Since 2020, consumer behaviors and shopping practices have completely changed. While brick-and-mortar businesses were once the norm, online sellers have now taken the lead, adapting to the evolving realities of shoppers.
Companies that used to solely have a physical presence have had to shift strategies and build up an online presence overnight, while newer small businesses that already had an online presence found themselves needing a way to scale up quickly.
The downside here is that there are inventory storage limits on Amazon properties and fulfillment centers. Sellers and small businesses must understand what the FBA limits are, the criteria for those limits, and what they can do to ensure compliance.
Amazon sets limits for inventory storage to ensure smooth operation in its fulfillment centers. Amazon was quite lenient with FBA sellers before 2020, but the explosion in online sales necessitated some changes to its policy.
FBA, or fulfillment by Amazon, limits relate to the inventory that each seller can store in Amazon’s fulfillment centers. While not all FBA sellers apply, the ones that do need to follow all guidelines. In general, new sellers and those with slow sales will see limits on their inventory storage.
The critical thing to note is that Amazon evaluates all its sellers on a monthly basis. Even those who have limits in place now might not have those same limits in the future. For those who do have FBA limits, Amazon uses color-coded indicators to communicate the remaining storage for that seller.
● Green: Inventory of 75% or lower.
● Yellow: Inventory between 76% and 90%.
● Red: Inventory of 91% or higher. Approaching FBA limit.
Amazon updates its inventory levels daily, and changes can take up to 24 hours to take effect and display correctly in your account.
Criteria for FBA Storage Limits
Amazon sets criteria for storage limits based on type and size. Amazon generally measures in cubic feet, and it breaks products down into these types:
● Standard size
Sellers do not set the type of their products; Amazon takes care of that. From there, the marketplace looks into the characteristics and size of the item in question. Amazon gives an active individual seller up to 10 cubic feet of storage. It’s important to note that you can’t appeal your storage limit from here.
What Is IPI?
Amazon uses your IPI, or Inventory Performance Index, to decide the degree to which you can manage your inventory. This score ranges from 0 to 1000, and the threshold for storage capacity will fluctuate with time and activity in fulfillment centers. On average, the threshold sits around 450. With that said, at the height of online selling at the beginning of the pandemic, 500 was a standard threshold.
Amazon maintains secrecy around how IPIs get calculated, but the company has revealed the factors that can improve an IPI score:
● Bringing down extra inventory
● Bringing up sales
● Keeping inventory active and buyable
Amazon does not penalize you if you run out of stock on an item, but regularly being out of stock can affect your IPI.
How Should I Prepare?
With global situations constantly in flux and an increased reliance on online marketplaces, sellers who are FBA eligible or want to enroll must prepare to deal with inventory storage limits on Amazon. Luckily, sellers have a few things they can do to shift the situation in their favor.
The biggest priority for any seller is to keep on top of inventory levels daily. With restrictions that could reduce storage limits significantly, sellers need accurate data and transparent information on each product listing.
Cleaning up your inventory while clearing out items that aren’t selling remains one of the best ways to stay on top of your IPI. When updating its metric, Amazon looks to past sales, so accurate sales data will help sellers stay ahead of potential IPI score drops. Amazon also provides recommendations to improve IPI scores. Following these can be the difference between a bad IPI score and a great one.
What Can I Do About This?
Amazon sellers need to ensure that they have inventory for at least three months of sales. While selling out of an item is technically a good problem to have, habitual item vacancies don’t look good when it comes to your next IPI score review.
On Amazon’s inventory page, the company has included a way to check the current limits. Inventory storage limits on Amazon can change quite quickly, so it’s crucial to keep tabs on the latest provided information.
What if I Exceed My Inventory Storage Limits on Amazon?
While Amazon does have a monitor that you can keep current on in your account, the company will only notify you once you’ve reached your limit, not before. From there, a seller has limited choices. They’ll need to quickly reduce their overall inventory before requesting additional storage. Sellers who go ahead and send new inventory after reaching their limit will have additional items refused automatically.
Many sellers assume they can simply buy more storage, but that isn’t the case. Amazon does not sell additional storage, but it does give sellers the opportunity to request more storage. To qualify, you’d need to sell at least 8% of your entire inventory on a weekly basis for a duration of nine weeks total.
The last few years have opened up tremendous opportunities for small and large retailers, but supply chain issues and lack of storage have also introduced pressure points into the process. Sellers need to be agile, dynamic, and quick to react in order to stay ahead of Amazon’s latest rules and regulations.
Click Fluency Is Here to Help
Do you need help navigating the new inventory storage limits on Amazon? Our team can help you through every step of the process so that you can focus on what you do best: running your business. Schedule a call with Click Fluency today to get started.