New product launches being slashed by FBA storage limits
2 years ago
FBA has always been considered the ultimate easy access fulfilment solution as it’s pay-as-you-go, massively scalable and is available to absolutely anyone. Sending inventory off to FBA was nearly as simple as delivering an email. Sign off a few things online, print a label and ship it to the Amazon warehouse. Not a care in the world as everything that happened next was Amazon’s problem (assuming you get sales of course!).
Houston, we have a problem. Apparently, warehouse space isn’t infinite and it’s been bad for business to allow it to be treated that way. To be fair, they didn’t see the massive rise in demand due to the pandemic, but this has caused a rethink. Following these discoveries, in the second half of 2020, we’ve seen Amazon has introduced a few things…
- IPI-driven storage limits (The Inventory Performance Index, or IPI, is a metric to gauge your inventory performance over time. IPI score measures how efficient and productive you are in managing your FBA inventory)
- Long-term storage fees
- Amazon standard identification number (ASIN) level limits
- Peak-season storage fees
- Processing delays which run into 2-3 weeks or longer at peak times
- A pandemic-related block on non-essential products which is now lifted to a large extent.
The emergence of COVID-19 has thrusted the demand for online shopping light years ahead. With that said, sellers are being struck with the harshest limit of all; a maximum 200 unit restriction on FBA storage for new products pushing many into a hybrid of FBA, FBM or even SFP. Combine this with processing delays and a natural uptake in online sales with the third lockdown, and it becomes next to impossible to make sure popular items are in stock.
I’m sure you’re more than aware that FBA is not the only selling method on Amazon. However, if you wanted a short term passive income, FBA might have been the way forward for you. This option removes the labour-intensive side of order fulfilment in your own business, and it features a seamless integration with Amazon. If that’s not enough, you also receive the Prime badge which supports your listing at winning the Buy Box and increases the listing position in search ranking.
SFP (seller fulfilled prime) is an option but you have to use dedicated couriers and adhere to some pretty strict regulations to avoid being kicked off the privilege.
Amazon’s business model has been number one for the last 10 years as it attracts a bounty of entrepreneurs and side hustlers. FBA is deep-rooted in this model to the point most sellers tend to say “I’m doing FBA” instead of exclaiming how they’re selling on Amazon.
However, say you want to sell on Amazon, but not under FBA, what are your options? FBM – Fulfilment by merchant is what you are looking for! To simplify it, you either pay an external company to handle your own order fulfilment (3PL), or you do it yourself simply posting orders as you get them. If this is the case for you, there are fortunately a bevvy of third-part logistics companies who are more than capable of doing this.
There is a slight complication with FBM: obtaining a Prime badge. Running the program Seller Fulfilled Prime is your golden ticket to retrieving one of these badges. This will enable yourself or a third-party logistics company to prove that you are able to deliver orders as efficiently and accurately as Amazon. If so, you will be rewarded with the all important Prime badge.
Have you been affected by these changes?
The ASIN quantity limits are nothing new, but they have been massively scaled up since the latter half of 2020. Many sellers witnessed the impact these restrictions would have on new product launches since their announcement in July 2020.
Fortunately for us, as 2021 progresses and as we hopefully get back to some sense of normality with vast vaccination across the country, limits are expected to ease off. So just sit tight a little longer and hopefully the current climate will improve.
In the mean-time you might be asking the following questions:
- How are sellers meant to successfully launch a product? Additionally, how are they going to formulate a sales history in the first half of the year to cope with this peak season?
- How far ahead do sellers have to plan with these changes?
- So, the limits are going to be eased off, but will they return?