On July 13th, 2020 3rd Party Amazon Sellers received notification via email and in their Seller Central portals that changes are being made by Amazon to deal with unprecedented demand and prepare for the Holiday Season.
Since the COVID Pandemic shut down traditional retail outlets, sales on Amazon have skyrocketed! This has proven to be both a blessing and a challenge for Amazon Sellers.
While many sellers have seen record-breaking sales over the last few months, Amazon and supply chains have struggled to keep up with demand. If you simply buy on Amazon, you might have noticed that Prime deliveries that usually take 1-2 days are taking 5-10 and that is because of the tremendous strain that Amazon's fulfillment network is under.
Normally, Amazon plans for the holiday rush months in advance by hiring 100,000+ temporary workers, adding more logistics bandwidth, and encouraging its Re-Sellers to only keep fast-moving products in its FBA Warehouses. Many believe demand during the COVID Pandemic has been greater than the 2019 holiday season (in most categories) but Amazon (and its Re-Sellers) did not have months to prepare for COVID as they do for the holidays.
In an effort to better meet current demand this April, Amazon hired 175,000 employees and invested billions of dollars in COVID-related initiatives. While this is a huge feat, Amazon is still struggling to keep up with demand and now they are concerned about the 2020 Holiday Season.
Because of the importance of the Holiday Season for Amazon, this week Amazon announced some changes to its policies relating to IPI, Inbound, Removals, & Storage.
The following changes were just announced;
Unlimited Storage IPI Requirement Increased From 400 to 500
An Amazon Seller's IPI (or Inventory Performance Index) is an indication of how well an Amazon Seller manages their inventory in Amazon FBA Warehouses. Amazon rewards Sellers with Professional Seller Accounts and good inventory management metrics by giving them unlimited storage in FBA Warehouses. IPI's can range from 0 to 1,000 and are determined based on 4 factors;
Excess Inventory - this is inventory that you have at an FBA warehouse in excess of what Amazon's algorithms think you can sell. Having inventory that will take months (or years in some cases) to sell in an FBA warehouse can severely hurt your IPI because Amazon does not want to waste its FBA storage space on products that are not selling (and you shouldn't want to waste your money paying Amazon to store slow-selling product)
Sell Through - this metric is based on how quickly you sell products that Amazon thinks you can sell quickly (unlike excess products that Amazon's algorithm does not think you can sell). This metric can be negatively impacted by things like pricing your product above the Buy Box price so you don't get any sales on a potentially fast selling product.
Stranded Inventory - this is inventory that Amazon marks as "stranded" for various reasons (usual things like pricing errors). This is one of the easiest metrics to control because the product is not often stranded and as soon as a product is stranded you can either fix the stranded problem or have it removed.
In-Stock Inventory -this metric is based on how well a Seller keeps products they've sold in the past in stock. If a Seller is always running out of inventory and/or has many products listed in their inventory that have 0 in stock, the In-Stock Metric will suffer.
By increasing the IPI threshold for unlimited storage to 500, Amazon is penalizing sellers who overbuy products or sell closeout or 'one-off' products.
Inbound Quantity limits
FBA Inbound Quantity Limits are something we first saw at the start of the COVID Crisis. This is Amazon's attempt to limit strain on its warehouses by only allowing sellers to send in limited quantities of specific products.
While normally a seller might be able to send in thousands of a specific product, Amazon is currently limiting most sellers from having about 200 units of any particular product in the system at a single time. This means if a seller already has more than 200 units in the Amazon FBA eco-system (inbound, in-stock, reserved, etc.) they will not be able to send more of that product to FBA until they have less than 200 in the FBA eco-system.
Free Removals Promotion
To make up for these unforeseen limitations on 3rd Party Sellers and create room for more productive inventory, Amazon is offering a free removal fee promotion for a limited time. This means sellers can remove any of their products from FBA for free for a limited time.
Amazon Competing Less
A final positive note from this announcement is that Amazon will be decreasing its retail product ordering which should mean more opportunity for 3rd party sellers because of less direct Buy Box competition from Amazon.
"Even though it’s July, we’re preparing early for the holiday season to meet sustained increased demand, and have already reduced our own Retail product ordering to accommodate more of your products and help you continue to see sales growth."
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