Improve Your Amazon Sell-Through with FBA Liquidations

How do you handle FBA inventory that just won’t sell?

There are a few options to help you avoid storage limits and long-term storage fees. The first step is typically lowering your price to see if you can get the inventory to sell. It might be worthwhile to sell at a very slim margin or even a loss to increase your FBA sell-through rate, which impacts your IPI score.

If that doesn’t work, you might try updating your listing, advertising, or some combination of all three. Amazon Outlet can also be a good option.

Then what? Well, for a fee you can have your inventory removed from FBA and either disposed of or returned to you. But there’s also another option: the FBA Liquidations program.

In this article, we’ll explore how the program works.

FBA Liquidations

This Amazon program helps sellers recover value from excess inventory as well as returned items while avoiding storage fees and preventing inventory disposal. Rather than paying a fee to remove or dispose of FBA inventory, you can simply leverage FBA Liquidations to use a wholesale liquidator on your behalf. This program is open to US sellers and non-US sellers who are selling in the US.

The wholesale liquidators resell Amazon-owned and FBA inventory, typically through other eCommerce platforms or brick-and-mortar stores. They are not allowed to resell FBA liquidated products directly on Amazon. They also can’t return liquidated inventory to you.

Recalled or hazmat (dangerous goods) items are not eligible for liquidation. If you have unfulfillable inventory, note that only items with the following reasons are eligible: Customer Damaged, Carrier Damaged, or Distributor Damaged. If your inventory has expired, is defective, or categorized as Warehouse Damaged, it cannot be liquidated.

During the brief period between when you submit a liquidation order and when the inventory is moved to reserved status, you can still fulfill customer orders with the inventory. If your inventory is used to fulfill an order while the liquidation is pending, you will receive the sale proceeds instead of a liquidation payment.

After the eligible inventory is submitted for liquidation, it will stop accruing monthly and long-term storage fees. It’s important to know that you cannot cancel a liquidation request after it’s been submitted. You can only send one liquidation request for the same item.

Net Recovery Value and Liquidation Fees

Liquidating inventory allows you to recover part of the inventory cost (net recovery value) while avoiding Amazon fees. The net recovery value appears on the Payments page in your Amazon account within 60 days after you submit a liquidation order.

Net recovery value is calculated based on your inventory’s average selling price (ASP). Amazon calculates ASP based on your sales history, the ASIN’s sales history, and the average FBA selling price. Wholesale liquidators purchase inventory from Amazon for a gross recovery value, about 5-10% of the inventory’s ASP. Amazon deducts a processing fee as well as a referral fee and then pays you the net recovery value for each item you liquidate.

The processing fee for standard-size items ranges from $0.25-$0.40 + $0.20 per pound above the first two pounds. The processing fee for oversize items and items that require special handling starts at $0.60 and goes up to $1.90 + $0.20 per pound above the first ten pounds.

The FBA Liquidation referral fee depends on the item’s category. This fee ranges from 6-45%.

FBA Liquidations and Your IPI

As mentioned above, FBA sell-through rate is an important component of your Amazon IPI score. Excess inventory brings down your score. If you choose to submit a removal order with FBA Liquidations, your IPI score won’t be influenced while the inventory is pending removal. (This is also true of other removal options.)

However, after the inventory is liquidated or removed, your sell-through rate should improve because excess/aged inventory is reduced. An improved sell-through rate leads to a better IPI score!

You can help prevent excess inventory and keep your sell-through rate steady with inventory management software designed for FBA sellers, like RestockPro by eComEngine. RestockPro helps you keep your IPI score above the minimum threshold by making it easy to focus on key tasks to stay in stock. You can also experiment with creating kits or bundles as another way to handle excess inventory.

The Bottom Line

FBA inventory that doesn’t sell continues to cost money as long as it’s in the fulfillment centers. Not only that, it prevents you from maximizing your FBA storage space for items that sell well.

Using FBA Liquidations to remove inventory isn’t going to bring you a profit, but it might be a good option to stop the bleeding and recover some value. This is particularly true if you have bulk inventory that you can’t sell.

As Amazon and other companies become increasingly focused on sustainability initiatives, this seems like a reasonable step to help prevent unsold inventory from ending up in a landfill.

However, some sellers have expressed concern about liquidation. Amazon’s guidelines state that FBA liquidators are “contractually restricted from reselling FBA liquidated products directly on Amazon.” But there's nothing to stop FBA liquidated inventory from being purchased and restored or repackaged to be listed on Amazon again. Brand owners will certainly want to consider any implications with this approach before deciding whether or not to liquidate inventory.

What do you think? Do you plan to use the FBA Liquidations program?