Retail

Leaving Inventory at Amazon Warehouses Will Cost You

Douglas A. McIntyre

Published: July 1, 2018 6:10 am

Last Updated: January 11, 2020 9:37 pm

Amazon.com Inc. (NASDAQ: AMZN) does not want companies which sell products at its website to store items at its warehouses for long. And, as a disincentive, it has raised the costs to do so. The increased charges will probably not make America’s most massive e-commerce company much money. It will, however, clear out what has become more and more valuable real estate space.

The new rules posted at Amazon Seller Central are immensely complex and include dozens of fees. They also offer a guide on how to unlock the complexity of the charges and even a “frequently asked questions” section. The instructions boil down to one thing:

Through the inventory management tools and FBA storage fee structure, our goal is to encourage efficient inventory management that benefits you, customers, and Amazon. While we continue to invest in our fulfillment network to better serve your business, 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.

Amazon has a new “Inventory Performance Index” to grades its e-commerce suppliers.

Amazon already makes a great deal from its vendor “Selling Plan” which is broken down into fees for both corporate and individual sellers. Corporate sellers are those who move over 40 items a month. They pay a base fee of $39.00 plus a percentage of sales dollars. Individuals pay $.99 an items plus one or more of a complex set of extra payments.

The new plan is part of Amazon’s fine-tuned system to manage its supply chain. As it has built more and more distribution centers, with the costs of real estate, construction, and maintenance, Amazon wants to recoup some of those costs. And much of that clearly will be balanced on the backs of Amazon selling partners. Bit by bit, Amazon will make money off those who want to use its distribution system and its foundation which is the Amazon.com website. This could push some vendors off Amazon.com, but the company is measuring that against what it costs to keep inventory beyond its own.