In the wake of the 2020 crisis, people’s shopping habits were significantly reshaped, although e-commerce was already on the rise even before the pandemic. Consumers were forced to shop online because of health restrictions. A massive 39% increase in online sales occurred from Q2 to Q4 of 2020, compared to a 14% increase during Q1 of the same year. Although most eCommerce businesses have experienced excellent growth, not everyone has been able to meet the demand. Amazon had to alter its FBA program in response to the rapid changes in the eCommerce market. The move will most affect retailers that store inventory with Amazon FBA.
The Amazon FBA inventory management and storage limits policy has been modified several times throughout 2020. FBA sellers have had a difficult time keeping up with all the new requirements. It is extremely important for retailers selling on the market to be aware of current inventory storage guidelines as the holiday season approaches.
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Amazon FBA Inventory Storage Limits
As part of the fulfillment center logistics process, Amazon requires fulfillment centers to limit the amount of inventory they store. As far as storage is concerned, Amazon was lenient towards FBA sellers before 2020. The eCommerce giant, however, became more strict with the policies about its Amazon FBA inventory storage limits as a result of the unprecedented rise in net sales and social distancing guidelines.
The Amazon storage limit is the maximum amount of inventory that an FBA seller can store in Amazon’s fulfillment centers. FBA sellers are not all subject to these restrictions at the time of writing. New sellers and seasoned sellers with slow-moving inventory are subject to the updated Amazon FBA Inventory Storage limits even though they have automated inventory management software. Likewise, certain products are restricted by the marketplace.
Amazon evaluates all sellers every month, and if a seller faces storage restrictions, an alert will appear in their accounts. On the monitor, yellow, green, and red indicators display how much storage space is left:
- Greed indicator
Inventory levels are at 75% or less.
- Yellow indicator
Inventory levels are between 76% and 90% of the limit.
- Red indicator
Storage is reaching capacity. Inventory levels are at 91% or more.
Amazon FBA Storage Inventory Limits Criteria
There are many factors that affect storage limits, which are generally measured in cubic feet, and the limitations vary depending on the type of storage. There are six different types of storage that Amazon offers:
- Standard Size
Inventory categories cannot be altered by sellers. According to the physical characteristics of the item, the marketplace determines the type of storage. Individual selling accounts with Amazon allow sellers to store 10 cubic feet of goods. Storage limits can’t be increased for these accounts, and storage cannot be appealed.
Amazon may restrict accounts associated with professional selling or may not. Among the factors that influence this decision are:
- Customers who maintain a satisfactory Inventory Performance Index (IPI)
- The program is not open to new sellers who started less than 26 weeks prior to enrollment or with insufficient sales to generate an IPI.
- In terms of standard, oversize, clothing, and footwear inventory types, all professional storage accounts are limited to 25 cubic meters.
The specific variables Amazon uses to establish storage limits aren’t as transparent as they should be. Below are a few factors that go into establishing storage limits for sellers:
- Volume of sales
- IPI scores throughout history
- Fulfillment center capacity in the nearest location
The marketplace tends to extend higher storage limits to accounts with consistently high IPI scores and commendable sales volume.
Inventory Performance Index
In order to determine the management capacity of a seller, the Inventory Performance Index is computed. Amazon gives these scores, which range from 0 to 1000. IPI thresholds for inventory storage limits shift depending on several factors, such as the marketplace’s capacity for storing inventory. At the time of writing, 450 is the threshold for storage limits. A reference point of 500 IPI was set during the height of the pandemic.
It is Amazon that determines which sellers have storage limitations, and it is even Amazon that calculates the IPI. It is Amazon’s policy not to disclose their formula since it is proprietary information. A customer’s IPI score is impacted by three factors:
- Taking steps to reduce excess inventory
- Sales growth
- Ensure all inventory can be purchased
Having too many specific products in your account does not result on Amazon penalizing you. Some items being out of stock have no effect on an individual seller’s IPI.
Dealing with Exceeding Storage Limits
A retailer would be notified once they exceeded their inventory storage limit by Amazon, in addition to the monitor located on their account. Storage requests for new shipments would not be allowed until inventories drop. There is a good chance new inventory will be refused by Amazon if retailers insist on sending new items to their fulfillment centers despite their storage limitations.
Amazon does not sell storage space in its fulfillment centers at present. Retailers can, however, increase the storage capacity of their fulfillment centers. Applicants must sell at least 8% of their inventory each week over the course of nine weeks in order to be considered. Contacting the selling partner support is the first step to requesting a higher storage limit.
2020 was a challenging year for eCommerce, despite considerable growth in the industry, the pandemic has had a significant impact on retailers. As a result of the crisis, businesses have become more agile and open to partnerships and collaborations.
The following are Amazon FBA inventory limits that you should know about before you start selling there. Checkout Inventooly if you have a hard time managing your inventory or Amazon or any E-commerce platform. It is inventory management software designed specifically to address your needs related to inventory issues.