Amazon Liquidation Program – The Ultimate Seller Guide

For a business to thrive on Amazon, all the FBA inventory has to clear out within a short period.

However, having excess inventory is quite common among Amazon sellers. The Amazon liquidation program helps businesses get rid of that unsold inventory.

In this guide, I will walk you through the process of the liquidation program. You’ll learn how the Amazon liquidation program benefits or presents challenges for your business.

Let’s begin!

What Is Amazon Liquidation?

Amazon liquidation is a program that helps Amazon sellers offset excess inventory. The program categorizes different products and packages them into valuable bundles. After that, the products will be sold at discounted prices.

Generally, the idea is to reduce extra inventory and sell at discounted prices within a limited time. However, the prices are not negotiable since Amazon takes care of your excess stock. Once Amazon packs the quantities, sellers won’t be able to customize them.

Additionally, all liquidation purchases cannot be refunded, returned, or exchanged. You can access liquidation orders through your invoices, orders, and order history fulfilled by Amazon Warehouse package deals.

What Is FBA Liquidation?

Amazon FBA liquidation is a process that helps sellers prevent losses from dead stock. However, you must pay storage fees for inventory, which covers only a limited time.

If the stock stays longer in the warehouse, you’ll have to pay extra. The same applies to returned products.

To avoid paying hefty fines on excess inventory, sellers can sign up for the FBA liquidations program. With this program, Amazon will take over and enlist wholesale liquidators to resell the products at lower prices. You’re only limited to liquidation companies partnered with Amazon.

This will allow you to recover a portion of your inventory cost while avoiding monthly costs and long-term storage fees. You can also use the extra money to cover your bills and the storage space for fast-selling products.

The amount you recover will reflect on your seller account 60 to 90 days after the liquidation.

How Do Amazon FBA Liquidations Work?

For Amazon to determine the net recovery value of your excess inventory, they will calculate the average selling price. Here are some factors that Amazon evaluates:

• The average FBA selling price of the ASIN on the Amazon marketplace
• Your overall sales history of your Amazon business
• The average sale history of liquidated individual ASINs

For a cheaper price, the liquidators can buy your excess inventory based on the set rates. Amazon will then deduct additional charges before the seller receives the net recovery value of the liquidated merchandise.

There are some exceptions to Amazon liquidation:

1. Once potential liquidators have found your inventory, they will sell the stock via other eCommerce platforms or stores. However, they cannot sell that inventory on the Amazon marketplace.
2. Amazon cannot liquidate dangerous goods. Products that are expired, defective, or have been categorized as “Warehouse Damaged,” are not eligible for liquidation.

However, the following item categories can still be covered:

• Items damaged by a customer
• Carrier-damaged goods
• Items damaged by the distributor

Benefits of Liquidating Inventory

The liquidation service provides liquidators a cheaper way to source quality inventory. The liquidators use the Amazon FBA inventory in their online stores or retail locations.

On the other hand, FBA sellers also enjoy liquidation benefits in the following ways:

1. The liquidation process allows sellers to dispose of extra inventory. This allows them to avoid recurring storage fees and cut losses.
2. Having excess stock lowers your Inventory Performance Index (IPI) score, which means that selling the extra inventory alleviates this problem. A low IPI score might limit or incur average fees on your storage capacity.
3. It creates extra space for new stock in fulfillment centers.

When Do You Need to Liquidate Your Inventory?

Now that you know how the liquidation process works, here are situations that may lead to you liquidating excess Amazon inventory.

You Have Items That No Longer Sell

Amazon inventory that doesn’t sell piles up over time while accruing storage fees. Dead stock can result from low demand, poor product quality, or high shipping fees.

Sellers order large inventory quantities when there’s an increase in product demand. This sometimes leads to excess inventory after the demand goes down.

For instance, a seller might buy decorations during the Christmas season. However, the unsold inventory quickly becomes dead stock (obsolete inventory) after New Year’s Eve.

Costly Inventory

If you have unsold items in the Amazon warehouse, it’s time to use the liquidation program. Otherwise, you’ll have to deal with Amazon’s high storage fees.

Liquidating your inventory is one of the most profitable ways to deal with excess inventory.

How to Liquidate Amazon Inventory

Liquidate your Amazon excess inventory by creating a removal order. Start by visiting the Inventory page or the Recommended Removal report in Seller Central. Continue by following these steps:

• Go to the Inventory Planning page and select single or multiple ASINs. Click Action on your selected items.
• Select Create Removal Order in the drop-down menu.
• On the Recommended Removal report, click on Begin Removal Process. If this option is not present, then you don’t have inventory that Amazon thinks you should remove.
• Under Removal Method, select Liquidations.
• Fill out the amount of unfulfillable or fulfillable quantities you wish to liquidate.
• Review the liquidation order, and you will see a prompt to confirm it.

To create a bulk order, get a template from the Upload Removal Order File page, then submit your request. Then, under the value for Removal Disposition, select liquidate.

Note that you cannot cancel a liquidation order. However, you can use the stock and sell it to your buyers during the pending liquidation order period.

After a successful order, this inventory will automatically stop accruing storage fees.

How Much Do Liquidators Pay for Inventory?

Once your liquidation order is placed successfully, Amazon finds a liquidator for the selected inventory. When they find one, the liquidator will acquire your stock at a rate of 5 to 10% of the average selling price.

From there, Amazon calculates a gross recovery value for your merchandise and pays you after 60 days.

8 Ways to Liquidate Your Amazon Inventory

There are other alternatives to the FBA liquidation program. Below are different ways to help eliminate excess items without hassle.

Lower Your Prices or Offer Discounts

While discounts can help drive sales faster, they shouldn’t be your first option.

Try to find the minimum prices for your items that don’t lose you money. Start by matching fees with your competitors, or undercut them slightly.

Customers love discounts, making it an effective way to dispose of excess inventory.

Try Increasing PPC Budgets to Drive More Sales

The pay-per-click (PPC) Amazon auction system can help you increase sales. With the right amount of PPC, your products can get more traffic.

You can use Amazon marketing since it receives over 2.3 billion visitors monthly. As you continue to drive more sales with PPC, focus on acquiring product reviews so that you can rank high. This also lets you gain the trust of more Amazon customers. Good product reviews encourage repeat customers that prevent stagnant inventory in the future.

Scarcity Marketing

Scarcity marketing is an old trick that a lot of marketers still use. Inform customers that a product will no longer be available once it sells out. This gives them a good reason to buy your product sooner rather than later.

Giveaway Program

Everyone fancies free products. That’s what makes giveaways excellent.

In most cases, giveaways are helpful when launching new products. However, they also work well if you are clearing your inventory.

Giveaways may lead to customers shopping for more items and staying loyal to your brand. As a result, your new inventory might get recognized faster.

Influencer Marketing

You can find influencers on Facebook, Instagram, TikTok, and other social media platforms.

Adopt the influencers approach. You don’t have to be an expert in social media marketing to do this.

For instance, famous brands like Pepsi, Nike, and Adidas use influencers to promote their products. This means the marketing strategy is working out for them.

Similarly, you can set aside a small budget and reach out to local influencers within your niche.

Influencers leverage their audience to advertise sponsored products. They make their money selling the products, and you clear your inventory. Furthermore, their huge following helps build your brand exposure.

Create Bundle Offer

Bundles are well-known for pairing up similar items. For instance, you can create a bundle offer of shaving cream, razor, and aftershave products.

Look for high-selling products and pair them with your excess inventory. Your customers won’t know (and probably won’t care) you are getting rid of your excess stock.

Submit Products to Deal Sites

If Amazon isn’t working for you, you visit other sites to get rid of the inventory faster.

Check out other marketplaces like eBay, Shopify, and Walmart. It’s even possible to make more profit from your inventory. Facebook Marketplace and Instagram Shopping are also good places to market your products.

You must submit a removal order from your Amazon Seller account if you wish to leverage other sites. For example, a removal order allows Amazon to transfer your items from their warehouse to a different location.

However, Amazon will charge you the following additional charges:

• Return fees are $0.50 per standard item and $0.60 per item for oversized items.
• Disposal fees are $0.15 for every standard item and $0.30 for every oversized item.

Sell to Your Competitors

Selling your inventory to your competitors may sound counterintuitive, but you can profit from it instead of liquidating your inventory at low prices.

Essentially, your competitors will be buying your inventory at cheap prices to take you off the market.

With your products’ unique features and brand value, you can sell them to a worthy competitor. First, look for a seller that offers the same products as yours. Then, negotiate for good prices.

Apply business logic and sell your inventory close to the original cost price. You’ll avoid massive losses and solve your inventory issues in one move.

What Fees Are Involved in FBA Liquidation?

Since June 1, 2021, Amazon has been charging their FBA customers liquidation fees.

Sellers pay for these charges once their inventory leaves the Amazon warehouse to be sent to various liquidators. In addition, sellers are charged processing and referral fees per item and category. The liquidation processing fee is charged per item and depends on item size and weight.

The liquidation referral fee calculates the gross recovery value and charges a 15% rate. Amazon sets the processing fees as follows:

Standard-size items

• $0.25 for each item up to 0.5 lbs
• $0.30 for each item between 0.5 and 1 lb
• $0.35 for each item between 1 and 2 lbs
• $0.40 for each item over 2 lbs plus $0.20 for each lb over the first 2 lbs

Oversize items and items that need special handling

These may include shoes, fragile goods, jewelry, apparel, and watches.

• $0.60 for each item up to 1 lb
• $0.70 for each item between 1 and 2 lbs
• $0.90 for each item between 2 and 4 lbs
• $1.45 for each item between 4 and 10 lbs
• $1.90 for each item over 10 lbs plus $0.20 for each lb over the first 10 lbs

Fees are charged as percentages per category. Check out the outlined prices in the example table below. For more examples, go to your Amazon Seller Central’s liquidations referral fee page:

FAQ – Frequently Asked Questions

Can I use my standard seller central tax report to report liquidation sales?

Yes. Your tax report on Seller Central determines the period you need to report your sales. The tax report is based on the cash receipts and shipment dates.

Liquidation sales reports are in the same period based on the date of shipment of your items. However, the sales will not appear in your report immediately. Instead, you must wait until the liquidator transfers the payment to Amazon.

Always review the Removal Order Detail report to follow up on the sales in real time. After the liquidator transfers the payment to Amazon, follow up on your order account. This ensures that everything is properly documented.

Can I calculate tax on items liquidated through the program?

Yes. Amazon has tax calculation services to help you calculate tax orders. Note that Marketplace tax collection jurisdiction in the United States is not covered by these services.

The tax calculation and reporting services are only available to sellers with the FBA plan. However, for items destined for Marketplace Tax Collection jurisdictions, Amazon handles everything. That includes calculating, collecting, remitting, and refunding calculated taxes.

How much will I receive for the items that I liquidate?

Gross recovery value is somewhere between 5 to 20% of the Average Selling Price (ASP) of your inventory items. However, there is no standard recovery value set for FBA liquidations.

The net recovery amount you receive varies based on low liquidation rates. Below is an example of comparing possible recovery values for your liquidation orders.

Gross recovery value = Contracted liquidator rate * Average Selling Price (ASP) of the item

Net recovery value is obtained by:

(Gross recovery value – liquidation referral fee – liquidation processing fee)

Are FBA liquidations open for non-US sellers?

The FBA liquidation program is open to all sellers on the Amazon marketplace. It does not matter whether you live within or outside the US.

Conclusion

Inventory management is an important step contributing to successful businesses on Amazon. However, if you are stuck with excess inventory, Amazon liquidation is your way out.

It’s time to eliminate your inventory and make a little money. At least you don’t lose all your capital or waste money on items when disposing of them. Furthermore, the little profit protects your IPI and sell-through scores.

If you found this article helpful, check out our other blogs like the best accounting software for Amazon sellers to help you grow your business.