This week, Amazon implemented a new “low inventory fee” targeted at merchants utilizing FBA (Fulfilled by Amazon) services. Here’s an overview of how this fee works and its implications for businesses.

How this Fee Works

Amazon’s system calculates the days of supply for each product stored in FBA, which involves dividing the stock level by the daily shipped quantity. If a product’s days of supply fall below 4 weeks (28 days) within both a 30-day and a 90-day window, the merchant is required to pay the low-inventory-level fee for that specific product.

You can learn more about the fee here.

Why is Amazon Doing This

The rationale driving Amazon’s decision lies in the disruption that low stock levels cause to their distributed inventory model. Amazon’s goal is to optimally distribute merchants’ stock across their network based on demand patterns to ensure fast shipping speeds. Inadequate stock levels hinder Amazon’s ability to efficiently operate this model.

Unsurprisingly, the introduction of this fee has sparked an outcry within the Amazon merchant community. Amazon, acknowledging these concerns, has provided a one-month grace period regarding the fee implementation.

From Amazon:

“Starting April 1, the transition period will begin. You will still be charged the fee on eligible products shipped with historical days of supply below 28 days. Then, we will credit back any charged low-inventory-level fees for units shipped between April 1 and April 30. You can expect to see this credit in May.”

“Starting May 1, the fee will be charged without a credit back.”

Here’s more information about the one-month grace period, here.

Tips for FBA Small Business Owners 

For small business owners utilizing FBA services, proactive management of stock levels is crucial. Here are key steps to navigate this new fee structure:

  • Real-time Inventory Tracking: Maintain real-time visibility into your stock levels and shipping history to avoid falling below the threshold.
  • Timely Restocking: Ensure timely restocking of your FBA warehouses to prevent incurring low-inventory fees.
  • Utilize Inventory Management Tools: Consider leveraging inventory management apps compatible with Amazon. Or keep a close eye on the “FBA Inventory” page within your Amazon Seller Central account. 

If you’re not already tracking your inventory in real time, it’s imperative to start now. 

Various inventory management apps are compatible with Amazon’s platform and can assist in maintaining optimal stock levels.

Shameless Plug: Ordoro’s Inventory App

Ordoro offers a popular inventory management app fully compatible with Amazon and FBA. Our app comes highly recommended by numerous Amazon merchants. Feel free to reach out to us for assistance with managing your inventory effectively.

By staying informed and utilizing appropriate tools, FBA merchants can navigate Amazon’s low inventory fee while optimizing their operations.


About the Author

Jagath Narayan is the CEO and co-founder of Ordoro, the #1 ecommerce platform for retailers growing from 10 to 10,000 orders/day. Follow him on LinkedIn to learn more about entrepreneurship and ecommerce.