Ch-ch-changes: Amazon is rolling out a few significant FBA inventory updates set to launch officially on March 1, 2023. If you’re a brand selling via Amazon FBA or considering switching to FBA, you’re going to want to read this post. These changes are in your favor.
Let’s take a look back really quickly. Fulfillment by Amazon (FBA) sellers have experienced somewhat of a rollercoaster ride over the past few years, as Amazon Fulfillment evolved due to macroeconomic and supply chain challenges. Amazon pivoted their FBA inventory limits, guidelines, and fees, at times with little notice (if any) to sellers before rolling out these changes.
In 2022 alone, FBA sellers experienced (just to name a few):
Some of the more recent Amazon updates above have been beneficial, but the majority have put FBA sellers in sticky, unpredictable situations with their FBA inventory forecasting and capacity limits. With 2023 now in full swing, Amazon is more closely listening to 3P sellers' needs and frustrations, and launching solutions that help sellers regain control of their inventory in Amazon warehouses—which brings us to some exciting new changes…
Effective March 1, 2023, FBA sellers have a single, month-long FBA capacity limit, now measured in cubic feet instead of units. In addition, Amazon will provide estimated capacity limits for the following two months. This allows sellers more time to understand and plan what inventory they can send to and store at Amazon Fulfillment Centers (FCs), keeping seasonality in mind.
Previously, Amazon updated restock limits for FBA sellers every week—that means sellers typically wouldn’t know until the week of whether or not they could ship in additional inventory. As our logistics team puts it, “It’s a rollercoaster every week. We would wake up every Monday and log into Seller Central worried and wondering if we’re shipping this week, or if we’ve already hit capacity.” Thankfully, Amazon acknowledged this ambiguity, anxiety, and confusion.
With the March 2023 rollout, Amazon says FBA capacity limits for the upcoming month will be revealed to sellers in the third week of each month via the Capacity Manager in Seller Central. Sellers will also receive a monthly email notification. Amazon’s restock and capability limits take into account inventory already on-hand at Amazon FCs as well as the shipments sellers have created but not yet arrived at Amazon FCs. The new three-month capacity estimates will take into account Amazon’s warehouse space and labor, as well as how efficiently FBA sellers use their capacity, as measured by their Inventory Performance Index (IPI) score. Amazon says that “the majority of sellers will now have access to greater capacity volumes than before.”
* An Important Note: Amazon is allocating space based on the size tiers for Standard, Oversize, Extra Large, Apparel, and Footwear. The SupplyKick team noticed that Amazon very recently changed their metrics for what they consider Extra Large inventory, which could be a problem for sellers of these product sizes. Amazon changed the length metric on the Extra-Large tier from anything over 96" to anything over 70". If you sell Extra-Large inventory, be sure you double-check your storage usage to ensure you aren’t suddenly put over your restock limit or subject to overage fees.
Another exciting rollout: FBA sellers will be able to request additional inventory capacity in Amazon warehouses should they need it. Amazon's new FBA Auction gives sellers the opportunity to request a higher limit, based on a seller-specified reservation fee.
Amazon grants space starting with the highest fee, but every bidding seller will be charged the lowest fee granted. Amazon explains that “requests are granted objectively, starting with the highest reservation fee per cubic foot, until all capacity available under this program has been allocated… If your request for additional capacity is granted, your reservation fee will always be less than or equal to the maximum reservation fee that you specified in your request. In addition, it will be the same reservation fee, per cubic foot, as for other sellers whose requests are granted that week.” Once Amazon grants the additional capacity, a seller's reservation fee is offset by earning performance credits from the sales they generate using the extra capacity. This means that as long as an FBA seller’s products sell through, the performance credits could offset up to 100% of their reservation fee.
Time will tell with how the FBA Auction bidding process will play out, but Amazon does provide a calculator tool/spreadsheet to help sellers estimate how much they should bid. Sellers who request additional capacity must put an expiration date for their bid request. Amazon says everyone will pay the minimum awarded bid.
* An Important Note: You pay for the extra inventory space regardless of whether or not you use it. With that said, our team warns FBA sellers to use caution—make sure you are confident in the warehouse space needed and whether or not you truly need a space increase. This comes down to having a very solid and proactive inventory management and forecasting system in place
There’s no doubt Amazon is putting more control in the hands of third-party FBA sellers this year, with the goal of also limiting unproductive use of their warehouses. For sellers, this means you’ll no longer be blindsided by restock limits (thank goodness)—and you can now plan and predict inventory needs thanks to Amazon’s ongoing efforts to give advance notice and insights.
This is hopeful news for FBA sellers, as Amazon Fulfillment is still the most cost-effective solution for Amazon wholesale sellers out there, with the most expansive global warehouse network available. As an Amazon seller consultant, we are grateful for FBA especially in the current macroeconomic climate—and we’re ready for whatever 2023 may bring.
SupplyKick has over a decade of experience as a third-party Amazon seller. Want to learn more about how we can help you streamline your FBA inventory management, build a solid inventory forecasting plan, provide reorder recommendations, and more? Contact our team.
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