Article by Forum Brands
As an Amazon FBA seller, you understand how juggling Amazon’s fluctuating logistical policies is half the business. This also means you need to stay updated on Amazon packaging requirements and Amazon Seller FBA refund policies, among many others. Furthermore, from Amazon’s perspective, understocking your inventory can eat up valuable storage space while overstocking indicates that you’re not cycling out inventory fast enough.
To find a happy medium and sell your products fast, you need to be not only fluent in understanding Amazon’s ungated categories but also in the strategies involved in running an FBA business.
Below, we’ve taken a closer look at Amazon’s newest suite of restocking limits and storage limits so you can avoid feeling the pinch as an FBA seller.
What FBA Sellers Should Know About Amazon’s Storage Limits
Amazon storage limits are meant to serve two purposes:
● Regulate the amount of inventory FBA sellers have in Amazon fulfillment centers
● Encourage businesses to make use of that space by selling and replenishing their merchandise efficiently
If inventory exceeds the imposed storage limit, Amazon prohibits sellers from sending additional inventory to their fulfillment centers until they’ve sold enough merchandise to free up valuable space in their facility or increased their rate of sale enough to see an increase in that allotted storage space.
That said, not all businesses receive the same storage caps. Amazon uses three tiers of criteria to determine your inventory limit, and the first revolves around the kind of business you are:[1]
● Individual sellers must adhere to an inventory storage limit of 10 cubic feet. Unfortunately, individual sellers aren’t able to request or purchase more storage space from Amazon.
● Professional sellers’ Amazon FBA inventory limits depend on their performance. If your inventory performance index skews high, you may be able to eschew storage limits altogether. Moreover, professional sellers who have been on Amazon for fewer than 26 weeks won’t receive any Amazon FBA inventory limit at all. This is because Amazon hasn’t gathered enough data about your business to assess what kind of inventory level limit to impose.
The second criterion that will determine your storage limit is the type of inventory you sell. Amazon recognizes 6 different storage types in its facilities:[2]
● Apparel
● Footwear
● Flammable items
● Aerosol items
● Standard-size inventory
● Oversize inventory
From the consumer side, Amazon’s physicality is really only felt when a customer unboxes their latest Prime delivery.
On the business side, however, Amazon fulfillment centers are an incredibly complex physical enterprise. Every item for sale on Amazon’s marketplace must be stored and handled properly before it can make it to shoppers’ doorsteps in one piece—which makes classifying products a crucial element of keeping customers happy.
The third and final factor that directly impacts your storage allowances at Amazon is IPI, a metric the company developed to measure seller performance.
What is Amazon IPI?
Efficiency is the name of the game at Amazon, so it’s no surprise the company created its own performance measurement systems to keep fulfillment running smoothly.
IPI, or inventory performance index, is a metric Amazon developed to determine the health of FBA sellers’ businesses. IPI primarily addresses:
● How much warehouse storage FBAs are absorbing
● The rate at which FBAs are selling their products
All FBA sellers receive an IPI score between 0 (the poorest score) and 1000 (the best). It’s important to keep an eye on your IPI score, which fluctuates every month, by checking in with your Amazon Seller Dashboard regularly.
As of New Year’s Day 2022, Amazon inventory level limits are imposed on FBA sellers who dip below Amazon’s designated “minimum threshold”, an IPI of 400.[3] Some sellers report that maintaining a good IPI score can increase their storage capacity limits by up to 5x—which means that learning to manage your score is essential for fostering a profitable FBA business.[4]
4 Factors That Affect Your IPI
Amazon hasn’t been very transparent with FBA sellers about the precise calculus they use to arrive at an IPI score. That said, there are some measures you can take to help maintain a healthy score and avoid storage limits that would put a pinch on your business:[5]
- Pushing excess or aging inventory – Amazon interprets lingering inventory as a financial liability. To avoid docking your IPI score and suffering from incurred storage limits, Amazon recommends keeping enough inventory to meet customer demand for 1 to 2 months. You can encourage shoppers to help clear out aging merchandise by offering discounts, sales, or ramping up your marketing efforts. If push comes to shove, sellers can also execute an Amazon removal order to bring some of the aged goods back into their own facility as a 1-2 punch to the sales-driving strategies above.
- Enhancing your sell-through rate – Maintaining a solid sell-through rate is a challenge for any business, whether or not they’re on Amazon’s marketplace. Bear in mind that Amazon usually calculates FBA sell-through rates every 90 days, so it’s in your interest to tailor your merchandising and sales strategy per their schedule.
- Resolving unfulfillable or stranded inventory – When an item is in stock at Amazon’s fulfillment center but doesn’t have a corresponding marketplace listing, this is known as stranded inventory. Conversely, when an item is listed on Amazon’s marketplace but isn’t physically available (or in good condition) in their fulfillment center, it’s referred to as unfulfillable inventory. Either way, Amazon penalizes discrepancies between your material inventory and your online Amazon storefront. To avoid penalties, keep an eye on your SKUs and hit “Fix Listings” as soon as you’re alerted to a listing error.
- Staying in stock on your most-loved items – Amazon wants its sellers to succeed, which means a surefire way to keep sales up is to keep your top-selling items in stock. They recommend paying attention to your FBA in-stock rate, which measures how long your most popular items have lasted on the shelves compared to the number of units dispatched to customers.[6]
Feeling The Storage Crunch? Pass The Baton to Forum Brands
Navigating Amazon’s ever-changing seller policies and Amazon stock limits can be a challenge for entrepreneurs, especially when strict FBA inventory storage limits make it that much harder to grow your business.
Forum Brands helps entrepreneurs grow their FBA business to its potential while giving entrepreneurs an off-ramp from the Amazon jungle to sell their Amazon FBA. We’re a team of former sellers and execs who’ve helped to build trusted brands, and we want to partner with business owners who are ready to move on to their next endeavor.
With Forum Brands, you can cash out with years of revenue in your pocket, and solidify your reputation with the customers who’ve grown to trust your business. To learn more about how we can help you build a legacy brand, drop us a line to discuss a sale today.
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