Many Amazon FBA sellers experience a puzzling discrepancy: strong sales figures that don't translate into expected profits. Often, the culprit lies in overlooked inventory placement fees—specifically, the costs associated with Amazon's inventory placement service. These frequently miscalculated expenses can significantly erode margins over time.
Inventory Placement: Consolidated vs. Distributed
Amazon offers two primary inventory placement options:
- Consolidated Inventory Placement (Inventory Placement Service): For an additional fee, sellers can have all FBA products—including different SKUs—stored in a single Amazon fulfillment center.
- Distributed Inventory Placement: Amazon's default setting automatically splits inventory from the same shipment across one to three different fulfillment centers based on proprietary algorithms.
Sellers encounter these options when creating FBA shipments under the "Inventory Placement Option" setting.
Why Amazon Prefers Distributed Inventory
Amazon's default distributed placement strategy serves two primary corporate objectives:
- Optimized Warehouse Utilization: The system analyzes each fulfillment center's capacity, environmental conditions, and product compatibility to prevent congestion while maximizing storage efficiency.
- Reduced Shipping Costs: Geographic distribution enables faster, cheaper deliveries by positioning products closer to potential buyers, enhancing both Amazon's logistics efficiency and customer experience.
Calculating Placement Fees
Amazon's FBA fee structure includes three primary components:
- Fulfillment fees (order processing, pick & pack, weight handling)
- Monthly storage fees
- Inventory placement service fees
Both consolidated and distributed placement incur inventory placement fees, though the calculations differ based on:
- Product dimensions and weight
- Placement strategy selection
- Current fulfillment center capacity
Key considerations:
- Consolidation fees typically exceed standard placement costs due to additional handling requirements.
- Distributed inventory may generate higher transportation expenses and complicate inventory management despite avoiding explicit consolidation charges.
Strategic Placement Decisions
Optimal placement strategy depends on multiple business factors:
- New sellers with limited SKUs may prefer consolidation for simplified inventory control.
- Experienced sellers managing extensive catalogs often benefit from distributed placement's logistical advantages.
- Oversized, heavy, or fragile items frequently warrant consolidation to minimize damage risks during transit.
Financial Oversight Recommendations
Because placement fees often appear buried in Amazon's detailed reports, sellers should:
- Regularly audit FBA expense reports, particularly the "Inventory Placement Service" line item
- Analyze historical placement fee patterns for unnecessary expenditures
- Adjust shipment strategies promptly when identifying cost inefficiencies
Neither placement option universally outperforms the other—successful sellers continuously evaluate their fulfillment strategy against evolving business needs and marketplace conditions to maximize profitability.