This Issue's TLDR...

• Amazon storage fees are about to get gnarly. We're 6 weeks away from the heightened fees going into effect, but you really need to be analyzing your stock and taking action NOW, in order to avoid getting whipsawed.
• I walk you through an overstock situation with one of my products, and the decision paths that I've explored (including a hack to avoid storage fees).
• A preview of what's to come in this newsletter, plus the most comprehensive (and accurate!) guide to the A9 algorithm that I've ever come across.

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Also!

A warm welcome to the 805 subscribers that have joined in the past week. Wow! I'm overwhelmed.

You've trusted me to deliver high level Amazon content, for the Top 1% of Amazon sellers (or the aspiring Top 1%), and that's what I aim to do. Week in, and week out.

Thank you.

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BEST from Me

Inventory management at Amazon is about to SUCK.

Long-time sellers know this.

Around 2018, Amazon introduced a special Q4 rate card for FBA fees, and has since tweaked it to further tighten the screws on sellers in ways that would make Wall Street financial engineers blush.

Honestly, even I have trouble parsing the various rate cards...and I literally helped architect FBA fees on Amazon.ca back in the day (Sorry).

Anyway, the Q4 rate card doesn't kick in until...Q4...but you really need to start taking action now in order to avoid been bent over and shown the 50 states.

So, quick context and foundational information...

The 4 FBA Fee Types

FBA fees often getting lumped together in a single category, but all serious sellers know that there are really 4 fees that go in the "FBA fee":

1. FBA Fulfillment Fees -- This is your Pick & Pack fee based on item weight and dimensions.
2. Monthly Storage Fees (MSF) -- This is the monthly toll that you pay for storing your products with Amazon, irrespective of how well you manage your inventory there.
3. Aged Inventory Surcharges (AIS) -- This is just a re-branding of the Long-Term Storage Fee that Amazon charges sellers for being poor inventory managers and clogging up FCs with stock that doesn't more.
4. Removal/Disposal Fees -- This exactly what it sounds like. A per-unit fee that Amazon charges to either a) send your inventory back to you or b) destroy it.

I'm going to be talking about #2 and #3 (and, a little bit about #4) in the coming sections because, like I stated above, the draconian Q4 rate cards for these fee types really change the calculus around how you manage your inventory.

The Math You Need to Do Now

I'm emphasizing doing this math now not as some sort of marketing psy-op. I'm emphasizing taking action now because the days really matter here.

Consider:

• The Prime Big Deal Days event is happening in October. The exact dates haven't been announced, but let's just say October 17-18.
• FBA Removal orders typically take 45 days during slow periods. Around event periods -- Prime Day, BF/CM -- this lead time could balloon to 75-90 days. (The reason for this, by the way, is that, leading up to events, Amazon adjust FC resources and processes to bias for Inbounding products and, after events, re-adjusts toward Outbound)

So, let's say you're heavy on ASIN 1. You're staring down the barrel of massive MSF and AIS beginning in October. But...ASIN 1 is expensive (so you don't want to destroy it) and seasonal (so you expect to sell it in November).

You could:

1. Do nothing and eat the massive MSF and AIS for the next 2.5 months
2. Sit on your hands for 3-4 weeks, create a Removal order at the end of September (thus avoiding a portion of your AIS), physically receive those removed units on or around November 15, re-inbound those units, miss BF/CM because those re-inbounded units didn't get received in time.
3. Do the math and take action now -- either Remove, Dispose, or Liquidate (or my MCF hack below) -- and have a shot at both avoiding MSF and AIS, AND ensuring that the stock that you need is at Amazon, when it matters.

Your mileage may vary, but I'm choosing Option 3 every time.

So, what's the math that you need to do?

Look, it can get as complicated as you want to make it. But, I generally like to keep things simple, and you can get a passing grade simply by comparing:

Number of Excess Units x Net Profit Per Unit

VS

Total Monthly Storage Costs x Number of Months of Cover from Excess Units

If the total profit from your excess units exceeds the storage costs that you expect to incur, good news, you can probably get away with doing nothing!

But, if total profit from your excess units is less than the storage costs you expect to incur, you need to do some additional math.

That additional math has a broad decision tree and a lot of different permutations, so I'm not going to run through that here. If you need help, grab some time with me using the link at the end of this newsletter.

I will, however, walk through an example with one of my ASINs, to illustrate the possible decision paths.

A Real Example

So, in doing the "math" above, here's one ASIN that I need to make a decision on (it's the ASIN in the top row):

With this ASIN, my Net Profit Per Unit (NPPU) is $4.33, and I have 128 excess units subject to the incremental AIS fee. The 128 units also incur a steeper MSF, because there is an additional Storage Utilization Surcharge (we'll label it "SUS" because, well, Amazon is getting a bit suspect with all these incremental fees).

Anyway, these 128 excess units are worth $554 in total profit to me.

And, I'm looking at $143 in storage fees on these units next month.

"Jon, didn't you say that if total profit exceeds storage costs, then I don't need to do anything??"

Well, yes. But what I've just presented is the storage fees for 1 month.

The reality is that I sell only ~25 units of this ASIN each month, so I actually have around 5 months worth of excess units.

$143 x 5 months = $715

$554 total profit vs. $715 in storage costs.

So, I need to act on this ASIN. (Actually, the math is far worse, because the both the AIS and SUS fees escalate as the inventory ages more AND the Q4 rates jump. The real math shows that this ASIN is going to cost me closer to $2300!)

Roughly, my options are:

1. Drive Sales -- through PPC, promos, pricing, etc.
2. Remove -- this will cost me $634, or $4.95/unit
3. Dispose -- same cost as Removal, plus my $2.90/unit in COGS
4. Liquidate -- I can expect to recover 5-7% of my Average Selling Price with this
5. Remove (sort of) -- using a little MCF hack

Let's run through these, briefly.

If I choose to Drive Sales, I should be willing to spend up to $554 dollars (on PPC, price discounts, whatever) to sell-through these units in the next 30 days. By doing so, I don't make any profit (obviously), but I avoid $715(ish) in costs that I would otherwise incur. A cost that is avoided is a close cousin to actual profit.

If I choose to Remove, well, I should believe that I can sell these 128 units in the future for at least $634 in net profit. I should also have some conviction that this ASIN won't see a massive Prime Big Deals Day bump because, per above, it will probably take 45-60 days for me to receive these units and I won't be able to re-inbound them in advance of the event.

If I choose to Dispose, I'm going to have to be OK eating $634 in Disposal fees, plus $371 in COGS. I think the only real Use Case for Dispose is when you have expiration-dated products, or products that you can't Liquidate, so I'll just leave it at that.

If I choose to Liquidate, there's a possibility that I recover 5-7% of my ASP with this. Or, there's a possibility that, 60 days later, the units end up back in my inventory because no liquidators wanted the units. But here's a little detail about the Liquidate option that people overlook...when you submit products for liquidation, the clock on MSF and AIS pauses. Here, see for yourself:

So, with the Liquidate option, I may recover 5-7% of my ASP (which would be ~38% of my COGS) and avoid MSF and AIS while the liquidation process plays out. Or...I've bought myself 60 days to sell-through the non-aged inventory so, when the excess units come back to me, my overall inventory of that ASIN isn't as aged (Amazon operates First In, First Out for FBA inventory, so even though these units are "old," when they come back, the age basically resets).

If I choose to Remove (sort of), I'm going to, in a sense, seek to arbitrage time or Seller Central features. The arbitrage here comes from the Multi-Channel Fulfillment (MCF) feature. Remember that $634 Removal cost that I mentioned above? And the 45-60 day lead time to get my products back? Well, sometimes it's cheaper (or close) to just MCF the units back to yourself. But, it's always faster.

In the case of this ASIN, it would only cost me ~$100 more to send these units back to myself via MCF, but I get them by August 31, rather than, say October 15. If your play involves taking units out, and sending them back in, and timing is tight, use MCF for the Removal.

That's one "hack" with MCF.

Another one is to "Create hold order" rather than "Create order". When you create a hold order, you can have the units sidelined for up to 14 days. Or, put differently, you can have these units moved to "Reserved" status, which means that MSF and AIS stops accruing.

Anyway, as to the $554 question...what am I going to do with this ASIN?

I'm going to discount it through the end of this month, up to the point where I've given up a maximum of $413 in profit ($554 minus $141 in potential recovery from liquidation).

After that, I'm going to send to Liquidation.

BEST from Everyone Else

The next few issues of this newsletter are going to be 🔥🔥🔥.

Here's what I have on the docket:

• A Deep Dive into the A9 Algorithm, blending stuff I learned on the inside, public Amazon discussions, and some smart observations from fellow thought leaders in the Amazon space. This will be a multi-part series, because there is SO much ground to cover.
• 5 Bada$$ Traffic Hacks. One of these I've just started testing in my businesses, and the results are super exciting.
• How to Eliminate Add-to-Cart Leakage. You've probably done this as a customer. You've added an item to cart and then...nothing. Of course, with Search Query Performance data, brands can now quantify ATC leakage. But, what can be done about it? [NOTE: I will not be talking about PPC/DSP retargeting, or Brand Tailored Promotions]
• Undercover at an Amazon Aggregator. I got my hands on the financials of an Amazon Aggregator. I'll tell you how I got the information, which aggregator it is, and what is noteworthy in the numbers.
• The 3 Metrics for Product Research and Validation that NO ONE talks about. Honestly, I might not post this one, because I'll be shining a light on metrics that I think give me an edge. We'll see.

And there are 5-6 equally cool topics right behind these!

But, why am I telling you this in the "BEST from Everyone Else" section of this newsletter?

Well, the multi-part Deep Dive into the A9 Algorithm has some pre-work.

You see, my buddy across the pond, Danny McMillan has just penned a massive 11k word missive on the A9 algorithm, sharing everything he has learned over nearly a decade.

This is my exact email to him after he shared the article with me:

Updates to the Amazon Private Label Pathway

I say "no" to 9 out of 10 interview and/or podcast appearance requests.

Partly because I’m too busy building. But also, I feel a deep need to share something that’s actually worth the audience’s time.

Unfortunately, interviewees don't often have much editorial influence over the topics discussed. Or, if they do, they're just on the podcast to "talk their book." I refuse to be someone that does the podcast circuit and talks the same schtick each time.

When my good friend Adam Heist asked me to come on his YouTube channel though, it was an easy "yes". Not only is he a good friend and better human, he also gave me free rein to come up with an original topic, of my choosing. We also sort of agreed that the podcast wouldn't be about me and my story (honestly, who cares); instead, we'd spend a full hour jamming actionable tips and insights down the metaphorical throats of his audience.

So, that's what we did. I've added the video to the Amazon Private Label Pathway, but you can also just click the video thumbnail below.

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Back Story on the Amazon Private Label Pathway, ICYMI...

A few months back, I had a small group of coaching clients that were at the same point in their Amazon seller journeys.

I found myself answering the same questions, and pointing them to the same resources, so, in true Amazon fashion, I asked myself "What's the 1-to-Many solution here?" and built a Notion page of helpful resources, which I've called "Amazon Private Label Pathway."

You can get access to it here: https://auxo.gumroad.com/l/amazonpathway (it's free; but if you want to buy me a beer, I won't object)​

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Amazon Questions? Amazon isn't easy. Everyone needs a little help from a friend sometimes. If you ever have a tough Amazon question, I'm only a phone call away. Let's Chat

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