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Amazon’s Low-Inventory-Level Fee: What It Is and How To Manage it

Explore how Amazon's low-inventory-level fee impacts sellers and how inventory-aware repricing technology can help. By Rachel Horner March 14, 2024

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The introduction of the low-inventory-level fee has added a new layer of complexity for sellers striving to strike the right balance in managing their stock effectively. This fee, set to take effect from April 1st, is designed to motivate sellers to optimize inventory management and streamline distribution within Amazon’s fulfillment centers.

With Amazon now reportedly taking 45 cents in fees out of every dollar of third-party sales, it’s more important than ever for sellers to protect their profits against inventory fees. We’ll explore what the low-inventory-level fee means for sellers and how AI-powered repricing technology can enable sellers to take a proactive, more efficient approach to their inventory management.

Low-Inventory-Level Fee: Explained

The low-inventory-level fee will be applicable for standard-sized products and implemented for consistently low inventory levels starting April 1st. The fee only applies to standard-sized products when both its long-term (last 90 days) and short-term (last 30 days) historical days of supply are below 28 days. 

In introducing this new fee, Amazon aims to motivate sellers to optimize their inventory management and expedite the distribution process within fulfillment centers. The fee specifically targets instances where sellers maintain inadequate inventory relative to their unit sales, potentially impeding Amazon’s ability to efficiently distribute products through the FBA network in a timely and cost-effective manner.

While the recent fee introduction may bolster Amazon’s efficiency in fulfillment center distribution and supply chain management, it presents a hurdle for sellers. While fees are essential, they can significantly diminish a seller’s profits; reportedly, Amazon now deducts 45 cents in fees from every dollar of third-party sales. This new fee adds to the array of inventory-based costs that sellers must vigilantly manage, including:

  • Low-Inventory-Level Fee: A fee charged when a product’s inventory levels fall below 28 days — relative to its historical demand.
  • Fulfillment costs: The costs that Amazon charges to fulfill the order. It varies based on the product size and weight. 
  • Storage costs: The fees Amazon charges for the space the inventory takes in its fulfillment center. The fee is calculated based on the average number of units stored in the FBA center per month, varying most notably during Q4.
  • Storage Utilization Surcharge: A charge incurred when a seller keeps inventory units in an Amazon warehouse longer than 26 weeks,
  • Aged Inventory Surcharge: A monthly charge assessed using an inventory snapshot on the 15th day of each month. The Aged Inventory Surcharge is only charged on inventory units stored in an FBA center longer than 180 days.

The new low-inventory fee penalizes sellers for having too little stock, adding to the above existing excess inventory fees. Striking the right balance has become a delicate act akin to walking a tightrope.

 

Managing Inventory Fees with Advanced Repricing Technology

Sellers are in need of a solution that not only offers vital information about their inventory health but also delivers actionable and timely strategies they can implement before it becomes problematic. Consider the following scenarios.

Too Much Inventory 

Imagine that low Buy Box visibility is slowing your sales and hindering product movement. While you’re conscious of the looming risk of excess charges due to inventory health, you’re uncertain about the strategic steps needed to rapidly generate and convert more demand before incurring additional fees. You need a solution that maximizes your Buy Box visibility and evaluates price elasticity to pinpoint the optimal price for increased demand, ultimately boosting sales velocity and expediting inventory turnover.

Too Little Inventory

Picture this: you’re dealing with unexpectedly high demand for your product. Knowing you need to replenish your inventory quickly, the challenge is determining the right reorder quantity. Adding to the complexity, the new inventory may not be readily available. You need a solution that prevents a significant stock shortage without disrupting your sales flow.

Just Right

In both scenarios, the crux is optimizing inventory velocity. Given the multitude of factors at play, sellers must automate the process and respond promptly. But while many solutions offer data, the missing link is actionable real-time strategies per Asin that only AI can achieve — truly optimizing the pace at which your products move. Navigating Amazon’s latest fees is no longer about responding to market changes; it’s about predicting and influencing those changes.

This is where Feedvisor’s advanced repricing technology comes into play, going beyond simple insights to empower sellers with actionable strategies. With its latest update, Feedvisor has enhanced its prowess in optimizing pricing and profitability by now factoring in the pace of product sales. The result: Sellers are able to fine-tune their price velocity, preventing inventory issues. 

Feedvisor’s inventory-aware repricing not only allows sellers to competitively price against others but also ensure profitability and increased sales simultaneously. Feedvisor’s repricing solution is able to merge smart algorithms, competitive signals, and real-time inventory insights. It swiftly adapts to market shifts, intelligently adjusting prices in real-time to discover the optimal point for achieving the desired level of sales and inventory velocity, including: 

  • Slowing down sales to avoid stock depletion.
  • Identifying the optimal price point to boost demand, accelerating sales velocity for quicker stock turnover.

In other words, Feedvisor’s powerful repricing solution goes beyond grasping price elasticity nuances. It considers market dynamics and inventory levels at a granular level, empowering sellers to minimize fees and boost profits.

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About the Author

Rachel Horner serves as the Content Marketing Writer for Feedvisor. She has extensive experience in writing for diverse B2B brands, particularly in the tech industry, and is dedicated to fostering meaningful brand-audience connections.

Final Thoughts

Predictive and influential approaches are paramount in the dynamic landscape of Amazon’s fees. Feedvisor’s AI-based repricing solution, focusing on market dynamics and granular inventory levels, positions sellers to navigate these changes successfully, cut fees, and boost profits in the ever-evolving world of e-commerce. See it in action with a free, 14-day trial of Feedvisor’s industry-leading repricing platform. 

 

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