Changes to FBA stock limits
Amazon restock limits: Obstacle or opportunity?
How does Amazon’s recent changes to its FBA restock limits affect your business? And how can you turn it into a positive?
There’s an unwritten rule in business: never make any big changes on a Friday. Well, two months ago, Amazon ignored that advice, introducing a significant change to their FBA restock limits and then disappearing into the ether for the weekend.
In the following weeks, we’ve been working hard to understand how these changes affect our clients and what we can do to help them. In general, the majority of sellers appear less than impressed with the changes; there’s even an entire forum of sellers asking for Amazon to remove restock limits.
But despite the lack of communication from Amazon, their recent changes to inventory thresholds should be seen as an opportunity, not an obstacle. And here’s why…
First things first, what has Amazon changed?
Simply put, Amazon has decreased restock limits for the majority of sellers, while also increasing the IPI (Inventory Performance Index) threshold for storage limits from 450 – 500. To make things more confusing, those restock limits are also now capped for your entire account, rather than being based on individual ASINs – as they were prior to April 23rd.
So, whereas Amazon used to increase stock limits for an ASIN in line with its velocity of sale, now if you’re selling 10,000 units a month across your whole account and have a healthy 5,000 units in stock, Amazon would in theory provide you with 10,000 units of available stock quantity. Notice the emphasis on ‘in theory’ there.
Ultimately, what this appears to have done is restrict sellers to having either 2 or 3 months’ worth of stock in fulfilment centres at any one time.
Why has Amazon done this?
Amazon’s motives are unclear, but the most likely reason is that the company is trying to ensure sellers have clean, fresh stock in fulfilment centres, while also clearing up some more shelf space in the process.
A growing concern for Amazon is that seller products currently account for more than 60% of the inventory in Amazon’s UK and EU fulfilment centres. One of the main reasons for this is because Amazon only starts enforcing excess inventory charges on stock that has been in a fulfillment centre for over 12 months, encouraging sellers to send in a year’s supply of stock – saving money but taking up unnecessary space.
The problem is, the official line from Amazon is that they have made this change “so that your products can be received as quickly as possible” – which doesn’t really make sense, considering they’d receive your products anyway. While Amazon is usually quite good at conveying information on big changes, the smoke and mirrors here are making it difficult for sellers to fully understand the benefits of these new quantity thresholds.
How is it impacting sellers?
We work with a range of clients at SHIFT and I’ve seen very little consistency in terms of how these changes have affected them. Some have seen their limits rise, but we’ve also had some see their limits dip by 50%.
Again, the exact reason behind these inconsistencies is unclear, but my guess would be that Amazon is calculating account metrics at a sku level. For example, if the majority of your ASINs are selling well, but you’ve got 2,000 units of one product which just won’t budge, Amazon could view that as a negative skew to your selling power, bringing the total restock limit down.
Sellers are then faced with two options – wait to sell through the existing stock or pay to recall it.
What makes things more difficult is that Amazon appears to be moving the goalposts at will, which can be especially damaging when shipping to fulfilment centres in other countries. If you’re shipping to the US, for instance, you’ll want to make sure that you’re shipping enough units to make it cost-efficient. But if Amazon decides to lower your quantity threshold at the last minute, you could end up with a huge amount of units which you simply can’t send anywhere.
What’s the bottom line?
There are two key things you need to ensure you do from this point forward:
- IPI Score – Ensure your IPI score is always well above 500+. The easiest ways to maintain a strong IPI score are reducing excess inventory, improving your 90-day sell-through rate, fixing any stranded product listings and ensuring popular items are always in stock.
- Restock Limits – Ensure your stock is lean. Plan more effectively, think about the seasonality of your products and be efficient in how often you are shipping products to fulfilment centres.
What should you NOT do?
Don’t have a knee jerk reaction. If your available units have fallen, it may make sense to make space for more units by removing any surplus stock, but what happens if Amazon increases the limits a week later? We’ve already seen Amazon change its new metrics weekly, and you could easily end up spending huge amounts to remove stock for no reason.
Instead, you need to see this as an opportunity to stop ignoring your surplus stock, and start selling it. Remember, you put that stock there for a reason; it was either selling well or you bought the stock specifically for Amazon. If you can figure out why those sales have slowed down, then it makes sense that you can speed it back up again.
Will there be any future changes?
It makes sense that Amazon may also be looking to lower the threshold for excess inventory. If Amazon was to start charging sellers for excess stock after 9 or 6 months, then that would give sellers another reason to keep a closer eye on their stock.
But at the end of the day, you shouldn’t really be leaving stock in fulfillment centers for this long anyway. Regardless of the fines, all you’re doing when overstocking yourself is taking up space in a fulfilment centre which could be used for faster-moving products.
Amazon has something of a habit for forcing through changes whenever it deems them necessary, but it’s about how you manage those changes and how you turn them into a positive rather than a negative which is important.
And that’s exactly what we’ll help you do at SHIFT. Before you recall all your stock, get in touch with a member of our team first, and see if we can’t help you make the most out of your restock limits.