The year 2020 saw a net sales increase of nearly 40% for Amazon. Online shopping continues to grow in prevalence, and Amazon's latest ASIN-Level restock limits are a reminder of this. If you happen to be an FBA seller, this article will be significant for you.
Below, we will dig into the latest 2021 update that impacted Amazon FBA restock limits and how this might affect your ability to grow as a business.
1. What is the New Update?
The new update releases Amazon FBA restock limits, setting them instead to the storage level of your local fulfillment center. The result is creating one less area for you to track, creating flexibility in managing shipments. As of April 22, 2021, Amazon implemented this change solely for FBA sellers.
If you are a third-party seller, this announcement will not affect your stock limitations. This also does not affect professional selling accounts or individual sellers that do not subscribe to FBA. However, this may impact those under effect from the storage limit impacts from January's announcement.
How this Impacts the January Announcement?
As of January 1, 2021, the Inventory Performance Index (IPI) has a storage threshold of 450. This was reduced from the previous storage limit of 500.
Individual sellers have a set storage limit of 10 cubic feet. Professional sellers who maintain an Inventory Performance Index (IPI) above two checkpoints will not be subject to any restrictions.
Also, sellers who created their account within 26 weeks do not have enough information to make an IPI score. These new accounts must be subject to restrictions until they can prove their abilities to meet Amazon's demands.
Even those part of the Fulfillment By Amazon program cannot exceed their FBA storage limits. Your limits will be available on Seller Central, and there will be different tracking for both oversized and standard items.
2. Why Did Amazon Remove the Limits?
Amazon removed the ASIN-level quantity limits to make things easier on their available sellers. Because of the recent growth in Amazon's sales over the past several years, the natural way to improve those sales further is by removing limitations.
However, there are still two major issues coming from the update:
- Issue #1: What if You Sell Limited Stock in High Numbers?
Ideally, those who sell items in bulk will receive the greatest reward with this. Suddenly, they can ship large quantities of things at once, allowing them to worry less about inventory levels. They might have to pay a long-term storage fee if they do not make those sales, but it might save them money in the long run after running a cost-benefit analysis.
But for those who sell a large number of items all at once, they might find that the ASIN-level restock limits the amount of inventory in transit to houses. That means that people who sell at this rate might have to wait until all of their in-transit items reach their destinations.
- Issue #2: What if You Have a Limited Stockout?
The second common problem comes with people who have limited stockouts. With Amazon's demands changing, you can bet that their demands of higher perfection will only follow suit. That means if you have a one-time stockout, it could ruin the game.
Our next section will delve further into how ASIN stockouts impact Amazon Product Rankings.
3. What is the Effect of ASIN Stockouts on Amazon Product Rankings?
Several studies have found that stockouts can completely ruin the potential of your product. This situation is especially actual for new listings made in the past four weeks. Amazon products with a more extended history of success have a higher potential to recover. ASINs without this history may never recover, severely limiting your ASIN-level quantity limits.
Having higher ASIN-level quantity limits allows Amazon to address a higher maximum inventory level for successful products. These Amazon FBA restock limits primarily come from a high IPI. So this FBA storage update is brutal for people who cannot maintain that performance.
The effects, especially after the update, can result in the following from stockouts:
- An intense drop in search engine rankings
- A decrease in sales related to performance concerns
- An extended period of recovery to be back on those listings
- The potential destruction of this ASIN
4. How are the Restock Limits different from Storage Limits?
A big part of the FBA storage update comes back to Amazon setting restock limits to a storage-type level. The change results in more flexibility, but there is still a difference between restock limits and storage limits.
What are Restock Limits?
Before the update, ASIN-level restocks limits were different from storage limits. Restock limits come from the rate at which you sell items. Once you reach a certain level, Amazon sends you a notification through Seller Central that your items need restocking.
The idea is to keep enough room not to have an excess inventory while ensuring that the customer experience is good. Amazon bases this on your sales speed history, so they will recommend a restock once you reach a certain level. Typically, restock limits are lower than the storage volume limit.
What are Storage Limits for Amazon FBA Sellers?
Storage limits are the number of cubic feet that the Amazon Fulfillment Center grants you. With the new update, you will be able to stock ahead of schedule. This feature results in a higher storage cost. The FBA Storage Limit might provide you more flexibility, but you will still receive storage limits based on your IPI. Also, note that storage limits differ based on the product category. Apparel, electronics, oversized items, and smaller items are in different types.
If you have an incoming shipment ready for a fulfillment center, you will have to wait until your storage level goes below a certain level. Because items in transit still might return, those are considered part of your stored inventory.
5. How Does Amazon Decide on ASIN-Level Restock Limits?
Amazon primarily decides on Amazon FBA restock limits from the IPI figure we've mentioned throughout the product. To manage your IPI, you must be aware of these different potential impacts:
- Reducing overstock
- Improving 90-day sell-through rates
- Fixing stranded listings
- Keeping high-demand items in stock
The inventory performance help page indicates that four colors dictate your combined performance in each of the areas:
- Excellent is dark green
- Good is light green
- Fair is yellow
- Poor is red
For more details on why you are in this color bracket, click on the "show more details box" associated with each category.
Here's the breakdown of how you should manage each type:
How Excess Inventory Percentage Impacts IPI?
Excess inventory is a sign that you aren't moving your product fast enough. With the new FBA storage update, this could mean you will be limited. ASIN-level quantity limits exceeding suggested inventory levels are too much.
This data comes from your competitors. If it is common for people in your field to have excess inventory, you might not have to worry about this. Still, you want to limit paying for storage fees over three years, as those long-term storage fees are going to add up.
What is Stranded Inventory?
Stranded inventory comes from a technical issue that prevents prospective buyers from purchasing due to technical problems with your listing.
If you have many SKUs (Stock Keeping Units) without an active listing, you need to fix your listings. Amazon has a "fix listings" button under Seller Central to track those that fall under the stranded category.
FBA Sell-Through Rate - How does it Impacts IPI?
One of the most significant impacts to your Amazon FBA restock rate comes from the sell-through rate. Amazon tracks the units sold and shipped with those ASINs. Amazon also includes a recommended action setting to remind you how to make improvements in this area.
The more you sell, the more often you will see restock requests. As a result, Amazon will see your item as high-performing. Provided you can keep up with that demand; Amazon will keep you on those high rankings.
FBA In-Stock Rate - What is It?
The in-stock rate directly impacts your sell-through rate, as it tracks the times you ran out of inventory during the past 30 days compared to the units sold over the past 60 days. ASIN-level quantity limits will always be above the in-stock rate.
Labels are essential here, as you have the opportunity to indicate items as un-replenishable. This setting is crucial if you plan on discontinuing items or there is some supply shortage.
You will also see a "restock today" button, which indicates when orders might need expedited. If you want to avoid the dreaded stockout, it's best to keep ahead of the game if your selling rate goes up.
Should I Increase Prices to Reduce Restock Chances?
To reduce sales and increase profit margin, some companies might recommend you raise prices. While this isn't a bad thing, there is a chance you might reduce the number of sales you make beyond increasing your profit margin effectively.
When deciding whether to raise the process, make sure you remain comparable to other options in your field. Amazon puts a high priority on competitiveness, and pricing is a critical component of that.
How Does Multi-Channel Fulfillment Impact IPI?
Multi-Channel Fulfillment (MCF) is the process of using a third-party platform in which to sell your amazon products. When you are a professional seller, you can use platforms like Shopify to create an off-site experience while still allowing Amazon to manage your logistics.
Because Amazon is still managing your logistics and inventory tracking, any orders people make from your off-site page (provided that Amazon supports it) will reflect Seller Central. Impacts from MCF are the same as impacts from effective product description pages. Your FBA storage limits indicate part of what you sell through MCF.
6. Do Restock Limits Remain Constant?
The short answer: no. Restock limits are constantly fluctuating based on the environment. Those who sell items impacted by the season feel those effects to a great level. Nobody is selling high numbers of the "Elf on a Shelf" outside of the holidays.
You'll find that these FBA storage limits are instrumental during the holiday seasons. Those making those IPI targets don't have to worry about potential sales loss due to inventory restrictions. Others may suffer, but there's still a lot of potential for growth as online shopping becomes an even bigger deal.
It's essential to be aware of significant changes are restock limits change based on demand. Here are a few simple examples that your product might fall under:
- You can expect to sell more sleds, winter coats, and skiis during winter.
- People who sell sunglasses, grills, and inflatable pools see higher sales during the summer.
- Everything explodes on Black Friday and Amazon Prime Day.
- People who sell coffee are more likely to sell pumpkin spice latte flavors during Autumn.
You are right to think that these are a few super simple samples, but think about when people mainly need your items? You likely see that those items may boost sales during particular times in the year.
7. Does this Affect the Currently Due Shipments?
Those who had shipments out during the change-over were still under the old system. However, those who continue to use Amazon after the FBA shipment update will notice that items still in transit are considered in storage.
That means you will need to wait for those items to finish reaching their destination in some cases. It can be a problem for people who might expect a boost in sales. However, it does act to create more room for others who manage to get high IPI marks.
Recent changes through the FBA storage update can help and hinder you. January's update increases those limitations, while April's update removes those limitations. You need to be aware of those FBA storage limits to understand your maximum levels. Keeping a close eye makes you more aware of restocking times.
To keep a closer eye on how your product information may help or hinder your available FBA storage limits, check out DataHawk Product. To benchmark and test out changes in product descriptions and other efforts, our team can help you out.
This article covers everything you need to know about Amazon Inventory...