Knowing how to manage obsolete inventory is critical in order to help sellers preserve profit margins despite having to deal with unsold or customer-returned Amazon products. To deal with excess inventory, Amazon encourages the use of the FBA Liquidations program. This type of program is designed to help Amazon sellers recover value from obsolete or excess inventory items.
Obsolete Inventory Explained
An obsolete inventory, or sometimes referred to as excess inventory, is an inventory that has not been sold for an extended period of time. In addition, this type of inventory is nearing the end of its product cycle.
Some of the reasons for excess inventory include mainly poor forecasting, issues with the product itself, and other inventory management failures.
In the context of Amazon business, excess items or customer-returned inventory items can hurt the business if not managed properly. Thus, requiring Amazon sellers to learn proper inventory management to mitigate the impact of obsolete inventory on their business.
Amazon FBA Liquidations Explained
It is essential for sellers to know market trends and to closely monitor their inventory levels to maximize profitability. However, in the case of unavoidable excess inventory items, sellers should likewise know how to recoup for profit. There are many ways for sellers to recover profit from excess or customer-returned Amazon products, one of which is via the Amazon FBA Liquidations program.
What is FBA Liquidations?
FBA Liquidations is a program designed by Amazon to assist FBA sellers in recovering value from customer-returned items and excess inventory. This also helps sellers avoid paying storage fees for obsolete inventory items stored in the Amazon warehouse.
In a sense, the FBA Liquidations program is a profitable way of disposing of unsold items from your Amazon inventory.
How Does FBA Liquidations Work?
When sellers participate in the Amazon FBA Liquidations program, sellers can choose to have their obsolete or excess inventory liquidated through a wholesale liquidation company. This means that Amazon will arrange a buyer for the items that sellers have deemed excess and subject to liquidation.
For sellers participating in this program, the excess or returned inventory items will be liquidated, allowing them to recover a portion of their inventory cost. The net recovery value will appear on the seller’s account within 60 days and no later than 90 days following the submission of the liquidation order.
In order to identify the net recovery value of the items to be liquidated, Amazon will determine the average selling price through a multiple factor evaluation. Some of the factors to be evaluated include:
- Your Sales History
- The Sales History of the Specific Asin
- The Average FBA Selling Price on Amazon
For about 5% to 10% average selling price (ASP), the wholesale liquidators will purchase this inventory for a gross recovery value based on the contracted rates. Afterward, Amazon will then deduct fees before paying the seller the net recovery value of the liquidated items.
What Fees Are Involved in FBA Liquidation?
Beginning June 1, 2021, Amazon started charging FBA Liquidation fees. The seller will incur these fees once the inventory item leaves the fulfillment center. Sellers will still incur fees for those liquidation orders submitted before June 1 if they have been shipped on or after the aforementioned date.
Amazon charges a PROCESSING FEE per item and REFERRAL FEE based on the item category. For guidance, the processing fee and corresponding referral fee are shown below:/
PROCESSING FEES
Seller Central: A screenshot (cropped) of FBA Liquidations page, Date Retrieved: June 3, 2021; Retrieved From: https://amzn.to/3cfMtjL
REFERRAL FEES
Seller Central: A screenshot (cropped) of FBA Liquidations referral fee page, Date Retrieved: June 3, 2021; Retrieved From: https://amzn.to/3vSX1NO
Seller Central: A screenshot (cropped) of FBA Liquidations referral fee page, Date Retrieved: June 3, 2021; Retrieved From: https://amzn.to/3vSX1NO
Seller Central: A screenshot (cropped) of FBA Liquidations referral fee page, Date Retrieved: June 3, 2021; Retrieved From: https://amzn.to/3vSX1NO
Seller Central: A screenshot (cropped) of FBA Liquidations referral fee page, Date Retrieved: June 3, 2021; Retrieved From: https://amzn.to/3vSX1NO
Amazon FBA Liquidations | Frequently Asked Questions
- Is FBA Liquidations Open for Non-US Sellers?
The good thing about the FBA Liquidations program is that it is open for all sellers selling in the US marketplace, regardless of whether they reside in the United States or not.
- Who are These FBA Liquidators?
The liquidators involved in the program are reputable wholesale liquidators who sell Amazon-owned and FBA inventory to downstream consumers. Since Amazon contracts them, these liquidators cannot resell the FBA liquidated products on Amazon.
- Can my Liquidation be Canceled?
Yes, a seller’s liquidation order may be canceled by Amazon if the inventory is not ready for removal. These include instances when an item is still part of a pending customer order. If canceled, sellers will see in the Removal Order Detail report page that the item is marked as “Canceled.” Canceled liquidation items will be returned to the seller’s inventory.
- What are Some Other Ways to Earn From Excess Inventory?
Apart from the FBA Liquidations program, sellers may also opt for Amazon Outlet to recover value from the excess inventory.
A Profitable Solution
If you are having trouble with your Amazon inventory, address the issue’s root before deciding to liquidate Amazon products via the FBA Liquidations program.
Carry out effective product research to identify popular and fast-moving items. Additionally, the use of Amazon repricers will also aid in developing a competitive pricing strategy for better product movement.
However, if all else fails and inventory is not moving, consider the Amazon FBA Liquidations program to recover some value from excess inventory or returned customer items.
