Overview

In early 2024 the Serious Sellers Podcast aired episode 105, featuring an Amazon inventory‑management specialist who warned that sloppy stock decisions can surrender a sizable portion of a seller’s margin to Amazon. The conversation highlighted how excess units, mistimed replenishment and hidden storage charges drain cash flow, and why tightening inventory controls is essential for protecting profitability.

Key Points

• Long‑term storage fees — Products that linger in Amazon’s fulfillment network for more than 365 days incur a charge of $6.90 per cubic foot each month, quickly eroding margins.
• Capital tied up in inventory — Over‑stocking a $25 kitchen gadget by 1,000 units can lock up $25,000 that might otherwise fund PPC campaigns or new product launches.
• Reorder timing errors — Ordering too early creates unnecessary holding costs, while ordering too late triggers stock‑outs that result in lost‑sale penalties and reduced Buy Box eligibility.
• Inadequate demand forecasting — Relying solely on last month’s sales without adjusting for seasonal spikes or upcoming advertising spend leads to inaccurate purchase plans.
• Removal and disposal expenses — When inventory ages past the 365‑day mark, Amazon charges $0.50 per unit for removal and $0.15 per unit for disposal, further shrinking profit.
• Data‑driven tool integration — Platforms such as Helium 10 can automate alerts, generate reorder recommendations and surface hidden cost drivers, helping sellers stay ahead of the profit‑leakage curve.

How the Profit‑Leakage Cycle Works

1. Over‑purchase after a promotion — A seller sees a 40 % sales surge during a July flash sale and doubles the normal order quantity, sending 2,000 units of a $25 gadget to Amazon instead of the usual 1,000.
2. Extended storage accrues fees — Post‑promotion demand falls back to baseline, leaving 800 units idle for several months; each month the seller pays $6.90 per cubic foot in long‑term storage, amounting to roughly $1,200 in fees over three months.