Amazon Low-Inventory Fees Favor Larger Brands
Sean Frank, CEO of Ridge, on the state of ecommerce post-COVID
Amazon was turning inventory management into another profit center. The low inventory level fee meant a seller could get charged when stock ran too lean relative to recent sales, even after already paying referral fees, fulfillment fees, storage fees, and surcharges for carrying too much stock. In practice, it pushed brands to hold more buffer inventory inside FBA so Amazon could place units closer to shoppers and keep fast delivery promises, while shifting more working capital burden onto the merchant.
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The fee went into effect on April 1, 2024 for standard size FBA products with consistently low days of supply. Amazon later said April charges would be credited back, but the policy itself stayed in place. The operating logic was not random, it was to penalize stock levels that made Amazon move units farther across its network.
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That sat beside other inventory penalties on both sides. Sellers were already paying monthly storage and storage utilization surcharges for holding too much stock, while also facing inbound placement fees that raised the cost of sending inventory into the network. The result was a tighter target where merchants had to be neither overstocked nor understocked.
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This fits the broader shift Sean Frank is pointing to, where Amazon marketplace growth matured and monetization moved toward extracting more from each seller transaction. Amazon’s 2023 filings show third party seller services at $140.1B and advertising at $46.9B, which helps explain why keeping merchants inside an increasingly fee dense system matters so much.
The direction of travel is toward a more managed marketplace where sellers that forecast demand well, keep four plus weeks of inventory, and can fund more stock in advance will hold the advantage. That favors larger brands with stronger balance sheets, and makes Amazon look less like a simple sales channel and more like a high take rate operating system for commerce.