It’s happened again. Everyone had settled into the new Amazon shipment restrictions, effective April 22nd, that instead of ASIN limitations of 200 units there would account level FBA re-stock unit limitations. Those new account level unit FBA re-stock limitations on a general level were workable and allowed for more flexibility and strategic shifts in seasonality. Many FBA sellers that we have spoken to referenced having 50-70% availability in FBA with the April 22nd mandate. Then, without warning, numerous third-party accounts were then cut by 50% or more the last couple of weeks — leaving little to no additional room for additional shipments. Why no warning from Amazon? How can you as a third party seller manage your business? What steps should you be taking to protect your business in the future?
Why no warning from Amazon?
Like many new restrictions rolled out in the last year from Amazon there was little-to-no warning for the latest stunt. As usual, Amazon is looking out for Amazon and your seller business revenue or profit goals are not considered. It is one of the many risks with selling on such a dynamic and powerful marketplace. They have the traffic but they also have many macro level pressures they are facing. Many are pointing to the fact that their current massive warehouse footprint is maxing out. They continue to build new warehouses at an absurdly growing pace but still they cannot keep up. With successful YoY growth quarter after quarter, new sellers joining everyday and many existing sellers beefing up inventory for both the summer season and Prime Day it seems they are looking for a relief valve.
You need to learn to anticipate and expect literally anything when selling on the Amazon marketplace. It’s like a version of Stockholm Syndrome where you have dependency on the marketplace due to its vast reach, but it frequently abuses you as a seller. Understanding that you must be your own advocate and make sure you are watching all of your inventory metrics – specifically your IPI score – is critical. There is little recourse typically through case management with Amazon. You can expect boilerplate copy+paste messages from your old friends at Seller Central.
Still, understanding how and when to push back is crucial to managing your overall account health. Do not let these numbers fall as they will catch up with you. The most frustrating part is even if you are doing everything right and your numbers are ‘in the green’ Amazon can make unilateral changes like this and then as a seller you are stuck finding alternate solutions.
How can you manage through this?
If you are one of the many third party sellers already over or close to being over your re-stock limitations you must get aggressive immediately on excess inventory in order to be able to replenish fast sellers. Review ASINs that have more than 90+ days worth of inventory and either remove this inventory or mark it down deeply to move it through. Next review your reorder cadence. Look at lead times to be sure the replenished product you are sending in will move fast enough to keep up with your overall business goals. You will have to prioritize higher velocity and high profit margin ASINs over slower turning, lower profit margin ASINs. This could mean discontinuing the bottom section of your product assortment (which isn’t the worst thing in the world).
Many sellers already have product inbound from overseas or other manufacturers that is “marked” for FBA. If your account is tight on re-stock availability you may have to divert this merchandise to a 3PL, your warehouse, or your parent’s basement. You will have to pivot quickly or this product will be ultimately denied entry into an Amazon fulfillment center, resulting in additional fees.
All third-party Amazon sellers should have an alternative space to receive, store and ship their products to their customers. If you are solely reliant on FBA you will get burned time and time again. A 3PL is typically the easiest situation for sellers as most do not have an in-house logistics arm to their business model — that’s what FBA has been serving. You should research and vet your 3PL choice to ensure they have the experience, expertise and are equipped to ship direct to consumer. Location is especially important when you consider Amazon’s inventory distribution model. You will want a 3PL centrally located.
Lessgistics checks all of these boxes and more. With years of Amazon logistics experience in your corner you will have a partner to navigate the ups and downs. With a 3PL partner you will have the unlimited option to ship merchant fulfilled direct to consumer while still harnessing the traffic and success of the Amazon marketplace. While these products likely will not be Prime – they will be active listings- which is a better choice than a dreaded stock out which offers you zero revenue and profits (not to mention lowering your IPI score). You can also leverage a 3PL as a direct feeder system. Amazon is moving towards leaner inventory levels for sellers so they should counter with having inventory on hand ready to be sent in quickly.
What steps should you be taking to protect your business in the future?
There are many ways to insulate your business from the wild ride that is Amazon. Diversification of business revenue being the most strategic and important. Develop your own branded website, sell on other marketplaces (WalMart, eBay, Etsy) and also introduce or grow your brick-and-mortar presence. Being reliant on one stream of revenue is a great risk to any business. If that stream of revenue is Amazon, the risk is even greater.
Manage your inventory metrics in Seller Central, most importantly your IPI score. While there is no public information to how the formulas are weighted we do know that your IPI score comes into play in many inventory restrictions within Amazon. Turn your product quickly, deal with your stale or dead inventory and most importantly cut out ASINs that are dragging you down.
Engage with a trusted 3PL partner. This additional logistics arm of your business should serve you everyday and will be rooting for the success of your business, not looking to restrict it. At Lessgistics we recently doubled our warehouse space and are ready and willing to engage and be your partner every step of the way.