An annoying aspect about Amazon’s Fulfillment by Amazon (FBA) is paying Amazon’s outrageous storage fees. Depending on the month, storing your products at Amazon’s warehouses can cost as low as $0.75 to $2.40 per cubic foot. While the cost may seem low, the cost can be higher depending on the products you sell and how much space your inventory requires.
But that’s not the end of it. What’s worse is Amazon’s long-term storage fees which charge a premium price of $6.90 per cubic foot or $0.15 per unit, whichever is greater. These horrendous rates apply to every single product that is in an Amazon warehouse for over 365 days. To avoid paying these premium rates, Amazon sellers are getting rid of their inventories using Amazon Direct Shipping.
What is Amazon Direct Shipping?
As their excess inventory gets closer to the 365-day mark, Amazon sellers begin to panic at the thought of paying Amazon’s long-term storage fees.
What can you do? Your products are stuck in a warehouse, they aren’t selling, and now you’re about to be charged Amazon’s long-term storage fee for every unit stuck in their warehouses.
Then Amazon sellers came up with a unique idea: why don’t we give our products away for free? This is where Amazon Direct Shipping comes in. Instead of letting their inventory collect dust in a warehouse and getting charged long-term storage fees, Amazon sellers take their extra products from these warehouses and directly shipping their products to random customers. These sellers are essentially giving away their own products for free, and in exchange, they clear their Amazon inventory and avoid the storage fees. These “free products” are commonly known as “freebies.” And there are tons of customers hungry for free products.
Cutting Down Storage Costs with Direct Shipping
You must be thinking, why would any seller ever give away their products for free? Aren’t they losing money? Well, technically yes. But you need to look at the long-term advantages of Amazon Direct Shipping and freebies.
For starters, getting rid of excess stock allows sellers to avoid Amazon’s long-term storage fees. Remember, these fees charge whichever fee is higher. So if a seller has 1,000 excess units sitting in a warehouse, they can be charged $150 ($0.15 per unit, 1,000 units) or more. And this fee is applied every single month your products continue to sit in long-term storage. While sellers are losing money on freebies, they can protect themselves from losing more money in the long run if they get rid of excess products sooner.
Another thing to note about Amazon storage is every seller has a max storage capacity. To better manage their warehouses, Amazon limits every seller to 10 cubic feet of storage. This means unless you sell your products quickly, the rest are just sitting in the warehouse. If a product has been sitting in a warehouse for the past 365 days, this either means your products have poor sales or that you ordered too much inventory. Regardless of the reason, this inventory is now occupying space that could be used for better-performing products. By giving away freebies, sellers can take that space and reinvest it into products that could make you money.
Although it might not make sense to give away free products in the short-term losses, it might save sellers money in the long run. Sellers can also take those savings and invest in better products that will make them more money.
How Customers Can Get Freebies
Amazon Direct Shipping happens entirely between the seller and the customer, Amazon is not involved in direct shipping. If you are a seller looking to get rid of excess stock, you can start giving away freebies to interested customers. Before you give away freebies, communicate with the customer to discuss shipping costs and procedures. Most sellers giving away freebies using Amazon Direct Shipping meet customers through 3rd party websites. There are dozens of Facebook groups, Reddit threads, and even websites dedicated to giving away freebies.
Both sellers and interested customers can connect and communicate through these 3rd party websites. Then both parties must negotiate any potential costs and shipping logistics. If you are interested, simply head to one of these sites or Google and search for “Amazon Freebies”. You’ll find tons of groups filled with both sellers and customers trying to get rid of their products.
Remember to negotiate the shipping costs and get the shipping address from the customer. Then the seller should notify Amazon to directly ship the freebies from the warehouse to the intended customer. We suggest Amazon sellers do this weeks in advance before their 365 days are up. That way, you can clear your inventory before you accrue any long-term storage fees.
How Sellers Can Reduce Freebies
For sellers worried about accruing long-term storage fees and want to avoid Amazon Direct Shipping, the best solution is to forecast your sales and order the proper amount of inventory. To forecast sales, monitor your product’s sales over a 30 day, 90 days, and 12 month period. By analyzing your product’s sales performances, you can estimate the sales of any product and purchase enough inventory to meet the demand. We recommend sellers stock at least 3 months’ worth of inventory if possible. This is enough inventory to meet demand while providing a safety net if you sell out quickly.
If you just started selling or cannot forecast your sales, we suggest you check out FBA seller tools. While there are many seller tools on the market, we highly recommend using Sellgo’s Product Tracker. The Product Tracker evaluates any product on Amazon and tracks its sales performances for you. You will be able to utilize the Product Tracker to track the Average Daily Sales of any product you sell. Then, you can use the sales estimation to restock the perfect amount of products.
With the Product Tracker, you will always know how much inventory to purchase and never have to worry about excess inventory or Amazon’s long-term storage fees again.
Be Proactive, Not Reactive
While Amazon Direct Shipping is a great solution for sellers dealing with overstocking and storage fees, it should never reach this point. Freebies may help get rid of excess inventory and protect sellers from fees. In the end, sellers are still losing money giving away products. By being proactive with seller tools like the Product Tracker, you can prevent giving away freebies. You will always purchase the perfect amount of stock to meet demand and prevent long-term storage fees. Your Amazon business will thank you.