In a move that may be an attempt to strike a competitive edge in the fast-approaching 2022 holiday season, Amazon appears to have reduced storage limits for several sellers recently.
Several sellers reported receiving 10%-25% reductions in their inventory storage capacities, which has affected their ability to replenish their inventory. Some sellers are even forced to choose between making costly inventory adjustments or hoping their low-stock items sell through quickly enough to allow them to replenish the unavailable inventory.
In an email to sellers in August, Amazon said that it would be restricting the amount of inventory allowed on the site from some sellers. The company said that 5% of its FBA sellers would be affected by this change, which would require them to reduce the amount of inventory they have on hand.
Amazon announced in August that it would allow its sellers to keep at least four months of inventory in the company’s fulfillment centers. But in October, Amazon announced that it would update this policy, allowing all sellers to keep at least three months’ worth of oversize inventory in FBA.
That said, it is difficult to tell whether the email announcing a decrease in the allowable storage months of inventory was simply a clarification of policy or if it reflects that the company has decided to reduce storage limits further than it had estimated.
Although Amazon stated it had excess storage capacity earlier this year and was looking to shed space, ocean freight rates have dropped to 80% from last year, primarily due to decreased demand.
How are Restock Limits Calculated?
Amazon’s Restock Limits algorithm considers your products’ seasonal and peak selling periods, as well as forecasts for your ASINs and new selections. Sophisticated machine learning models generate forecasts to predict sales of your products based on previous sales volume.
Potential Solutions to Tackle the Inventory Storage Limit Problem
- Reserve a bunch of shipments now so you can easily restock items quickly in case Amazon reduces the limits again in the next few weeks.
- Create a removal order for items with either no or low sales. This way, you can make some space for the best-selling items.
- You can use the manual unfulfillable inventory clean-up to free up some space despite the restock limit restriction. Amazon allows an average of 50-70 days of inventory at FBA.
- Another great solution offered by Amazon is Amazon Warehousing and Distribution (AWD). This new inventory management solution will help you overcome the temporary storage limitations that may arise due to changes to Amazon’s FBA restock limits ahead of the 2022 Holiday Season.
AWD operates from distribution centers and not from fulfillment centers. This means that AWD will not impact the amount of space allocated to you at a fulfillment center.
Although a recent update in Amazon inventory limits was not unexpected, it has caught many sellers by surprise, and some are even struggling to adjust their inventories. However, everything should be fine if you manage your stock wisely.
Also, Amazon has yet to announce when it will increase inventory levels again; presumably, it will be after the 2022 Christmas season.