It’s safe to say the biggest struggle for most Amazon FBA sellers this year has been dealing with restock and storage limits. The change from ASIN based limits to category based limits came with no warning and created some real problems for a lot of Amazon businesses. Here is a typical perspective on the challenges.
Thankfully storage limits are fairly easy to handle once you understand how it works – you simply have to keep your IPI score above 500 and you won’t have any storage limits to deal with. If you do need help with your IPI (inventory performance index) and getting it above 500, then take a look at this recent blog post I did on the topic: https://andrewminalto.com/fba-inventory-limit/
But restock limits on the other hand can be much harder to consistently improve as while Amazon give very clear guidelines on how to improve your IPI in 4 key areas, this doesn’t contribute to your restock limits.
Now I know there’s a lot of confusion and misinformation about this, so let’s very quickly run through the difference between the two.
Restock Limits vs. Storage Limits
|Restock Limits||Storage Limits|
|What it manages?||Inflow of Inventory||Physical Storage Volume|
|IPI score relevance||Applies irrespective of IPI Score||Applies if you are below IPI Threshold|
|Limit form||Units||Volume (cubic foot or metre)|
|Any applicable fees||N/A||Overage Fee|
|Utilisation||Includes inventory at Amazon and shipments on the way||Includes inventory at Amazon|
So as you can see Amazon clearly state that your IPI is irrelevant when it comes to restock limits and they’re instead “determined on historical and forecasted sales and determine the maximum unit quantity you are allowed to send and store in Amazon fulfilment centres”.
Now this doesn’t mean more sales = higher restock limits, and I’ve seen companies with millions in revenue have their restock limits slashed!
What it mainly depends on is your inventory age.
What is FBA Inventory Age and why does it matter?
And this is exactly what it sounds like, the age of the inventory you have stored with Amazon, which is split into 6 ranges:
- 0-60 days
- 61-90 days
- 91-180 days
- 191-330 days
- 331-365 days
- 365+ days
You can find this by logging into Seller Central > clicking on the Inventory tab > and then going to the new Manage Inventory Health page (which is a consolidation of the previous Inventory Age and Manage Excess Inventory pages).
Now from a number of tests I’ve run myself and from speaking to Amazon Sharks members, it’s clear that Amazon want this number to be as low as possible and they actually start to penalise you for any stock that falls out of the first category of 0-60 days.
And really this makes perfect sense from Amazon’s point of view… they are operating fulfilment centres, not a storage warehouse, and they don’t want sellers keeping stock with them for long periods. They make much more money from fulfilling orders at a high rate and getting their FBA and referral fees with the shortest turnaround time possible.
So what does this mean for us sellers?
Well simply put we now have to only send the amount of stock into Amazon that we expect to sell within the next 2 months.
And while this doesn’t sound like a big deal, it really is and makes inventory planning much more difficult – especially when coupled with the delays and extremely high prices we’re still seeing with air and sea freight.
For example, say you normally order 6 months’ worth of stock from your supplier in China at one time. You now either have to cut down your order size and order more frequently, or you have to store the stock in the UK before sending it into Amazon. Which one should you do? The answer here is simple!
Don’t lower your order sizes on FBA products
In 99% of cases it won’t make any sense to lower your order size. Two months’ stock is simply way too low and you leave yourself open to any small delay leaving you out of stock, which will not only cost you a ton in lost sales, but it will also damage your listings’ search rankings in the long term.
That’s not even considering the fact that you’ll end up paying significantly more per unit with less price breaks from your supplier and higher shipping costs. So just don’t even think about this!
Instead focus on finding the best solution for storing your stock in the UK as you have a few options here.
Store stock at home
This is very dependent on your individual set up and the size of the products you sell. But if it’s something small and you have a spare room / garage available then this is the “cheapest” option.
Store stock at a warehouse
For most people this is a more feasible option, but it does come with the added cost. You can either look for local self-storage companies or speak to specific storage warehouses. As mentioned in a previous blog post I definitely also suggest speaking to the freight forwarder who’s handling your import as they can often offer storage at very good rates as well. The two I recommend are Woodland Global and Westbound Global.
Further to this there’s also one further “add on option” that works in conjunction with storing stock yourself or with a dedicated warehouse – Seller Fulfilled Prime!
Once again, I’ve mentioned Seller Fulfilled Prime (SFP) in a previous blog post and you might remember that I explained how I’m not a big fan as I simply love how Amazon handle everything to do with orders and fulfilment when using FBA.
There’s nothing quite like checking your phone at the end of the day and seeing Amazon have shipped out 100s of orders for you and you haven’t had to lift a finger.
But it’s something that many sellers have turned to in response to the inventory limits as it allows you to still offer Prime shipping and keep that coveted badge, without using up any of your restock and storage limits.
The SFP eligibility requirements are pretty basic and shouldn’t be a problem for most sellers:
- Have an Amazon Professional seller account
- Have a domestic warehouse from which to fulfil your orders
- Ship over 99% of your orders on time
- Have an order cancellation rate of less than 0.5%
- Use Amazon Buy Shipping Services for at least 98% of orders
- Deliver orders with our supported Seller Fulfilled Prime carriers
- Seller must agree to the Amazon Returns Policy
- Allow for all customer service inquiries to be dealt with by Amazon
The issue is more keeping up with the shipping requirements once you’re enrolled in the program!
As of June this year Seller Fulfilled Prime requires you to post orders the same day, with a 4pm cut off time, and you also have to dispatch orders on at least one weekend day. This is obviously a big problem for businesses operating Monday-Friday and also for anyone who uses Royal Mail, who won’t offer a Saturday collection.
Overall there’s no way I would want to handle the order fulfilment myself as it means a 6 day work week and hiring staff – flashbacks of my days selling on eBay!
Thankfully there is one other alternative – Seller Fulfilled Prime fulfilment centres.
In theory this should be as good as using Amazon FBA. You send your goods to a fulfilment centre, who store it and ship out any orders. All while you get the Prime shipping badge and from a customer’s point of view it’s no different to you shipping directly from Amazon, but you don’t have to deal with any restock and storage limits…
It almost sounds too good to be true?
Well that’s exactly what we’re going to find out as I’ve contacted multiple fulfilment centres in the UK who offer SFP to have a little showdown and see if it’s a viable option for Amazon sellers.
Let’s get to it!
In total I contacted over 15 fulfilment centres, asking about moving my Amazon FBA inventory to them to be fulfilled under SFP.
A surprisingly large number of them were unable to offer seller fulfilled prime shipping, usually because they couldn’t guarantee the same day delivery cut offs. That was an immediate no from me because it’s integral that we keep Prime shipping – the whole point is lost if not!
And then further to that I discarded a few more options as they had some questionable reviews – of course this is a bit harsh but I can’t take any risks when it comes to my Amazon business and account.
Lastly I also tried to focus on fulfilment companies that weren’t too small, where they don’t have the track record and expertise, but at the same time that weren’t too big and only deal with huge international companies as I’ve had some bad experiences with such fulfilment centres in the past.
This left me with 4 final companies to put into our showdown:
We Prep FBA
Multi Channel Fulfilment
Multi Channel Fulfilment
Now to keep things as simple as possible I’ll be comparing what I pay with Amazon FBA to fulfil each order – i.e. Amazon’s fulfilment fee – vs what I would pay to fulfil each order with these companies, and this is made up of two separate amounts:
- the pick and pack fee
- the postage cost
Now for the product I used when contacting the fulfilment centres, the FBA fee is £1.77 per unit.
This is a hard figure to beat considering it includes packaging and postage as well, so let’s see how the Seller Fulfilled Prime fulfilment centres get on!
- Fulfilment Crowd
Pick and Pack Fee – £1.08
Royal Mail Tracked 24 – £1.77
DPD – £5.10
So with the normal pick and pack fee and posting via Royal Mail, I’d be looking at a fulfilment cost of £2.85.
That’s £1.08, or 68%, higher than Amazon.
And unfortunately, that’s as good as it gets! As you’ll see fulfilment centres just can’t compete with Amazon’s pricing when it comes to shipping.
Let’s quickly run through the rest of the results so you can see the exact figures.
- We Prep FBA
Pick and Pack Fee – £1.79
Royal Mail Tracked 1st Class Large Letter – £4.50
In this case the pick and pack fee by itself is more than Amazon’s FBA cost! And on top of that the only real postage option for SFP works out at £4.50, which completely wipes out any profit.
The total fulfilment cost of £6.29 is more than three and a half times higher than what Amazon charge.
- Multi Channel Fulfilment
Pick and Pack Fee – £0.99
Admin Per Order – £0.35
Royal Mail Tracked 24 – £4.24
DHL – £5.45
Once again the postage costs destroy any chance of competing with Amazon, with a total fulfilment cost of £5.58.
And lastly we have:
- The Storage Place
Pick and Pack Fee – £0.85
Royal Mail Tracked 24 – £3.15
DPD – £5.25
Amazon Logistics – £3.55
The Storage Place give us the lowest pick and pack fee so far, of just £0.85, but I have to point out that they also charge an account set up fee of £200 and £50 a week for account management support.
To try and make it tougher on Amazon I’ll even ignore those costs but that still gives a total fulfilment cost of £4.
So there you have it! Definitely disappointing results, which shows that it’s certainly not as simple as just using a fulfilment centre to get around Amazon’s storage and restock limits.
In the interest of fairness I will point out that maybe the item chosen was tough on the fulfilment centres as Amazon’s shipping is so low, and for a larger and heavier item the shipping costs will have been closer.
But I was using a real business and product for this test, so the results have to be taken at face value and the outcome is clear – Amazon FBA is still king and seemingly unbeatable.
So where does that leave us? Is it all doom and gloom then?
Well no there is definitely light at the end of the tunnel as Amazon have already started to open up new fulfilment centres which will increase their capacity and then hopefully our storage limits. In fact we’re already starting to see some signs of this recently with a lot of Amazon Sharks members and blog readers telling me they’ve seen an increase in their restock limits recently, right in time for the evergreen Q4!
Other than that there’s really no other option but to store excess stock and send in enough to Amazon for 3 months max, ideally 2, as that’s the sweet spot for their aged inventory metric.
And if you weren’t already focusing on it, inventory management has become more important than ever and thankfully we have a ton of tools and software to help with this.
I’ve personally been using Shopkeeper this year after moving over from Sellics and they’ve recently introduced a new feature that helps tremendously with this, which I’ll be covering separately in a dedicated blog post, so keep an eye out for that.
That’s it for today.
Until next time!
All the best,