The Amazon Low-Inventory Fee (and how to avoid paying it)

Back in December 2023, Amazon published an announcement on its Selling Partners microsite detailing changes to existing fees and implementing some new ones. Using language that would make George Orwell proud, Amazon stated it was “excited to provide sellers with more transparency and more control over their fulfillment costs.” The company reassured sellers that “on average, this year’s fee changes are significantly less than those announced by other major fulfillment services.”

While technically true, Amazon left out a major plot point: the addition of the new low-inventory fee. Beyond feeling nickel-and-dimed by the tech giant, sellers now face what has become a common sensation when trying to understand Amazon’s fee structure: confusion.

Let’s dive deep into how the low-inventory fee works, including which sellers and items it applies to, and your first step toward avoiding it altogether.

What is the Amazon low-inventory fee?

The Amazon Low-Inventory Fee (now called the “low-inventory-level fee”) is an additional charge imposed on sellers who maintain consistently low inventory levels for their standard-size FBA products relative to their sales velocity. Implemented on April 1, 2024, for the U.S. marketplace, the fee aims to encourage sellers to keep enough stock in FBA warehouses.

According to Amazon, low inventory “inhibits our ability to distribute products across our network, degrading delivery speed, and increasing our shipping costs.” The fee essentially penalizes sellers who frequently run lean on inventory, particularly affecting private label brands, wholesalers, and high-volume arbitrageurs not using Amazon’s auto-replenishment.

As of May 15, 2024, Amazon added an important exemption: products that have sold fewer than 20 units in the last 7 days are not charged the fee. This significantly reduces the impact on slower-moving inventory.

How the inventory level fee is calculated

If you’re a glass-half-full type of person, you’ll see this fee as a way of forcing you to be more thoughtful and precise about your inventory. That’s because you can avoid this fee with good planning. After all, it’s not applied based on your inventory levels at any single moment.

Instead, it’s based on “days of cover”—how long before you run out of a product if you don’t restock it. Let’s say you have 10 items on hand: if you sell an average of 2 per day, your days of cover is 10 divided by 2, or 5 days of cover.

Amazon’s calculations aren’t based on a single point in time, though. The metric measures days of cover as an average over both short- and long-term periods. In Seller Central, this is called “historical days of supply,” calculated for each parent ASIN using this formula:

Historical days of supply = Average daily inventory / Average daily units shipped

The calculation runs twice—once using the averages of the past 30 days, and again for the averages of the last 90 days.

In both timeframes—30 and 90 days—your goal is to maintain 28 or more historical days of supply to avoid the fee. If you meet that minimum in either time period, you won’t be charged. You only get hit with the fee if both your short- and long-term totals fall below 28 days.

The charge happens on a per-item basis at the time of shipment. If your historical days of supply for that item—for both 30 and 90-day periods—are below 28 days when the item ships, the fee applies.

Who is subject to the low-inventory fee (and who isn’t)

This new fee only applies to Fulfillment by Amazon (FBA) sellers. If you handle your own fulfillment, you can cross this one off your worry list.

Even among FBA sellers, several groups are exempt:

• You’re selling non-standard-sized products
• You’re a new professional seller (for the first 365 days after Amazon first receives your inventory)
• You’re launching new-to-FBA parent products (first 180 days, if enrolled in FBA New Selection)
• You’re using Amazon Warehousing and Distribution (AWD) for at least 70% of your replenishment
• Your products have sold fewer than 20 units in the past 7 days

The logic applies to other situations too. Used book sellers would rarely meet the conditions under which the fee gets applied. If you’re doing retail arbitrage on single units of single items—with no rolling stock—you’re generally safe. Non-replenishing online arbitrage sellers likely won’t be charged for the same reasons.

The sellers who need to pay closest attention are bulk book sellers, multi-unit retail arbitrageurs, replenishing online arbitrageurs, wholesalers, and multi-ASIN private-label sellers. For these groups, maintaining proper inventory levels becomes crucial to avoiding the fee.

If you meet all the criteria for the fee, here’s what you’ll be charged per unit shipped during weeks when your inventory falls below the threshold:

Remember, this fee is charged per unit shipped during weeks when your inventory falls below the threshold, and it’s in addition to standard FBA fulfillment fees.

How to track your historical days of supply

Monitoring your inventory levels is the key to avoiding this fee. To check your historical days of supply in Seller Central, log in to your account, go to Inventory > FBA Inventory.

When reviewing this data, remember that the displayed value is the greater of your last 30 days and last 90 days’ average days of supply. If both values fall below 28, your product is subject to the fee.

Amazon also provides suggested replenishment quantities to help you avoid falling below the threshold. These recommendations can be valuable guides, especially for sellers new to inventory planning.

Practical strategies to avoid the low-inventory fee

Now that you understand how the fee works, let’s look at practical ways to avoid it:

• Maintain adequate inventory levels. Keep at least 28-35 days of supply in Amazon’s FBA network based on your average sales velocity. This buffer helps you weather unexpected sales spikes or shipping delays without triggering the fee.
• Set up regular inventory reviews. Schedule weekly checks of your “historical days of supply” for all parent products, not just top sellers. Pay special attention to items approaching the 28-day threshold.
• Forecast demand spikes. Factor in seasonal patterns, promotional events, and historical trends when planning inventory levels. Items with predictable demand spikes require extra attention and advanced planning.
• Optimize reordering processes. Use Amazon’s Minimum Inventory Level and Restock Recommendations as a baseline. For high-velocity SKUs, consider maintaining a safety stock of 1-2 weeks above the minimum to prevent dipping below the threshold.
• Consider removal or liquidation strategically. If facing FBA capacity constraints, remove or liquidate excess/slow-moving inventory to free up space for faster-moving items. This prevents a situation where storage limits force you to run lean on high-velocity products.
• Plan for seasonal transitions. Analyze historical sales curves to identify when inventory might dip below the 28-day threshold after peak season. Have a clear plan for winding down seasonal inventory without triggering fees.
• Leverage inventory management tools. Consider using third-party inventory management solutions like InventoryLab for real-time alerts and predictive ordering. These tools can help you stay ahead of potential low-inventory situations.

When paying the fee might make strategic sense

Sometimes, counterintuitively, it might be better to pay the fee than to maintain higher inventory levels. Consider these scenarios:

Products with unpredictable demand

For items with highly variable sales patterns or risk of becoming obsolete, maintaining minimal inventory may cost less—even with the low-inventory fee—compared to paying monthly storage, removal, or long-term storage fees.

Items with short shelf life or price volatility 

Products that expire, become outdated quickly, or face rapid price changes might benefit from “just-in-time” inventory practices, even if you occasionally pay the low-inventory fee.

Pre-promotion strategy 

If a promotion or seasonal spike is imminent and reordering is impractical, paying the fee on the last batch of units could be preferable to excess storage costs after the promotion ends.

To determine if this makes sense for your business, compare these costs:

• Low-Inventory-Level Fee per unit × expected units shipped during the low-inventory period
• Monthly storage fees + opportunity cost of tied-up capital + potential disposal/removal fees for excess units

For example, if you sell a large standard item (up to 3 lb) with unpredictable demand:

• Low-inventory fee: $0.97 per unit (if days of cover < 14)
• Monthly storage fee: $0.83 per cubic foot, with each unit occupying 0.2 cubic feet
• Cost to store 50 extra units for one month: 50 × 0.2 = 10 cubic feet × $0.83 = $8.30/month

If holding those extra 50 units risks slow sell-through (leading to long-term storage fees), it might be cheaper to pay the low-inventory fee on 20 units ($19.40) than to hold excess inventory indefinitely ($8.30/month plus potential long-term fees and tied-up capital).

Plan ahead to avoid unnecessary fees

Amazon’s low-inventory fee is avoidable with proper planning and inventory management. Take time to understand your sales patterns, set up regular monitoring of your historical days of supply, and implement a proactive replenishment strategy.

For most sellers, maintaining adequate inventory levels will be more cost-effective than paying the fee. But don’t overcorrect—excess inventory brings its own costs in the form of storage fees and tied-up capital.

The key is finding the sweet spot: enough inventory to avoid low-inventory fees while not so much that you incur excessive storage costs. With careful planning and the right tools, you can navigate Amazon’s fee structure successfully and keep more of your profits where they belong… in your pocket.

Ready to stop paying unnecessary fees and start maximizing your profits? Try Seller 365 today and get access to InventoryLab plus nine other Amazon seller tools for just $69/month. Our all-in-one platform helps you source smarter, manage inventory more efficiently, and avoid costly Amazon fees that eat into your bottom line.