sellers have to set for themselves to profit despite new Amazon FBA fees:

1. Selling price criteria
2. Weight criteria
3. Sales rank criteria
4. Risk criteria

Let’s look at how all four of these factor into buying inventory in the current FBA landscape.

Protecting Against FBA Fees With “The Rule of Threes”

Before we establish buying criteria for you, let’s assume you want to maintain the timeless “rule of threes” buying formula:

1. At least tripling the cost of your book or item.
2. Maintaining a minimum payout of $3.

This is the “3x” formula I’ve taught Amazon sellers for years. Either take the “Rule of Threes” as gospel, or set your own rules, but everything I’m taking about here will be based around this tried-and-tested standard.

Let’s look at each of the four criteria (listed above) one-by-one, inform what inventory you should buy, and how they will save you from new Amazon FBA fees…

1. Selling price criteria

Simply put: This means having a minimum price you won’t sell a book for less than.

 

Despite everyone shouting that new Amazon FBA fees represent “the end of the $10 book,” the numbers don’t bear this out. What the numbers do bear out goes more like this:

“It depends…”

Let’s take a book I used in a recent article that I think represents the “typical paperback book”:

• The Tipping Point (ISBN 0316346624).
• Typical book size (5.5″ x 8.5″).
• Typical book length (300 pages).
• Typical book weight (<1 lb).

With this book, at a $10 sale, you still get a $3.49 payout. Anyone can say whatever they want about the end of the $10 FBA sale, but the numbers don’t lie.

2. Weight criteria

This means knowing the weight of your book when you buy.

Wait, didn’t I forget to finish my point on “selling price criteria”? No. Because weight is the biggest factor in Amazon FBA fees, and selling price & book weight are inseparable. So we have to merge the two.

Because the new FBA fees demands new precision, there’s an added advantage now to adding one new layer to buying criteria: Weight.

Estimating weight before you buy

Yes, your scanning app does this, but as covered exhaustively elsewhere on this site, your app isn’t showing you every FBA offer. So that net profit figure your scanning app shows you might not be accurate.

No matter what my app shows me, I want to be able to assess a book’s weight in a split second, and answer the question:

“Is this a book I need to sell for $10, or a book I need to sell for $12 (or more)?” (I’ll explain these numbers in a moment)

Then I check FBA offers, and I’m on to the next book. I don’t want to be forced into adding another step by visually confirming the weight of the book in my app. The more you can get done in the “pre-scanning” phase, the better. That’s always been the case, but it’s even more so today.

Estimating weight is pretty easy. To get a feel for it, just pick up a few books ,then look up their weight on Amazon or your scanning app. It gets pretty simple pretty fast to learn what a <1 pound book feels like vs a >1 pound book.

My price-weight buying criteria

Based on what we just covered, my criteria has become:

• <1 pound: $10 minimum FBA price.
• >1 pound: $12 minimum FBA price.
• “Big heavy book” (e.g. textbooks): $13 minimum FBA price.

If the weight is uncertain, I err on the side of “greater than 1 pound.”

Remember, this is assuming I’m still tripling my investment (i.e. books that are $1 or less). Based on the cost of goods, I adjust the pricing floor accordingly.

Like everything with sourcing books, this becomes second nature very quickly.

Recap on the impact of weight on Amazon FBA fees

To recap, here’s how I buy now:

“My minimum price for a book I instantly assess as being under 1 pound is $10, over 1 pound is $12, and “big and heavy” is $13.”

New Amazon FBA fees demand new precision.

3. Amazon sales rank criteria

Knowing the demand for your book. This one is pretty simple.

(I’ll cover this at length in the next article.)

4. Risk criteria

In other words, reducing price volatility and depreciation in your purchasing decisions.

Yes these are big words. But the concept is simple: Strategically limiting the purchasing of books that have a high possibility of plummeting prices. The science to this is extremely inexact, but there are tricks to tilt the odds in our favor.

This is the least important of your buying criteria, and you can avoid learning this altogether and still do fine. But this gives you a slight edge.

Risk mitigation is a level beyond simply knowing the numbers on the price you expect to sell your book at. It’s employing an added layer of scrutiny to avoid buying books whose prices are volatile and likely to fall.

This is designed to address one of the biggest grievances of Amazon sellers: You buy a book, ship it in, and the price plummets – never to rise again.

This is probably an entire article in and of itself, but here are three ways (not an exhaustive list) to detect books whose prices are likely to drop:

Risk mitigation move #1: Avoid highly competitive books

Of the three, this is by far the most impactful.

Simple fact: The more sellers there are for a product, the more competitive it is, the more sellers there are to underprice you, and the higher the likelihood of the price dropping.

You can still find plenty of books with 100+ sellers that have $10+ FBA prices. But those are also the offers whose prices are most likely to drop.

As a formula, what would this look like? It’s impossible to impose rigid rules, since this hinges upon Amazon Sales Rank (e.g. the better the sales rank, the more competitive a book can be and still maintain a profitable price).

That said, a conservative seller might begin to avoid all books with more than 50 or 75 offers.

Risk mitigation move #2: Avoid books for which you lose money if Amazon drops their price

Let’s say you have a book. Amazon is your only competitor. You underprice them by 50 cents and barely hit your desired profits.

What happens if Amazon drops their price? You take a loss.

The problem is that Amazon’s prices fluctuate wildly, and you can (almost) never price higher than Amazon and get a sale. So they are the one competitor you don’t want to mess with. If they drop their price, you’re out of business for that book.

Don’t go up against Amazon whenever you don’t have wiggle room.

Risk mitigation move #3: Avoid books that are “on their way out”

It happens all the time: You buy a book. Your qualitative alarms go off and tell you: “This is worth money now, but it won’t be for long.” You buy it anyway, because before new Amazon FBA fees, we had the luxury of being wrong a lot of the time.

Here’s a common example: Travel guides for which new editions come out every year. You can watch these go from a rank of 80,000 to 800,000 in a span of six months, because the demand plummets when the new edition comes out.

Prior to new Amazon FBA fees, you could throw money at books like this and reasonably expect to usually come out ahead. (I once bought close to 100 retired travel guides from a library book sale in Vail, Colorado without a second thought. Today, I might be more conservative.)

In practice this is always inexact. Kind of like predicting stocks, but a good formula might go something like this: Any book in a high risk category (list below), that has an Amazon sales rank inching close to 1 million, and has an Amazon payout that is within 50% of being unprofitable, then avoid or proceed with caution.

Be careful not to take this as gospel. I’m giving you the concepts. Create your own criteria to fit your needs and risk-tolerance.

Examples of high-risk books that tend to fade quickly include:

• Super-volatile categories of textbooks like law books.
• Any book with a year in the title [e.g. 2016 Guide To Casino Conventions].
• Computer books.

An in-depth analysis of FBA fees, long term storage fees, and their exact impact on the business of Amazon sellers. A complete guide to Amazon fees, from every angle.

This may be the longest article I’ve ever written, because its among the most important.

I’m cutting through all the noise to give a detailed guide to Amazon fees from every angle. Let’s get into it…

Increased FBA fees have not put booksellers out of business

Books and used media are still the cheapest and most abundant category on Amazon. They’re everywhere, and they’re cheap, and selling them is still 100x easier than getting a real job. However an elevated level of strategy is now required.

This is not the end of selling cheap used stuff via Fulfillment by Amazon. Just the end of us being able to do it lazily in a sleepwalking fashion and still make money. Today, we have to be smarter.

Two changes Amazon sellers need to make

Here are the top three adjustments FBA sellers must make after the latest Amazon fees increases:

1. Stricter standards applied to purchasing “long tail” books.
2. A stricter formula for liquidating books before the 6 month mark.

I will go into both of these in much greater detail later in this article.

So has Amazon raised its FBA fees in recent years?

The thing that motivates Amazon to raise their fees is nothing new: Their warehouses are bursting at the seams, costs of maintaining this fulfillment infrastructure are huge, and Amazon trying to firmly dissuade FBA sellers from shipping in all but the most profitable inventory.

Here is Amazon in their own words:

“At times we experience physical constraints on inventory capacity during key shopping seasons. To help minimize these constraints, we want to continue to allow the most efficiently managed inventory to flow through the network, while limiting less efficiently managed inventory.”

This is code for “stop sending us so much cheap and/or slow-selling stuff.”

You’ll notice that every increase in FBA fees is designed to 1) limit the amount of inventory getting shipped in, and 2) purge slow-selling inventory from FBA warehouses.

Here’s the quick lightning-round on which FBA fees have seen the greatest increases…

Fee increase #1: FBA selling fees increases

What this is

Increased commissions for anything sold via Fulfillment by Amazon (FBA)

What Amazon is saying

“We will adjust our fulfillment fees for most product size tiers and weights. The adjusted fees will apply throughout the year, and we will no longer have a separate rate for October through December.“

Severity level (1 to 10 scale)

7

More detail

This is closer to an 8 for lower-end books (sub-$10), and more of a 5 for higher priced books.

Fee increase #2: FBA monthly storage fees increases

What this is

Monthly storage fees have been raised about 8%.

What Amazon is saying

“Monthly inventory storage fees will be increased by $0.05 per cubic foot for standard-size and oversize items.”

Severity level (1 to 10 scale)

2

More detail

Not much to say about this. Compared to other new fees, this one won’t move the needle that much. The monthly fees are small enough as it is, that an added 8% just isn’t much of a big deal.

Fee increase #3: Long term storage fees changed to monthly

What this is

Every item in storage longer than six months will have be charged a LTSF each month (instead of every six months)

What Amazon is saying

“Long-term storage fees will be adjusted and the assessment dates will be changed from a semi-annual basis to a monthly basis.”

Severity level (1 to 10 scale)

8

More detail

This one is huge. Instead of getting hit with a big fee every August and February, Amazon is hitting FBA sellers with a smaller fee, but every month. On a month-by-month basis, this very roughly translates to a little less than double the amount of old long term storage fees (LTSF).

Fee increase #4: monthly minimum set for all items at Amazon over one year

What this is

For every item in your inventory for longer than a year, Amazon imposes a “floor” (minimum) on the monthly LTSF of 50 cents.

What Amazon is saying

“We will introduce a minimum charge of $0.50 per unit per month for items in fulfillment centers for 365 days or more. The greater of the applicable total long-term storage fee or minimum long-term storage fee will be charged.”

Severity level (1 to 10 scale)

8 (if you like your long-tail books as much as I do)

More detail

Before new fees, well under half of books were charged 50 cents every six months. These same books will now be charged that every single month. This adds a new seriousness to keeping books at Amazon over a year. You’ll essentially be charged a minimum of $6 a year for every book at an FBA warehouse.

My off-the-cuff assessment is that this means that for every book ranked roughly 3 million and up, FBA sellers need to get strict about shipping them in only if they have a sales price over a certain amount (and purging them when that price drops).

New thing #5: Inventory restrictions and the “Inventory Performance Index”

What this is

A new metric is applied to each seller as the basis for imposing inventory limits.

What Amazon is saying

“Storage limits will be evaluated every three months on a quarterly cycle. If your Inventory Performance Index is less than 350 six weeks before the start of a quarter, you will be notified of your potential storage limits.”

Severity level (1 to 10 scale)

3 (though full impact still unclear)

More detail

This is a new metric Amazon is using to determine who has inventory limits imposed, and how much. Called the “Inventory Performance Index,” Amazon is assigning this number to each seller, essentially to measure how much of a burden they are to Amazon’s warehouses (they would put it differently of course). This score is a factor of several things, such as:

1. Excess inventory
2. In stock rate
3. Stranded inventory

It’s not clear if the list above are the top factors overall, or just the ones I see in Seller Central that I personally need to improve (view your score here, then post in the comments below if you see additional factors not mentioned in this list).

I tend to think inventory turnover rate is a huge part of this metric, though they’re not divulging that outright.

The way it works is that each seller gets a score of 1 to 1,000. Anyone with a score of less than 350 will have restrictions imposed on the number of units they can store at an FBA warehouse.

The motive here is clear: Amazon wants to dissuade sellers who keep too much dead weight at their warehouses. The good news is, it appears to be really easy to stay above the 350 mark.

How to calculate the impact of Amazon fee increases

Assessing new FBA fees: Run any book through the old tried and true “Fulfillment by Amazon Revenue Calculator” for the new payout amount for any item.

Assessing new LTSFs: The best way to preview your upcoming LTSFs on Amazon can be found under:

Reports > Fulfillment > Inventory reports column (left hand side) > Inventory Health.

This is a report you can view online or download that shows which items in your inventory are subject to upcoming long term storage fees.

Analyzing FBA fees with hard math

Let’s get into exactly how FBA fees will impact your profits, with real examples.

I took a sampling of five books to show the “before” and “after” of the new fees. The books were chosen because weight is a factor in fees, and I wanted a sampling of the five most common book sizes:

1. Mass market paperback.
2. Trade paperback.
3. Average hardcover.
4. Large hardcover.
5. Textbook.

Examples of FBA fees with books

Let’s take 5 books at various weights and price points, and show how FBA fees of the past compare to new FBA fees today…

Book example #1: Mass market paperback

Sales price: $7

Payout before: $2.18

Payout now: $0.95

Payout percentage change of most recent fees:  -56%

Analysis: This is the end of the $7 book. RIP.

You see from the numbers above that this furthers the trend of new fees hitting low end books the most. The above example is the smallest size book you’re ever likely to sell (mass market paperback, i.e. romance-novel-sized), and at a $7 price point, new fees cut the price down by over half compared to a month ago. Brutal.

This pains me to say, but the days of selling $7 books via FBA are definitely gone. They were gone for anyone who needed $3+ payouts last year, but now they’re really gone – for all but the most serious bottom feeders.

Book strata #2: Standard paperback

Book example: Tipping Point (paperback)

Size / weight: 301 pages, 0.7 pounds.

Sales price: $8

Payout beofre: $2.45

Payout now: $1.79

Payout percentage change: –27%

Analysis: This a good example of an “average paperback book.” $8 is the current lowest FBA price as of the time I write this ($7.98), and it yields a less-than-impressive $1.79 payout.

After much consideration, I’m still committed to a $3 minimum payout for all my sales. To maintain this standard, you would have to list a book in the <1 pound range at $10 to get a $3 payout.

Somewhat good news to come out of the new fees: FBA prices have gone up, and noticeably so. For example with the above book, even with over 1,000 used copies for sale (a crazy high number) and fierce FBA competition, the lowest FBA price is still around $8. It’s not at all unusual to see books with 100+ used copies still having $10+ FBA offers.

So, FBA prices have gone up. But in terms of opportunity, does this mean $10 is the new $7? Have all the $7 books of 2016 simply become $10 books in 2018?

Not exactly, but there’s still tons of opportunity to hit a $3 minimum payout all day long, and do it with cheap used books, with a little effort.

Book strata #3: Standard hardcover

Book example:  Flash Boys (hardcover)

Size / weight: 288 pgs, 1.2 pounds

Sales price: $10

Payout before: $2.95

Payout now: $1.97

Payout percentage change: –32%

Analysis: Books take a huge hit with new fees when they get above 1 pound. The free increase is $1.50, the biggest jump between any weight tier.

To illustrate, the paperback version of this exact same book (which comes in under a pound) will yield you a $3 payout at the $10 price point. That’s roughly a 33% difference over just a few ounces.

To get a $3 payout (you may have different standards), you’ll need to list this hardcover via FBA at $11.25.

This is a big lesson for new FBA fees: it’s heavier books (over 1 pound) that are most difficult to sell for a profit at “average” prices. More than ever, it pays to be able to roughly assess the weight of a book, and save yourself that extra few seconds in your scanning app to determine payout. If a book is over a pound, you can often just put that book down and walk away.

Book strata #4: Big hardcover

Book example:  Money, Master the Game (hardcover)

Size / weight: 688 pgs, 1.8 pounds

Sales price: $10

Payout before: $2.55

Payout now: $1.96

Payout percentage change: –23%

Analysis: Notice the payout is only 1 cent off from the last example (which factors in one month of storage fees), yet this books is literally twice as thick.  Anything between 1 and 2 pounds (such as the last two books) get the same fees.

There is huge gap between one and two pounds, and a ton (over half?) of books fall into it.

Spoiler alert here, but I’ve abandoned having a flat “minimum sales price,” in favor of setting a two-tiered minimum: one for books under a pound, and one for books over. And then I’ve learned how to assess what weight bracket a book falls into in the pre-scanning phase, without relying on my scanning app (because all apps have FBA offer blindspots, there’s too many clicks involved to get a clear payout amount for every book. More than ever, it really pays to estimate weight yourself).

Book strata #5: Average textbook

Book example:  Introduction to Hospitality (textbook, ISBN 013281465X)

Pages / weight: 600 pgs/3 lbs

Sales price: $20

Payout before: $10.66

Payout now: $9.70

Payout percentage change: -9%

Analysis: While books sold at cheaper prices are severely impacted (see the first example), books at higher price points are barely impacted by new Amazon fees. I don’t want to diminish the impact that 10% can make on an Amazon business, but this is not a dealbreaking amount. This is a big and heavy textbook (over 3 pounds), and at $20, new fees only reduce payout by 96 cents.

For products above 2 pounds, the flat rate Amazon fulfillment fee only goes up 38 cents per pound. New fee changes shouldn’t make you cringe when you pick up a textbook, since the impact of a 3 pound book isn’t anywhere close to 3 times that of a 1 pound book.

Analyzing FBA long term storage fees (aka Aged Inventory Surcharge)

How brutal are Amazon’s Long Term Storage Fees (LTSF)? What do they mean for slow selling books (and more)? Let’s look at the numbers.

Let’s cover each trend in Amazon’s “aged inventory surcharge” (formerly “long term storage fee”) one by one.

Change #1: Long term storage fees (LTSF) now charged each month.

Explanation:

Previously, the way it went was this:

• An Amazon FBA seller buys a slow-selling book (either a book with low but nonetheless steady demand, or one that is a gamble and may never sell again).
• Once that book has been at an FBA warehouse for >6 months, it will get hit with a long term storage fee (LTSF) the following February or August (LTSFs were imposed twice a year).
• If an item incurred a long term storage fee after six months, you had another six-month grace period before it was charged again.

The six-month gap between LTSF charges meant we had the luxury of being a little lazy with how we dealt with slow-selling Amazon inventory. And even if we were so lazy as to ignore LTSFs altogether, on a book-by-book basis, they were rarely enough to make a book unprofitable (unless the price dropped).

In an effort to get slow-selling inventory out of its FBA warehouses, Amazon is creating a strong disincentive for us to continue being lazy. (And it pains me to say this, because I love being lazy). The six-month grace period is now gone, and Amazon is now charging us monthly.

Is this the end of long-tail books? No. Just the end of having the luxury of not understanding Amazon sales rank, and not knowing your numbers.

Change #2: Long term storage fees (LTSF) have almost doubled

Explanation:

Amazon has two tiers of long term storage fees: The fee charged for items in inventory for 6 to 12 months. And items in inventory 12+ months. On a month-by-month basis, both fees are almost doubling.

For all inventory in an FBA warehouse six months to one year

• Old LTSF, per cubic foot (6 to 12 months): $11.25 every six months.
• Old LTSF, per cubic foot (6 to 12 months, converted to a monthly rate): $1.88 / month.
• New LTSF, per cubic foot (6 to 12 months): $3.45 / month.

An increase of 84%.

For all inventory in an FBA warehouse over one year

• Old LTSF, per cubic foot (12+ months): $22.50 every six months.
• Old LTSF, per cubic foot (12+ months, converted to a monthly rate): $3.75 / month.
• New LTSF, per cubic foot (12+ months): $6.90 / month.

Also an increase of 84%.

Change #3: For all items in inventory for over one year, there is a monthly minimum LTSF of 50 cents.

Explanation:

If your first thought is “How many books would have cost over 50 cents per month anyway?” The answer is: Very few. In fact, this minimum increases the monthly LTSF for all but the hugest books.

Same trend at work here: Amazon is wanting to make it very painful for us to leave slow-moving inventory in their warehouse.

This is not the end of long-tail books, VHS tapes, and more. All the math needed to safeguard against losing money is pretty simple (and explained either below, or in an upcoming article) Those who dial in their numbers will emerge from this just fine. Those who decide that “math is too hard” will perish.

I don’t like FBA fees, but I love a good seller purge. So let the purge begin…

Examples of Long Term Storage Fees (aka Aged Inventory Surcharge)

This is what you came for: The numbers on what storing books at Amazon long term will cost you.

You have a book. It’s average Amazon sales rank is 4 million.. You’re going to sit on it for a while. You don’t know if you should buy it. How much will that book get charged if it doesn’t sell? How long will it have to sit before you actually lose money?

Here’s how this section is going to go: Since size is what determines LTSFs, I’m going to take a sampling of 5 books at the various sizes you’ll commonly encounter (ending with a worst-case-scenario of a big huge textbook that doesn’t sell for two whole years).

Here are the book sizes we’ll cover:

1. Mass market paperback.
2. Trade paperback.
3. Average hardcover.
4. Average textbook.
5. Super-huge textbook.

Disclaimer: For simplicity and ease of math, I did some light rounding of these figures.

Book Strata #1: Mass market paperback (romance novel sized)

• ISBN: 1612680194
• Book Dimensions: 4.2 x 1.2 x 6.5 inches
• Cubic Inches: 33.
• Cubic Feet Translation: 1/52 of a cubic foot.
• Monthly LTSF 6 to 12 months: 7 cents / month.
• Monthly LTSF 12+ months: 50 cents / month.
• Total LTSF after one year in inventory: 42 cents
• Total monthly + LTSF after one year in inventory: 54 cents
• Total LTSF after two years in inventory: $6.54 cents
• Sales price needed to break even after 1 year: $6.50 (+cost of book)
• Sales price needed to break even after 2 years: $13.60 (+cost of book)

Analysis: Setting aside the fact that this is a small book, these long term storage fees don’t look so devastating when you consider you still break even after an entire year selling this at a miniscule price ($6.50).

Book strata #2: Standard paperback

• ISBN: 0316346624
• Product Dimensions: 5.5 x 1 x 8.5 inches
• Cubic Inches: 47
• Cubic Feet Translation: 1/38 of a cubic foot.
• Monthly LTSF 6 to 12 months: 9 cents / month.
• Monthly LTSF 12+ months: 50 cents / month.
• Total LTSF after one year in inventory: 54 cents
• Total monthly + LTSF after one year in inventory: 78 cents
• Total LTSF after two years in inventory: $6.78 cents
• Sales price needed to break even after 1 year: $6.80 (+cost of book)
• Sales price needed to break even after 2 years: $13.90 (+cost of book)

Analysis: Again, because you rarely bring a book into your inventory not expecting it to sell anytime in the next year, in the event an average paperback book does not sell in one year, you only need to sell a book you paid $1 for for $7.80 (+the cost of the book) to break even. Not terribly daunting. No one wants to only break even, but it’s ok for this to happen (or even to lose money) on a certain percentage of your inventory, knowing you’ll make it up in aggregate.

Book strata #3: Standard hardcover

• ISBN: 0393244660
• Product Dimensions:  6.6 x 1 x 9.6 inches
• Cubic Inches: 63
• Cubic Feet Translation: 1/27 of a cubic foot.
• Monthly LTSF 6 to 12 months: 13 cents / month.
• Monthly LTSF 12+ months: 50 cents / month.
• Total LTSF after one year in inventory: 78 cents
• Total monthly + LTSF after one year in inventory: $1.02
• Total LTSF after two years in inventory: $7.02
• Sales price needed to break even after 1 year: $8.90 (+cost of book)
• Sales price needed to break even after 2 years: $16 (+cost of book)

Analysis: This is around the range we need to start getting serious about setting a minimum price we expect to list this for before bringing a long-tail book of this size into our inventory. Let’s say your standard minimum price for a book was $11. Then let’s say you picked up a book this size, and it had FBA offers around $11. So far so good. But then let’s say this book was ranked 3 million. Now you have to consider this book might sit a a warehouse for awhile, and you’ll have to answer the question: At what price is it worth it the potential LTSFs to bring this book into my inventory?

To settle this question, in an upcoming article I’ll break down some sample pricing guidelines at various sales ranks.

Book strata #4: Medium textbook

• ISBN: 013281465X
• Product Dimensions:  7.8 x 1 x 10 inches
• Cubic Inches: 78
• Cubic Feet Translation: 1/22 of a cubic foot.
• Monthly LTSF 6 to 12 months: 16 cents / month.
• Monthly LTSF 12+ months: 50 cents / month.
• Total LTSF after one year in inventory: 96 cents
• Total monthly + LTSF after one year in inventory: $1.32
• Total LTSF after two years in inventory: $7.32
• Sales price needed to break even after 1 year: $10.15 (+cost of book)
• Sales price needed to break even after 2 years: $17.20 (+cost of book)

Analysis: This is a decent-sized 600 page textbook. And even at this size, the storage fee is only 16 cents a month from six to 12 months. This definitely adds up, but doesn’t feel so menacing for a book in decent demand that you’re selling for $15+.

It gets considerably more serious after the one-year mark.

Book strata #5: Mega-huge monster textbook

• ISBN: 0134093410
• Product Dimensions:  9.2 x 2 x 11 inches
• Cubic Inches: 202
• Cubic Feet Translation: 1/9 of a cubic foot.
• Monthly LTSF 6 to 12 months: 38 cents / month.
• Monthly LTSF 12+ months: 77 cents / month.
• Total LTSF after one year in inventory: $2.28 cents
• Total monthly + LTSF after one year in inventory: $2.70
• Total LTSF after two years in inventory: $11.94
• Sales price needed to break even after 1 year: $13.60 (+cost of book)
• Sales price needed to break even after 2 years: $24.50 (+cost of book)

Analysis: Redundant reminder here, but this is a huge textbook, and pretty close to a worst-case-scenario. Presumably books this size already have an average selling price of over $15 for you, so you’re already covered here.

What this basically means is: When you bring a huge textbook into your inventory, and it doesn’t sell in six months, just keep an eye on it. Even with a textbook this size (two inches thick!), the fee is only 38 cents a month. Painful, but rarely lethal.

(Sidenote: This should not dissuade you from buying textbooks. “Textbooks only sell two months out of the year” is a huge myth. Textbooks sell year-round, so just stay on top of your repricing.)

Also note that Amazon’s new “50 cent minimum fee, per month” raised the monthly cost of every book we’ve looked at after 12 months except this one. This means that the 50 cent minimum will apply to all but the biggest books.

You now have an in-depth understanding of all aspects of FBA fees and long term storage fees.

Why Amazon sellers should not panic over new FBA fees

Every time Amazon raises FBA fees, sellers panic. Online chatter turns into “the sky is falling,” and “Amazon is a greedy monolith bent on destroying small sellers.”,

Happens ever time there’s fee hikes. And every time, I have to roll my eyes.

Here’s why these sellers are wrong, and why you shouldn’t care about FBA rate hikes:

#1: You don’t need to profit on every item

Some of the biggest sellers on Amazon actually lose money on half their sales. Hopefully this isn’t you, but the point remains: All that matters is that you make a profit in aggregate – when all the smoke clears and you get your Amazon payout.

You never acquire inventory you know you’ll lose money on. But if the price drops (or FBA fees go up) and you sell an item at a loss, you should be adequately buffered by the huge profits you’re making on the rest of your inventory.

#2: Amazon needs FBA sellers

You can abandon the conspiracy theories. Amazon isn’t trying to price sellers you out of FBA. Amazon needs us. Third-party sellers accounted for 58% of sales volume last quarter. You might be dead without Amazon, but they’re dead without us.

#3: Your huge margins should buffer you from the impact of any fee increase

If a 10% FBA fee increase is killing your margins, your margins are horrible.

Either do huge volume or have huge margins. Either way, you’re insulated from the impact of new fees.

#4: The leverage Amazon offers makes selling FBA worth it

FBA is worth it no matter what the fees.

With FBA, you’re getting shelf space in the largest store in the world. If you’re the lowest price (or own the Buy Box), anytime anyone searches for your product, they have a higher chance of seeing your offer than anyone else’s in the entire country. This type of access to so many consumers has never been possible in human history.

And Amazon stores everything for you.

And Amazon ships everything for you.

If that extra 30 cent FBA fee concerns you: your options are to either 1. retrain your perspective or 2. get a real job.

I know what side I’m on.

Many Amazon sellers have doomsday prophecies about rising FBA fees. To settle this issue, I’ve surveyed the wreckage to take stock of what has changed for sellers on Amazon.

How rising FBA fees affect the Amazon selling landscape

Anytime Amazon raises their FBA fees, here’s what happens:

1. Lowball FBA sellers raise their prices dramatically.
2. The low-end of the market vanishes.
3. A mini-exodus of FBA booksellers moves to the merchant fulfilled model.
4. A mini-exodus of Amazon booksellers get out of the business altogether.

And some of these are a good thing.

How are rising FBA fees sometimes a good thing?

How can new Amazon fees ever be a good thing for sellers?

It’s very simple. Higher FBA fees can be good if one of two things happens:

1. Skittish sellers flee the business, reducing competition.
2. They force FBA prices higher, so more books become more profitable.

With that out of the way, let’s examine the six possible effects of new FBA fees, and which of them did or did not happen (in no particular order).

A historical look at panic over new FBA fees.

Here are a few past theories Amazon sellers have raised about the effect new fees would have on the Amazon selling landscape, and which of them actually happened.

Theory #1: An exodus of FBA booksellers move to the merchant fulfilled model.

Did it happen? A: Uncertain.

Fact is, there’s no way to monitor exactly how many FBA sellers switched to merchant fulfilled after the new fees. Any examples are anecdotal, and hardly scientific. So the verdict is inconclusive.

Theory #2: Lowball FBA sellers would raise their prices dramatically.

Did it happen? A: Yes.

What is conclusive is that books on the extreme low end of the spectrum have vanished (see below). Whereas $4 FBA book offers were epidemic before, it is now extremely rare to see FBA offers below $6.

So prices on the cheap end of the spectrum have gone up. But just enough to get (most) books from selling at a net loss. I.e., the extreme lowball offers have gone from $4 to $6+.

Theory #3: Penny merchant fulfilled books would vanish.

Did it happen? A: Yes.

There was a time when the majority of books on Amazon were 1 cent plus postage. Those days are gone.

You still see penny books here and there (rarely), but by and large you now see few books below $1.

(Note: This means we need a clever new term to replace “penny books.”)

Theory #4: $4 FBA books would vanish.

Did it happen? A: Yes.

Again, you’ll still see these now and then, but they’ve almost totally disappeared.

With trends in rising FBA fees, profits from selling a $4 FBA book went from mere pennies (at most), to a significant loss. Literally no books can now be sold profitably at $4. Consequently, they have almost entirely vanished.

Theory #5: Megasellers would do nothing, and continue selling $4 FBA books.

Did it happen? A: No.

See above.

Theory #6: A mass exodus of Amazon booksellers would get out of the business altogether.

Did it happen? A: Yes. And I can prove it.

Using some data I obtained, later in this article I’m going to prove with hard data that the number of Amazon booksellers has dropped dramatically. And I’m going to reveal numbers as to what percentage of Amazon booksellers have left the business.

Have increasing FBA fees forced sellers to increase prices?

My rule has always been that I won’t sell a book that won’t bring me at least a $3 Amazon payout. Below that, it starts to feel like I’m just playing a bottom-feeder’s game.

I have no doubt I have walked away from six-figures in net profit over the years by passing on 50 cents books that would give a $2 Amazon payout. But I (mostly) held firm to my $3 payout rule.

So how have I had to adjust to new FBA fees?

Before new Fulfillment by Amazon fees, getting a $3 payout for the average book meant a selling price of $7.50.

Today, a $3 Amazon payout requires a selling price of around $12. Huge difference.

On one hand, its true that FBA prices have been forced upward. But I’m not seeing the same number of books that can be sold at $12 today that I could sell for $7.50 before the fees.

So the game of “selling a high volume of cheap books” as an Amazon bookseller has been significantly comprised.

High-priced books are minimally impacted by new FBA fees

If you’re not doing much business in books or media below, say, the $20 to $25 range, you’re not going to feel the new fees much at all.

At a selling price of $35, your profits are only impacted by about 10%. Not an existentially threatening amount.

That means Amazon sellers who are sourcing online (i.e. “online book arbitrage“), or generally dealing in higher priced books or media, are minimally affected.

Bottom line is if you’re doing most of your business in the $20 and up strata, you should barely notice.

What about the rest of us?

How to survive FBA fees if you’re selling cheaper books

Nothing genius about this part. If you’re doing significant business in sub-$10 books on Amazon and want to maintain your current revenue, you have to sell as many $12 books as you were selling $7.50 books in years past.

Problem is, there are dramatically fewer $12 books than $7.50 books. Any trip to a well-stocked book source will reveal as much.

So your options for adapting to this new reality are really simple:

1. Increase your average selling price (do more business in $10-and-up books).
2. Increase your sales volume (i.e. more / better book sources, or decreasing payout threshold to $2).

#1 is difficult to engineer without expanding your inventory sourcing range.

#2 is simpler, and my personal choice.

Within #2, getting more creative about sourcing is impossible to argue with, while decreasing payout threshold is a more controversial option.

To get a $2 Amazon payout today, your selling price must roughly be $10.75. Given this, I’ll start looking very closely at how common $2 books are now, and consider (read: consider) lowering my payout threshold if it will mean a lot more opportunity.

While I don’t like the implications of accepting extremely low Amazon payouts, consider that decreasing your minimum payout by 33% could mean you can increase your volume by 100% (or more).

Note I said “could.” It remains to be seen how many $7.50 offers exist with all the FBA offer price-shuffling taking place. But with lowball FBA prices now forced upward, we see the bazillions of $9 FBA offers becoming $12 FBA offers.

And if you’re willing to become a $2 bookseller, this could mean lots of new opportunity. Time will reveal all.

Have new FBA fees caused Amazon booksellers to flee?

I’m about to break down the evidence Amazon booksellers may have dropped by over 10% since FBA fee increases.

Lots of people have speculated booksellers are fleeing Amazon, but I haven’t seen anyone give solid numbers yet. So you’re getting an FBA Mastery exclusive here.

How I obtained his data

As a co-founder of an online book arbitrage tool, I’m privileged to have access to the massive amounts of Amazon data we harvest (data on millions of books daily).

I wanted hard evidence that new FBA fees caused a huge exodus of Amazon bookseller, forcing them out of the business. I wondered if the answer might lie in all the data we collect over at Zen Arbitrage.

So I called up the lead developer and asked: “Do we log the number of sellers for a particular book, going back at least two months?”

We did. He was able to give me the exact number of Amazon sellers for any book, going back at least a year. And what I learned supported a major suspicion:

New Amazon fees have caused a large number of sellers to leave the Amazon bookselling business.

I analyzed five books with thousands of used copies for sale

I wanted to see the number of total Amazon sellers for used copies before the latest FBA fee increase, and the Amazon number of sellers after.

To return the most accurate information. I picked five titles you find used copies of everywhere. Books that flood every source of second hand books, and for which there are generally around or over 1,000 used copies for sale on Amazon at any moment.

The books I chose are:

1. A Million Little Pieces (Frey)
2. Bridges of Madison County (Waller)
3. Midnight in the Garden of Good and Evil (Berendt)
4.  The Chamber (Grisham)
5. The Lovely Bones (Sebold)

To make the significance of any fluctuations as statistically sound as possible. I chose books with a flood of used copies for sale.

Here’s what I learned:

Sample Book #1: Million Little Pieces (ISBN: 0307276902)

Total sellers (used) before new FBA fees: 1,274

Total sellers (used) after new FBA fees: 1,142

A drop of: 10.36%

Sample Book #2: Bridges of Madison County (ISBN: 044651652X)

Total sellers (used) before new FBA fees: 1,643

Total sellers (used) after new FBA fees: 1,438

A drop of: 12.48%

Sample Book #3: Midnight in the Garden of Good and Evil (ISBN: 0679429220)

Total sellers (used) before new FBA fees: 1,288

Total sellers (used) after new FBA fees: 1,014

A drop of: 21.27%

Sample Book #4: The Lovely Bones (ISBN: 0316168815)

Total sellers (used) before new FBA fees: 981

Total sellers (used) after new FBA fees: 895

A drop of: 8.77%

Sample Book #5: The Chamber (ISBN: 0385424728)

Total sellers (used) before new FBA fees: 1050

Total sellers (used) after new FBA fees: 912

A drop of: 13.14%

What’s the average drop in sellers over the last two months?

Average across five books: 13.2%

What did we learn from this?

There is a significant difference among these books, with drops from 8% to over 20%. But the sheer quantity of books represented across the five titles provides us with what I think is a statistically significant sample.

And from this, we can see a trend indicating that, since FBA fees were last increased, somewhere in range of 10% of Amazon sellers may have left the bookselling business.

By any measure, 10%+ is significant. It means fewer sellers to compete against. Which means prices go up (although probably not noticeably so). And it means these things work in some small part to offset the increased fees.

How to respond to the new era of FBA Long Term Storage Fees

The premise of this section is this:

With Long Term Storage Fees, it’s more expensive to avoid risk (avoid slow-selling inventory) than to intelligently manage risk (buying slow selling inventory, but in a not-dumb way).

I’ll set out to answer the questions:

1. How should you change what you ship in to Amazon?
2. Is this the end of long tail books (and more)?
3. What are some specific formulas you can use to mitigate against the impact of Amazon’s long term storage fees?

Previous sections covered the specific numbers around long term storage fees. In this one, I’m covering something else: How to respond.

Do storage fee trends mean the end of selling low-demand books?

If you’re declaring this the end of long-tail/low-demand books, there’s a big problem:

1. It is over simplistic (or let’s just admit it – lazy) to declare new fees are the end of slow-selling inventory. (Better idea: create a buying formula that reduces risk.)
2. Residual sales are the key to Amazon selling: If all you’re doing is “flipping,” you don’t have a business.

Residual sales are everything in an Amazon business

if you abandon residual, longer-term sales, you abandon Amazon. To put another way, if you only sell inventory that will sell quickly, you’re effectively out of business.

Let’s say you’ve decided that long term storage fees mean an end to long-tail inventory (or aren’t sure, and have decided to listen to people propagating this sentiment). Unfortunately I have really bad news: That’s the same as saying you’re getting out of the Amazon business.

Residual sales are your life raft. You sell half of a shipment in 60 days, sales from the other half trickle in over the next year (or more). That’s how selling used books & media on Amazon works.

(Any seller who disputes this has likely been in business less than 60 days).

If your new mission is to entirely avoid long term storage fees, you’re simply out of business.

“Flippers” fail.

What’s the solution to long term storage fees?

So if avoiding long term storage fees is out of the question, what do we do?

The answer is mitigating long term storage fees with superior buying criteria. You must allow room for risk in an Amazon business, or you are out of business.

Since the most ominous change applies to books in inventory for over a year, let’s address those first…

An example of Aged Inventory Surcharge fees for books

Take an average hardcover book (slightly larger than the “average” book). Let’s assume it’s a few hundred pages and has dimensions of 6.5 x 1 x 9.5 inches. Pretty standard Hardcover.

After its been in your FBA inventory for one year (which hopefully won’t happen too often), the total amount you’ll pay in storage fees is around $1. Depending on the price of the book, that’s not an insignificant amount. It can put a serious dent in your margins. It can add up across a large inventory. But $1 isn’t a “call an ambulance” terrifying number.

However, to keep that book in your inventory for an additional year, it will cost you $6. (50 cents a month).

Recap:

• Hardcover at Amazon for 1 year: $1
• Hardcover at Amazon for 2 years: $7

That’s six times what it cost to keep it in your FBA inventory for the first year.

Before you panic, consider this

How often you do you ship a book to Amazon and not expect to sell in a year?

This is not the same asking “how many of your books don’t sell in a year.” It happens a lot, but you rarely expect it to.

Personally, it’s pretty rare I’ll ship any one book in where, if you asked me, I would say “I won’t sell this for at least a year.” Those books exist, but they are the super speculative purchases,  the “high risk / high yield” part of my Amazon inventory. The weird 70s spiralbound biorythm guides I create product pages for, the architectural-history-of-some-weird-midwest-town books on University of Nebraska press ranked 8 million, etc.

You expect nearly all books to sell on Amazon within a year. Of course, a lot of them don’t. In this situation, it’s important to know:

When books don’t sell in a year, 80% of the time it’s your fault.

This is actually great news, because it means most Amazon long term storage fees are in your control.

Let’s examine every reason a book wouldn’t sell that is on our control…

The Four Causes Of Long Term Storage Fees

When a book doesn’t sell after a year, it’s either one of four things…

1. A book I knew was in the “high risk” part of my inventory-portfolio.
2. A book that is in bad condition (that buyers are passing on despite my offer being the lowest price).
3. A book I was lazy about repricing.
4. A book whose price dropped, and I was too stubborn to cut my losses.

Let’s examine each of these and develop a plan to not get killed by LTSFs.

Going Deeper Into The Four Causes of Aged Inventory Surcharges

#1: Long Tail Investments: I do not advise you cut out this category above from your FBA inventory. Those are the high-priced books you sit on for 18 months and then sell for $99. One $99 sale offsets a dozen others that racked up another $6 in LTSFs. And if you’re on top of your repricing, it should never come down to only 1/12 of books selling in a year.

#2: Books In Bad Condition: For books in Acceptable condition, I add 50% to my price threshold before I ship in to Amazon. (My “long tail buying formula” is below). Being FBA gives my offer an advantage, and Acceptable condition isn’t a death sentence. It just means a book will take longer to sell. I price-buffer accordingly.

#3: Not Repricing: Not fun to correct, but easy to correct.

#4: Not Knowing When To Cut Your Losses: This is the big one. The one that’s hardest to remedy. Because you’re in a battle with yourself, and the justice mechanism inside of you that says “I’M GOING TO LOSE MONEY ON THIS BOOK AND IT’S NOT FAIR.”

So you rationalize. “Maybe the price will bounce back. It was $30 when I bought it, and gosh darn it, that’s the ‘right price.’ I’ll wait this out…”

This is myopic thinking, because it’s focused on a single unit of inventory. If you panic every time you have to purge a book but don’t also consider how much money you made from books you didn’t have to purge, consider the big picture. Looking at this big picture is much healthier (and more profitable).

When you fear the possibility of losing money on any item, it ignores the enormous (and real) costs of not shipping anything into Amazon that might incur a loss. Once you start playing it that safe, you’re basically out of business.

Do FBA fees for 6-to-12 month storage matter?

I’ve spent most of this article discussing the 12+ month fees, and I don’t want to downplay the 6 to 12 month FBA storage fees. They sting. But with a basic attention to Amazon sales rank and repricing, it’s still pretty hard to lose money until you hit a year. Then it gets ugly.

My “Long Term Storage Fee Aversion Formula”

The idea with the formula that follows is to keep it simple, so you don’t have to chart everything out in Inventory Lab and track every book down to the exact moment you start incurring a loss.

If your inventory management requires spreadsheets and white boards, its too complicated.

Here’s the kind of Amazon business I like to run:

• Feed tons of inventory into the Amazon monster.
• Let the Amazon monster feed money into my bank account.
• Avoid any huge dumb mistakes.
• Don’t sweat the details.

By all means, keep an eye on what’s racking up long term storage fees. But personally, I don’t want to be in a constant game of whack-a-mole, wondering what books are about to get hit with what fees.

I want clear formulas that mitigate risk and simplify my business so I can shut off 80% of my brain and focus on what matters: Sourcing profitable inventory to sell on Amazon. That’s it.

So here is the “Long Term Storage Fee Aversion Formula”, in three parts….

Long Tail Buying Tier #1: Books with an average rank worse than 4 million

• Average Amazon sales rank: 4 million or worse.
• Minimum price: $25

These are books that have a realistic possibility of sitting in my FBA inventory for a year or more. As covered, I rarely buy anything I expect to sit for a year or more, but things happen. Prices change, books don’t sell, and a year can go by fast.

Even after 2 years of fees, I’m still doubling my money on most books.

I wouldn’t blame you if you kept it to $30. There’s no science to this. But those are my numbers.

Long Tail Buying Tier #2: Books with an average rank of 2 to 4 million

• Average Amazon sales rank: 2 to 4 million.
• Minimum listing price: $20

The average hardcover is still getting a $10 Amazon payout after a $20 sale. Then factor in a $1 average cost (rough numbers here). Then factor in $1 in FBA storage fees if the book sits for a year.

As long as a sale does come around eventually, I can still let that book sit for two years before I’m losing money. And I can relax a lot with books with a sales rank of 2 to 4 million (vs ranks like 6 or 8 million), because it’s going to be pretty rare you’re going to have them for two years.

Long Tail Buying Tier #3: Books with an average rank of 1 to 2 million

• Average Amazon sales rank: 1 to 2 million.
• Minimum listing price: $15

This is the strata more technically called  “I strongly expect this to sell before 6 months, but it often won’t.” Doesn’t mean that a book with an average rank of 2 million isn’t selling more often than 6 months, just a nod to the Amazon gods that things don’t always work out how we think they will.

To put it more loosely, these are books in that have entered the “long term storage fee danger zone.”

This is another one where it wouldn’t be unreasonable to set a $20 minimum, it just comes down to your tolerance for risk.

The “Long Term Storage Fee Aversion Framework”

We just gave you some specific buying criteria to protect against storage fees. Now lets give you a bigger framework you can follow to make storage fees irrelevant.

Here they are: Eight truths, lessons, and mindsets for new Amazon long term storage fees, so you won’t be so afraid of them…

#1: Get comfortable breaking even on some books

If the thought of *only* breaking even on a book sends you into seizures, begin to consider that Amazon megasellers (and most smart businesspeople in most businesses) are comfortable breaking even (or even losing money) on much of their inventory. It’s okay to make a bet, have that bet not pan out, and walk away from that bet only out a few seconds of listing time.

Remember, its a lot more expensive to play it *too* safe, and to filter out any books that *might* incur a long term storage fee. If you know your numbers, there will always be more winners than break-even (or net-loss) losers, and profit from those winners will always offset losses from the losers.

#2: Get more vigilant about knowing what in your FBA inventory is approaching the 6 month mark

I’ve been the worst at this until the past year.

You’ll see from the math above, you’re still not likely to lose money on books after one year, even with new long term storage fees, as long as you adhere to basic buying guidelines. But after the six month mark, not only do you get charged monthly, you’ll get charged almost double.

You can see which inventory will get hit with fees (and exactly how much) in Amazon Seller Central at:

Reports > Fulfillment > Inventory reports column (left hand side) > Inventory Health

#3: Know what to do when a book is approaching the six or twelve month mark

A book getting close to incurring a LTSF is not a fire alarm for “purge that book immediately.” If you have the lowest price for that book, and it will still turn a decent profit after monthly LTSFs, then hold your ground.

Don’t go on purge-autopilot. Know when to hold, and when to… you know.

#4: Amazon’s long term storage fees don’t get really serious until after 12 months

You rarely bring a book into your inventory expecting it won’t sell: Even a book ranked 3 million should, in theory, sell on Amazon in less than six months. So in a perfect world, these long term storage fees don’t affect a huge percentage of books – if you reprice consistently and don’t fall victim to ego-battles that prevent you from disposing of losing inventory.

But when a book hits the 12-month mark, pay attention.

#5: Amazon sales rank doesn’t lie

If a book has an average sales rank of 3 million or better, it is almost definitely selling at least one copy every six months. If your copy isn’t selling, it doesn’t mean the book isn’t selling, it just means the sales aren’t going to you. Why would that be?

As covered, it could be condition. Could be a Buy Box thing. Could be your feedback score. But nothing comes close to the one variable that trumps all others: Pricing.

You’re probably not matched with (or below) the lowest priced offer. That is almost always the reason a book isn’t selling.

#6: Rising FBA fees means Amazon has revoked our being-lazy privileges

We’re not saying goodbye to selling long-tail books on Amazon, just to to shipping them in and forgetting about them without regard to whether they sell in 3 days or 3 years. (Those were good times and I’ll always remember them fondly.)

#7: This is not the end of long-tail stuff

The numbers don’t lie here. Even at a $15 selling price, you’re still making money on an average paperback book you paid $1 for – even after it sits at the FBA warehouse for 2 years.

The biggest lesson of all

Do you know what’s more expensive than Long Term Storage Fees?

Not taking risks.

Breaking news for sellers: 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.

What I will cover in this section:

• 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 how many books fit in a cubic foot?

Since Aged Inventory is charged based on cubic foot, how many books fit into one cubic foot?

About 36 average books.

About 11.6 large textbooks (really large ones).

Why freaking out over FBA fees 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 FBA long term storage fees:

1. The lump sum.
2. Added cost per book subject to long term storage fees.
3. Added cost per book, when fees are diffused across your entire inventory.

Here what I mean

Let’s say you have 5,000 books in your inventory, and 1,000 have been there for 6 months.

Every 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:

1. $310
2. 31 cents for every book subject to long term storage fees.
3. 6 cents for every book you ship in.

Let’s look at each of these individually and what they mean…

1. 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.

<multiplied times>

Number of books expected to not sell after 6 months.

<divided by>

Total number of books you ship to Amazon.

<equals>

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.

Real world example: what FBA storage fees will actually cost you

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.

It still makes you wonder why sellers treat these fees like such a big deal, 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 what’s the average FBA storage fee per book?

17 cents per book.

That’s it.

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.

Is it the end of selling low-demand 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: The average impact for storage fees is 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 before before FBA storage fees cause you to lose 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 to adapt for the future of FBA aged inventory fees

1. If you’re concerned, set aside 17 cents per book sold to cover new long term storage fees.
2. 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.

Big takeaways

1. Amazon FBA fees definitely do not mean the end of bookselling.
2. Have firm minimums and maintain them ruthlessly.
3. Higher FBA fees enforce new precision.
4. The cheaper the price point, the more severe the impact of new FBA fees.
5. Books take a big hit from 1 pound to 2 pounds, and more than ever it pays to accurately guess what weight tier a book falls in before scanning.
6. The sub-$10 FBA book sale is (moslty) dead.
7. If the new storage fees make bookselling unprofitable, you weren’t doing it right anyway.
8. Most “average” paperbacks come in at under one pound, and can yield a $3 Amazon payout at a $10 sales price.
9. Most “average” hardcovers and heavier paperbacks must be sold for around $12 to get a $3 Amazon payout.
10. The impact of new FBA fees is greatly diminished for books in the $15+ range.
11. FBA prices for lowball books have gone up, but far just enough to get lowball sellers back to 30 cent profits (shift form $4 to $7)
12. This is significant for books in the sub-$12 range.
13. This means very little for sellers in a higher price range / online sourcing.
14. Penny books have mostly vanished.
15. Options to cope are to increase your average selling price or increase your sales volume.
16. Lowering payout threshold to $2 could mean a lot of opportunity (jury still out).

That’s the full (and long) story on remaining profitable despite increasing FBA fees.

-Peter Valley

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