Does the recent news from Amazon regarding increased inventory storage fees have you worried? Are you scrambling to figure out what you are going to do about your shrinking profit margins? Don’t panic! Let Scott and Chris guide you through the information and give you some tips to understanding and dealing with storage costs. On this episode of The Amazing Seller, Scott and Chris will discuss tools that can help with inventory projection, how to plan ahead, and even take some questions from the Facebook Live session! Make sure to catch their helpful solutions.
Understanding the storage rate changes from Amazon
Whenever there is a sudden change or a change you didn't see coming, you’ll experience a bit of shell shock. It can leave you reeling and trying to make sense of what is going on. Many Amazon sellers are facing this situation with the current change to the Amazon inventory fees. Scott and Chris have the experience to walk through what all of this change means for you. Don’t let panic and fear set in. Take a deep breath and listen. The changes are simply Amazon’s way of expediting their sellers. They need to keep product moving so they are increasing long term storage rates. What this forces you as an Amazon seller to do is to think carefully about how much inventory you really need for the next three to four months at the Amazon storage location. If you think about it, this change can spur you on to be a more shrewd business owner. Listen to Scott and Chris break it all down on this episode of The Amazing Seller!
A helpful tool to project inventory needs
Information can be a helpful tool if you know how to use it. The wisdom to decipher and understand raw data comes often to those who have studied it and have spent a lot of time interacting with it. For most people, this seems completely out of reach and intimidating. Having one part to a two part solution isn’t only intimidating, it's frustrating. So when a tool, a tip, or person comes along to show you the way, you jump at the opportunity. That’s exactly what Scott did when he started using the online tool “Fetcher.” Scott knows a successful idea when he sees one and he has learned the value of using Fetcher. It’s tool that helps you makes sense of all the inventory data you have at your fingertips. To get ahead of the competition, Scott recommends checking out Fetcher.
A lesson with inventory learned the hard way
Some people have to learn the hard way. Scott has had his fair share of easy and hard lessons in life. On this episode of The Amazing Seller, Scott shares a lesson he learned from having some troublesome inventory that wasn’t selling quickly enough in Amazon’s storage. He took a great opportunity that Amazon was promoting which allowed him to pull most of this troublesome product at no cost. From that experience, Scott has learned some valuable lessons regarding packaging, inventory costs, and much more. To hear Scott expand on this lesson, make sure to catch this episode!
How should newcomers approach inventory costs and volume?
When you are just getting started on a new venture like selling on Amazon, unknown variables can be terrifying. That is a huge reason why Scott and Chris started their efforts toward coaching and helping people get the hang of this exciting industry! They are here to help break down the process and make it easier for entrepreneurial minded individuals to find success and financial independence. So when a new challenge like the rising costs of Amazon storage fees presents itself, Scott and Chris want to remove the fear and intimidation that might bring. On this episode of The Amazing Seller, Chris has some great advice he wants to share with sellers just starting out. If that’s you, make sure to listen in and find out how you can be smart with your inventory projections!
OUTLINE OF THIS EPISODE OF THE AMAZING SELLER
- [0:03] Scott’s introduction to this episode of the podcast!
- [1:25] Scott welcome Chris to the show.
- [2:00] Chris and Scott jump into talking about storage fees.
- [5:15] Understanding how Amazon is setting its storage fee rates.
- [6:50] Scott talks about a tool he’s been using called “Fetcher.”
- [9:20] How billing for storage fees works with Amazon.
- [10:45] Scott and Chris start taking questions from Facebook Live.
- [10:55] Have you used the inventory age report or any of the inventory reports that are available inside of Amazon?
- [11:50] What Fetcher can do over Amazon’s inventory dashboard tool?
- [15:55] Scott talks about a time when he had to pull inventory from Amazon storage.
- [21:10] How to project how much inventory you should have stored with Amazon.
- [27:35] How long can you store inventory at Amazon before the costs start rising?
- [32:20] For someone just starting out, how should they think about these storage issues?
- [38:00] Know your numbers!
TRANSCRIPT TAS 315
TAS 315 : Understanding and Limiting Your Storage Fees + Live Video and Questions
[00:00:03] Scott: Well hey, hey what’s up everyone! Welcome back to another episode of The Amazing Seller Podcast. This is episode number 315. Today we’re going to be talking about how to really understand your inventory storage fees because that has been a little bit of a shocker for a lot of people out there and we want to talk about that. Now, I do want to say we’re actually doing a little experiment here…
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…This episode I’m recording live with Chris Shaffer on video, on Facebook and we’re trying to stream everything together. We thought it would be kind of cool to give you a little bit of a ‘behind the scenes’ look of what it is like to record a podcast.
There’s no stopping and starting and editing and all of that stuff that I can normally do, so there’s a little bit of less pressure. We said let’s just do this. Let’s also get it out there because this one topic is pretty big right now. A lot of people are panicking about it because the last fee just came out the other day and people were all kind of blown away again and shocked and thought that it was over because of the 4th quarter.
What I want to do here is really talk about this, talk about what it means for us selling in the future. Is this going to be all the time? If you’re just starting, what should we be thinking about? Like I said, we’re going to be going through this. I’ve got Chris Shaffer again on. Chris, what is going on my friend?
[00:01:27] Chris: Not too much man. It is a beautiful day here finally. We got out of the snow-ice-apocalypse thing that I kind of moved to the south to get away from. My previous home is finally no longer under water, so that’s also good. Other than that I’m just sitting here this week and we’re seeing all kinds of posts inside the Facebook group again, as of the time that we’re recording this about these storage fees and everybody saying, “I’m getting hit with long term storage fees.
I’m getting hit with these big storage fees.” You’re actually not being hit with long term storage fees right now. I know that’s kind of terrifying to think about. The storage fees that a lot of people are getting in the last couple of days are actually just the regular monthly storage fees. I say regular monthly storage fees but what we’re actually talking about are the Height Q4 storage fees.
What Amazon did this year is they said in November and December any inventory that we have that isn’t sold through whatever space you’re taking up, they actually hike that storage fee by almost five times. It went from somewhere around 53 cents for a normal product to like $2. Those numbers aren’t exactly on but it went up about five times per square foot.
[00:02:31] Scott: You and I had a little bit of a conversation yesterday back and forth through Skype. We were talking about that and I was like… Here’s the deal, we’re talking about how much area it takes up in their warehouse, that’s what we’re talking about.
[00:02:46] Chris: Per cubic foot.
[00:02:47] Scott: Exactly, so we’re not talking necessarily about oversize, we could talk about that but we’re not, we’re talking about just standard sized products. Here was my example to you, I said, “Let’s say that I’m selling a coffee pot and it’s in a box that is 12 inches long and six inches wide and six inches high. That there is going to cost me more than if I have a product that I could put, maybe in that same space I could 10 of my products in that space. So now my cost per unit is less.” Is that correct in me thinking that way?
[00:03:22] Chris: Right. The storage fees are different from your fulfillment or from your picking pack fees. Storage fees are going to be based on the cubic feet that whatever your product is take up. If you have post it notes, just because that’s the thing on my desk, post it notes are going to take a heck of a lot less space than your coffee cup or this water bottle. I could put 20 stacks of post-it notes in the same cubic foot of space as I could one of these water bottles or two of these water bottles. That’s something that we have to keep in mind.
The thing that’s interesting with the storage fees is actually the storage fees for oversize products are actually less per cubic foot. Now, that sounds really great but the downside of that is obviously if you have an oversize product it’s over 18 inches so you can put a heck of a lot less of them inside of the same cubic foot. It actually doesn’t generally work out to be a better deal for you. Now just some actual numbers and something to keep in mind, generally speaking you’re talking about 54 cents per square foot for a standard sized product.
This year Amazon ran that January through October. November and December we were paying $2.25 per square foot. The reason for that is Amazon warehouses get packed to the hill in Q4. What Amazon is doing next year is they’re actually making that effective October 1st, so you’re going to have three months of that. Between now and October 1st of next year you should still be paying that 54 cents per square foot. Then October, November and December it actually is going to go up again to $2.35 cents per square foot. They want you to make sure that you’re selling through the stuff you have there in Q4.
[00:05:06] Scott: I think that the most important thing is knowing your numbers but let’s just talk a little bit about that cubic foot. We’re talking a cube that is 12 inches by 12 inches by 12 inches. Anyone that’s thinking like to themselves how big is that, well take a tape measure and measure 12 inches up, 12 inches out and 12 inches long and that is your cube. That’s what you’re paying 54 cents for or up to that or around that, I would say. Depending on when you’re listening to this it could change, who knows?
What you need to understand is, what they did is they tripled that… No, more than tripled that for 4th quarter, right Chris? It was like $2 and…
[00:05:50] Chris: It’s like four and a half times what it normally is.
[00:05:53] Scott: They basically said you better be selling your stuff. One thing I didn’t do Chris because this is a little different for me right now. We’re on live right now, I’m recording this. If you are listening to this on the live feed right now, this isn’t actually going to air for about two weeks on the podcast but this is episode 315. Depending on when you’re listening to it the show notes will be available at 315, so theamazingseller.com/315. If you go there now, if you’re watching this live, there won’t be any show notes. We got to figure out how we’re can work that out Chris, that’s a little bit of a challenge there.
[00:06:28] Chris: What if we get somebody to do it on the fly?
[00:06:29] Scott: Maybe on the fly we can have our transcripts automatically be done. I want people to understand though that it really does come down to knowing your numbers and it’s hard. It’s hard to know your numbers exactly every single time of the year. Now there is a tool that I’ve been playing around with probably for the past month now and it’s Fetcher. That is again by Greg Mercer of Jungle Scout, great friend of mine, great products.
I’ve been holding off for the longest time. I’ve just been so old school about doing things that I’ve kept things in a spreadsheet and also people now that I’ve partnered with they’ve kind of taken care of that themselves, so I haven’t had to worry about it. But now that I wanted to see things a little bit deeper especially with these storage fees that are getting figured in that you don’t really know that might even not be happening or that you think those are all my fees. What are my fees?
This thing breaks it all down. This isn’t a huge plug for that software other than that is what I’m using right now and I know a lot of people are. If you want to check that out by all means head over to theamazingseller.com/fetcher; there’s a 30 day free trial. It takes a little while though Chris to gather your information. It will literally be working for a couple of weeks sometimes depending on how long you’ve been selling.
The cool thing about this is it gives predictions of what have been sold because of what you’ve already sold. If you have history, like if you’ve gone through a full 12 months you can pre-plan for what is coming in Q4 or Q3, so you can plan. We’ve always just did a 30 day run. It’s like okay, what did it do last 30? What are we selling on a daily basis? What do we need to have in stock so we can keep no more than 60 days’ worth of inventory, preferably less?
[00:08:27] Scott: Now, I know our good friend and one of our students, Alan, had talked about this in the class recently. He was like, they’ve just hit me with this storage fee again and I thought that was all over with, why don’t you speak to that real quick? Some people are thinking like you got hit with that one big fee, some people got hit with… Our good friend Dom Sugar got hit with a huge bill, maybe you can speak to that. We thought it was just 4th quarter but it really…
[00:09:00] Chris: Well it is.
[00:09:00]Scott: I was just going to say, but it’s really two different times.
[00:09:04]Chris: You could build a month behind basically. Your cellphone bill is paid a month in advance basically but your Amazon storage fee’s bill is paid a month behind because it’s based on what you used in that months. They have to wait for the month to actually close before they can bill you for it, if that makes sense. What they’re doing and it’s still technically the end of January or the beginning of January I guess, as of the time that we’re recording this, they waited till your month closed down in December.
They did all of the calculations they said, “Scott you used 20 square feet, Chris you used 15 square feet, Dom you used 500 square feet,” probably an accurate example. They assess the fee based on that. It takes them a couple of days to do all of those calculations and do everything like that and then they can come in and actually bill you. You should be seeing that bill this week. The week of, I don’t know, what was Monday? Right now as the recording it’s January 11th, so if you haven’t seen it yet I would expect to see it in the next few days if you are with us live.
[00:09:04] Scott: Okay, cool. The other thing that I want. Before we go any further here we are on Facebook live too right now but if you’re listening to this on the podcast you can’t see that but if you are on Facebook live ask some questions. If you have you have questions right now that you want us to answer we’ll answer them live, the people listening will benefit from that. If you have any questions please send them in and we’ll go ahead and do our best to address them and answer them at least if we can we’ll do our best.
Definitely have them come in. Just send in your questions if you have any questions about this. Chris you got something, go ahead. I love this with video, I can actually see that you want to talk. I can actually see that you want…
[00:10:48] Chris: I know because otherwise I just point in my screen and you have no idea what’s going on.
[00:10:52] Scott: I love it.
[00:10:53] Chris: Fetcher, have you used the inventory age report at all or any of the inventory reports that are available inside of Amazon? Just yes or no to that.
[00:11:02] Scott: Yes I have but very, very rarely to be honest.
[00:11:06] Chris: What I’m curious about is, how is that different from the manage access inventory report or the inventory dashboard? What you see… Any of you guys that are listening to this can find this. If you go to your seller central account and scroll down along the right hand side you’ll see like payment summary, your sales summary. Right below that Amazon has started to make this a bigger priority which is part of the reason you’re seeing fees go up, they want you to manage your inventory better but you’ll see the inventory planning dashboard button thing.
That gives you a high level overview but if you click on, it says view inventory dashboard, it actually brings up your inventory dashboard report and it tells you how many expected days of inventory you have in stock. I’m just curious Scott, what does Fetcher get me that I don’t see in that report? Is it giving me like a 30, 60, 90 projected sales?
[00:11:59] Scott: I can dig around in there as we’re going through this but honestly I haven’t… Literally since I’ve been paying attention to it, it’s been about three weeks. I’ve had it running because it’s been still fetching the data. It’s Fetcher. It’s kind of fetching the data. What I really like about it that I’ve seen so far is that it gives me my averages so then I can do those predictions. As far as give me that number, let me do that while you’re maybe explaining a little bit more on the reporting and then I can let you know live here. That would be the beautiful thing as well.
[00:12:30] Chris: That would be really cool because the biggest problem that I have with the inventory dashboard is that it only gives me a 30 days snapshot. It says, I sold 90 units of this in the last 30 days and based on how much I have in stock I have 365 days’ worth of inventory which isn’t what we want. I have 100 days’ worth of inventory or 30 days’ worth of inventory. What that doesn’t take into consideration is December might not have been a good month for me, for that product. It might be a slow time. So it doesn’t tell me what I’m actually going to sell in January or February.
If I know what I sold in January or February of last year and something like Fetcher can pull that in for me and tell me, last year you did two times more that’s extremely, extremely useful. I don’t get that in the inventory tab. What I’ve been doing is I’ve just been doing that in a spreadsheet to do those types of projections.
[00:13:25] Scott: As I’m digging through I’m not really seeing that clearly, again I probably have to reach out to Greg and ask him if that is a feature in here. What I am seeing is if I wanted to go through and look for a certain month or a certain time period I can see my sales. That doesn’t calculate it for me and say you have this much, this is how much you’re going to need. I could calculate that myself just by looking at it if I said a 30 day period this is how many I sold.
As far as it being right in my dashboard I don’t see that but again that might be something I’m just overlooking. If someone else is watching this and they’re a Fetcher user or listening to this let me know. I’m going to reach out to Greg anyway and talk to him a little bit about more of the fine details here. I know there’s some probably some things that I’m not using inside it that could probably be even better.
[00:14:14] Chris: Knowing your inventory is really what we’re getting here whether you’re using Fetcher or you’re just using inventory dashboard and that’s going to be extremely important coming up. If you had a heart attack about the $2.25 fee in November and December you’re long term storage fee is coming up here. The 1st one of 2017 is going to be February 15th and the 2nd one is usually August 15th.
Anything that’s been in the fulfillment center six to 12 months, so anything that’s been there longer that six months basically, you get charged $11.25 per square foot on that. It’s another five times higher than what you even would have paid in December if that inventory has been sitting there longer than six months. Now I know the inventory planning tool inside the inventory dashboard tells you the exact number of units that will incur that long term storage fee on February 15th.
If you go into your inventory dashboard you can hit a little button it says “view units” and it will actually tell you how many units of each product are going to occur that long term storage fee and exactly how much that’s going to be per product. What you can do if that’s an issue is you can actually pull that inventory. Any time you pull out inventory from Amazon you run into that issue where maybe they don’t let you send as much in the next time.
Scott I know you ran into that issue with a product. Can you dive into that just a second so we can let everybody know a little bit about the problem that you had there where you had to pull all your inventory out?
[00:15:45] Scott: I was able to pull it out also because they were doing the… They were offering to do it for free so I took them up on that. We had a little bit of an issue with our… It was a bundle of product or of some products inside of one package in the bag. It was in a plastic, kind of like a cellophane type bag. It was kind of heat welded I believe on the one side it was breaking open when they were taking it out and things were falling out of the package, so I was getting all these complaints.
I had a few times that the listing was suppressed, it wasn’t allowing me to list it anymore because the refund rate was higher than they wanted and had to keep going back with them. From there I just decided to pull a good chunk of that inventory when they gave me that opportunity. Then now what we’ve done is we’ve repackaged those and now we have to ship them back in. It’s technically costing me the money to go back in obviously the labor to actually repackage those.
I was still able to salvage those because I had someone that I can actually ship them to now and then have them repackage them. I took advantage of that option of them saying like… They do it periodically. You can’t say it’s going to happen next month but when it does happen that’s when you have to make that decision, is this the time that I want to pull some of my inventory? If you do now you have to have a place to store it.
[00:17:11] Chris: Did you run into any issues? I’m trying to remember if this was you or not. Did you run into any issues when you tried to send more inventory in for that SKU?
[00:17:18] Scott: No, we have not.
[00:17:20] Chris: Okay. I’ve heard a few stories from different sellers about if they do a big withdrawal from…
[00:17:25] Scott: No, you’re absolutely right. Here’s the deal on that. Actually it was a good friend of mine had about 2,000 units. Basically he shipped in all of his product thinking he was just going to warehouse it there and then he found out that he was going to also have to pay sales tax on different states. He found that whole thing out but he was mainly selling a lot of his stuff on his own ecommerce store.
He said, I’m just going to pull all of my inventory out of there and then I’m going to decide later if I want to house it there or not. I just want to get it out. I don’t want to have to worry about sales tax in all these different states because he was already selling on his own ecommerce. When he pulled that then he talked to me a little bit and he’s like, “Oh really I could say what state I want it sent to?” And I’m like yes. That doesn’t mean that that’s where it’s going to reside but that is one way of getting it in one location at least one location to send it to.
Long story short is they wouldn’t let him send in, they said there had to be, I think it was 60 to 90 days before they’d let him send any in. He went back and forth with them and they finally allowed him to send in I think 300. He would only be able to keep 300 in inventory for those 60 or 90 days. If he sold 100 he could send another 100 in but it was going back and forth. If you do a big pull like that they will usually lock you from sending more in.
[00:18:44] Chris: That’s not necessarily a bad thing and it’s kind of what I wanted to get to here is, you don’t want tons of inventory sitting there. What a lot of people have done because it was so cheap to store with Amazon in the past, even cheaper than renting a storage facility. In most cases they would just order their 500 to 1,000 units and then they’d send it to Amazon not taking into account the fact that they have any of these storage fees or anything.
At 54 cents per cubic foot per month if you’re selling through your inventory that’s not a huge deal but if you’re not selling through your inventory it can add up very, very quickly. If you have $5,000 worth of inventory sitting there you have 2,000 units sitting there and it’s two units per square foot. That becomes a substantial cost to you every month even at just 54 cents.
My suggestion is to try to do some forecasting and you guys already do this upfront you just may not know that you do that. If you’re just sourcing your first product or you’re sourcing a new product and you don’t know what your actual sales history is going to be, what I would personally do… Again, still order your 500 to 1,000 but figure out what you think you’re going to sell in the first 60 days.
If you’re hitting that 10 by 10 by one, the first 60 days you’re not going to be selling 10 a day every day. You might sell a couple the first few days or even the first two, three weeks and then you hit your stride and you get into the 10 by 10 by one. Instead of sending in all 500 units maybe you send in 350 or 400.
If you notice that you hit that 10 by 10 by one, like Scott you’ve heard me talk in the past about a product that we launch, it hit 10 sales a day in the first week. If you hit that then you can send in additional inventory and you can keep it so that you’re always going to be in inventory. Inventory planning is going to be absolutely critical moving forward for people. Making sure that you’re using something like a Fetcher or even at the very least using that inventory dashboard to understand how many days of supply that you have.
I would say for me I want to try to keep no more than about 60 days worth of inventory. Amazon actually has a little metric that they show you and it says how many days worth of inventory do you have on average. You can do that but they also show you each individual product that you’re selling. How many days you have based on your sales in the last 30 days.
[00:21:04] Scott: Chris why don’t you…
[00:21:05] Chris: Like I said earlier, that’s not necessarily always accurate.
[00:21:07] Scott: Chris, why don’t you explain if you can, try to give a visual of where they would find that? I know I put you on the spot.
[00:21:18] Chris: The place that I would look, I mentioned a few minutes ago, is go to just your seller central dashboard like your login screen, your main dashboard. Along of right hand side there should be a little section called inventory planning. You can hit ‘view inventory dashboard’. Inside of that dashboard it’s going to give you a few snapshots of their reports. Now, there is going be some more specific ones like inventory age that you may want to look at for the long term storage fees.
On a regular basis you’re going to want to look at that manage access inventory report and it’s right there on the dashboard. Right now for me it’s the top left report in the ‘new view’ but if not it’s also listed across the top. It will tell you, inside of that manage access inventory report it tells you how many units you have in stock with FBA, how many projected days you have in stock, so it’s called ‘Days of supply’ and then your estimated excess.
This one it says I have an estimated excess of 110 units. The estimated storage cost for the next month and then if there’s a long term storage fee you can find that in that dashboard and in some of those reports as well. They have a very specific one for the long terms storage fee and again in that inventory dashboard it’s in the notifications sections. It just says this number of units will incur a long term storage fee on February 15th, should be the top right widget in that dashboard.
All you have to do is hit ‘view units’ and it tell you exactly how many units of each product are projected to incur that storage fee and then how much that long term storage fee is as well as how many of those you sold in the last 90 days.
[00:22:58] Scott: That’s definitely a way that you can kind of see… Again you need a little bit of history. I am finding that Fetcher is really more of your numbers, your fees, your numbers, slow moving product and those types of things. It’s really clean, that’s what I like about it I guess because it actually shows you… I’m actually looking at the dashboard right now as I’m on here.
It shows you in a nice little dashboard like dashboard and then it sales, expenses, profitability, refunds, product breakdown, P&L statement and that’s it. It’s really super simple. Right now if I want to do a quick search and see what December was I can look at that and then it will show me all of the products that sold in the order of the most. Then it will tell me like 17% of this product or this product was 17% of my overall sales.
This next product was 14% and it shows me the dollar amount. This one here was $4,177 and that was 296 units; that was 13% of the overall units sold. It gives you all of that stuff which is kind of cool but again if I was to look at this, like this is a month. If I look at this as a month I would say there’s 452 units I sold in December of that one SKU so now do the math. That’s over 10 a day. Then I would say I got to have at least 20 a day just to be safe, for 30 days that’s 600 units.
I got to make sure that my inventory stays there. Now, if you’re trying to project out further than that then just do another…Kind of go from November to December and then you would say it looks like I’m selling this or I sold this much last year, this is what I need to send in. It depends on your product too but in 4th quarter it’s going to be different than it is going to be in 1st quarter for a lot of people. You can’t use those numbers as the overall numbers.
[00:24:53] Chris: The basis of that.
[00:24:53] Scott: If you’re heading into 4th quarter then that’s when you really want to maybe go back to the data and see or you want to look at maybe your competition. Go to camelcamelcamel and look at their history and see how their BSR was throughout those few weeks or months and then you can see kind of and get an idea of what’s expected.
I honestly I would try to figure out as close as you can but also know that through that time if you’re going to have inventory that is sitting there in Amazon you are going to be charged more for it, so you have to figure that into your price. If you have an item that’s 12 by 12 by 12 it’s going to cost you over $2 and some change to store it 4th quarter.
[00:25:37] Chris: In Q4 right.
[00:25:38] Scott: Outside of that you’re talking 50, 60 cents, so it’s okay. You got to know the size of your unit, how much area it’s taking up and then also how many units are being sold, that’s really what it comes down to. You’re not going to ever figure that out perfectly. I don’t think anyone is. You just have to understand that that’s part of the animal. You could house all that stuff yourself if you wanted to and pay just a one-time fee for the storage of a local storage company and then you pay X amount every single month and it’s the same but then you still have to ship in. You’re still going to have cost involved there and stuff.
[00:26:17] Chris: You’re either paying the shipping upfront, you’re doing it in bulk or you’re paying a little bit of the storage fee which either way it’s a few cents per unit if you’re using like the small lightweight model that we’ve talked about. Obviously the bigger the thing is the more you’re going to pay. Small stuff envelopes will be great. To sell individual envelopes that would be fantastic.
[00:26:38] Scott: That would be fantastic.
[00:26:39] Chris: You’d sell lots and lots of them and you can fit a lot of those in a cubic foot. The other thing to keep in mind is your supplier should be able to tell you exactly how many cubic feet the entire shipment takes up because they need to know that number to ship it to you in the first place. You can run all of those numbers the second your supplier says, “Okay, all boxed up, all crated, all that stuff, if you’re going to send it directly into Amazon here’s how many cubic feet it takes up.”
You can plug that in, multiply by 54 cents and go from there and then you know if your inventory doesn’t sell through how much that storage fee is. Ideally you’re not even really paying that storage fee especially the long term storage fees and those are the ones that are killer. This is where Amazon is really trying to crack down. We mentioned a little bit earlier it’s anything that’s there six months or longer and then in August anything that’s been there 12 months or longer and then they do a little bit of…
[00:27:29] Scott: Chris, let’s timeout for a second. Slow down on that because some people are new. Talk a little bit about how much time you’re allowed before you get into the long term storage, so this way here people will know.
[00:27:45] Chris: It’s basically they go back six months. They have two different things and they call them inventory clean up dates basically and it’s February 15th and August 15th. Now, anything that’s been in the fulfillment center more than six months but less than a year as of August 15th or February 15th is charged $11.25 per cubic foot. Anything that’s been in an FBA warehouse more than a year is charged $22.50.
[00:28:20] Scott: That’s like that credit card that they gave you a great offer and then all of a sudden as soon as you didn’t pay it in 12 months they jack it 22%.
[00:28:28] Chris: That’s why that inventory age report comes in really handy because it tells you exactly how much of a long term storage fee you’re going to incur. Then it also tells you this many units have been here more than 180 days, which is six months, this many units has been here more than 365 days, which is more than a year.
[00:28:49] Scott: If you have 1,000 units that you’re going to send in and let’s say you send in 300 now and then 300 in in three months and then another maybe a week later you send in the rest of them. Everything is based off of when that hit the warehouse. Even though you have 1,000 units in stock everything is going to be divided up from the time that it landed in the warehouse, just so people are clear on that.
[00:29:20] Chris: From the day it gets scanned in basically.
[00:29:21] Scott: Every piece of inventory in a sense will have an arrival date and that’s where you would find that in that reporting, right Chris?
[00:29:29] Chris: It’s the inventory age report.
[00:29:31] Scott: Can you go really quickly through that how you would locate that again? I know people are going to want…
[00:29:37] Chris: Click on that inventory dashboard or you can use the dropdown at the top, it’s inventory and then inventory reports I believe and then it should be inventory age and you can either download it. I prefer just to view it in Amazon because you don’t get a whole if you download it or you can also use the search feature and just type in inventory age. If you click on your inventory dashboard it should be right there in front of you, you can click on it and open it.
Let me see where that is. If you’re in the inventory dashboard it’s the 2nd report down on the left. You have your manage excess inventory which is the one that we were talking about earlier and then you have the inventory age report. That actually gives you, just the little dashboard widget gives you a really cool snapshot. What you actually want to do is click into that, into the inventory age report and view it by SKU.
What you’ll see is that like in this one I have 15 that have been there more than a year but the vast majority of them have been there less than 90 days. It’s never going to be perfect and because Amazon doesn’t do first in, first out because they ship it from different warehouse, there’s always a chance that there’s one unit that you get charged because it’s just been sitting in the warehouse for a year and they haven’t needed to ship it out. Does that make sense?
[00:30:59] Scott: It makes total sense and I’m actually in there right now and looking exactly where you said. The inventory dashboard is going to be handy because if you go into inventory and you just scroll down a little bit so just hover over inventory and you can go to the reports like you’d said or inventory planning and then that will also give you a good snapshot. You can manage access inventory, you can…
[00:31:24] Chris: That’s that inventory dashboard.
[00:31:26] Scott: Yes, yes exactly. That there is visually good but if you wanted to again go through, like you said, inventory age, you can go to manage access inventory, inventory and stock report, fixed granted reported, restock inventory. That’s all on the top tab so you can kind of go through all of those different ones. Maybe what we should do Chris is maybe add a screenshot of this stuff too so people… When this does air live on the podcast they can go to episode 315 and they can see this, what we’re talking about.
That would be probably useful. We’re going to wrap this up but let’s talk really quickly about people that are just getting started and they are hearing about all of this news and what do we do now? What do we do with our inventory? If someone’s just starting, what are your thoughts as far as inventory goes?
[00:32:23] Chris: I mentioned this a few minutes ago. I would say try to project what you’re going to sell in the next 60 days. The reason I say that is you’re always going to have those stragglers like we just talked about, that one unit that’s just sitting in a central California warehouse for 365 days. If I have to pay 20 bucks for one thing that’s totally different than paying $1,000 because all of my inventory has been sitting there for more than a year.
Understanding that and projecting that helps you really go through that process and if you are selling out every 45, 60, 65 days the chances of that one unit not being sent to a warehouse where it’s going to get fulfilled are much, much smaller, so you’re going to limit those fees. The storage fees themselves, the month to month stuff not a big deal especially if you’re doing that inventory planning.
Quarter one through quarter three, basically January through the end of September 60 to 90 days. Q4 I would say even with the raised fees if you haven’t been through a Q4 before it gets harder to predict. Now, if you have something like Fetcher you can go back and look and see exactly what you did in Q4 last year you can project that 60, 90 days.
The thing to remember and the thing that I like to kind to preach to you is Q4 doesn’t end in December. Q4 runs through the middle of January and a lot of people run out stock in the middle of December and then aren’t back in stock. I would actually say even though the fees are higher I would probably project what I need like October, November, December and January even though I’m going to pay a little bit more just to have it there if you can.
[00:33:54] Scott: I think if you’re just starting… Again here’s the struggle though, here’s the problem. Let’s say I want to order 1,000 units of something because I’m going to get a better price, maybe I’m even going to use a freight forwarding company and I want to get the inventory here. The problem is most people in the past, including myself, have just shipped all 1,000 units in because Amazon made it so easy.
Dom tells us this all the time, Amazon was a storage facility for a lot of people. It’s a place where you sent it in and you just paid very low fees. It’s almost like they’re hosting for using it for your website or file sharing and stuff, it’s so cheap it’s like pennies. Now all of a sudden it’s not as cheap as it used to be and now they’re starting to say like, “Listen, we don’t want to be just a storage facility for your stuff and have it sit here for a few years.
We got space, we need to keep this stuff moving.” The struggle now is, how much inventory do we send in? I think it comes down to, like you said, you have to think to yourself, what do I plan on selling? What don’t you hope to but what do you think will sell within 30 to 60 days or even 90 days? What will you be able to do?
The thing is you either have your own place… I know Keith just put up storage in your garage. I’ve done that before. Actually one of my partners right now that’s exactly what they’re doing for us is storing it. They actually just purchased a new house with a bigger garage, so that’s part of our storage unit. If you don’t have that, some people that are international don’t have that flexibility.
There are places that will store for you and they’re not that expensive but that would be the option but then you have to also have someone there on the ground that will ship it in for you. There’s companies that will also do that for you as well but you have to think about these things.
[00:35:55] Scott: I would say if you’re just starting out, you’re testing a product or a market you probably want to start off with fewer units and if you run out of stock, you run out of stock. The whole panic before was always like, “I don’t want to get this thing going and then run out of stock.” I get it, but now there’s consequences. Now there’s penalties to pay if you don’t sell through that inventory and that could eat into a lot of your profits. You got to be careful but I like to say go out there, plan on the product that you’re going to sell but send in product that you think you’re going to sell within 30 to 60 days.
Once you start to sell you’re going to have time to ship more. If your supplier says “Well I have 500 units that I can send you,” and you want to start with 500 then go for it just understand you pretty got six months to get rid of it.
[00:36:46] Chris: Keep an eye on that inventory age report and your storage fees and remember October, November, December next year you’re going to be paying substantially more than you are January through September. Again, January 2018, next year’s 2018.
[00:37:00] Scott: Yes it is. Depending on when you’re listening to this.
[00:37:03] Chris: January 2018 it goes back down to the 56 cents range, 57 cents for that Q4 because they don’t want just stuff falling out windows at the warehouse like they’ve had in the past. They’re going to raise that fee so that you only have in stock what you need to need to have in stock and then you go from there.
[00:37:22] Scott: Hey Chris, do you hear that siren in the background, could you hear that?
[00:37:26] Chris: I do.
[00:37:26] Scott: The mic’s working then, the mic is actually cancelling that noise. That’s a good thing but there’s a siren like a loud long siren, like a fire… It sounds kind of loud. I’m surprised that Brody is not up barking right now. Chris I think that is good. I think we’ve pretty much covered everything. Did you have any questions that you wanted to quickly answer?
[00:37:48] Chris: No, none about storage. We got a bunch of other ones and it looks like Yvonne and Keith are helping us out in the chat there.
[00:37:54] Scott: If there’s no questions really on the inventory stuff for the podcast especially let’s keep it to topic. Chris, is there anything else you want to add before we wrap this up?
[00:38:05] Chris: No, other than know your numbers. Know how much it’s going to cost you to get it in the Amazon, know how much space it’s going to take up and know how much you think you’re going to sell. If any of those three things change you got to recalculate the other two. If your sales go up then obviously you need to order more inventory. If your sales go down then you need to keep an eye on that inventory age and the storage fees.
[00:38:25] Scott: That’s a big one, knowing your numbers and again, like I said, whether you have an inventory projection software, there are some out there. Like I said, me personally I’m old school, so I like spreadsheets but Fetcher has been a nice way to see things a little bit better on the eyes but also you can search it really, really easy. I’m a fan right now of it so I’ll keep everyone posted but I’m really, really enjoying it.
I love seeing the breakdown of the different SKUs especially when you get more than 10 SKUs then it becomes a little bit more challenging and this really does break it down nicely. Definitely go check that out, again theamazingseller.com/fetcher. I know Greg well, he’s a great guy and he’s got some pretty amazing products including Jungle Scout and stuff. I guess that’s pretty much going to wrap it up.
If you’re watching this on Facebook live thank you so much for watching. If you’re listening to this on the podcast well you can head over to theamazingseller.com/315 for the transcripts and show notes to this episode. You can always check out all the resources over there as well and that’s going to wrap it up. I want to remind you guys one more time that I’m here for you, I believe in you and I am rooting for you but you have to, you have to, come on say it with me, say it loud, say it proud, Chris come on brother, one, two three, “Take action.”
[00:39:47]Scott: Have an awesome day guys, we’ll see you on the next episode.
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