Just as the summer heat was starting, Covid cases were dropping and everything was starting to look good again – Amazon threw us a real curve ball with their new inventory storage limits! 

What Amazon FBA inventory limits mean

Here is a recent question on the Amazon Sharks FBA group that really nails what’s going.

Amazon Sharks FBA group sample question

Yes, Amazon have basically changed their storage limits from being ASIN based (i.e. limits for each product you hold at Amazon’s warehouse) to being storage type based! And this means that your storage limits include all ASINs within each storage type, which are split into 4 categories: 

1. Standard size storage 
2. Oversize storage
3. Apparel storage
4. Footwear storage 

Now this by itself wouldn’t be an issue IF Amazon had set reasonable limits but instead many sellers have been hit with a blanket 1,000 unit limit per storage type. 

Again, 1,000 units sounds manageable for most products but don’t forget that this is for all your ASINs. As another Amazon Sharks member has said:

“I’ve had a standard reply from Amazon but no resolution. Seems to me that if we have 10 products in the same category. We have stock limit of 100 each. For me that means restocking weekly and I think Amazon don’t take into account delivery and time in the warehouse so I’m sending smaller quantities on a regular basis.”

So depending on the amount of SKUs you sell via FBA this storage limit is in effect much smaller. 10 SKUs split evenly means just 100 of each, which is tiny! 

How long will the inventory reduction limit last?

Well the good news is that Amazon have assured us that these category based inventory limits will be lifted from July 1^st, but only for sellers that have an Inventory Performance Index (IPI) of 500 or more:

Hi,

Your Inventory Performance Index (IPI) score is 608. Because your IPI score is at or above 500, you will not be subject to storage limitations for standard-size, oversize, clothing or footwear inventory starting 01st July 2021. However, all products are subject to restock quantity limits. For more information, refer to Restock limits by storage type: Frequently asked questions.

Visit the Inventory performance dashboard today to continue improving your IPI score.

The Fulfillment by Amazon team

I’ve written about the Inventory Performance Index in detail before but long story short it’s an Amazon metric that uses multiple factors to “gauge your inventory performance over time” and give you a rating between 0 and 1,000.  

To check your IPI login to Seller Central then click the Inventory tab and select Inventory Planning. 

Then click on Performance and you’ll see your current IPI as well as a little graphic that shows you your “top influencing factors” and whether they’re Poor, Fair, Good, or Excellent. 

Top influencing factors

And there are 4 categories here that directly affect your IPI: 

1. Excess inventory 
2. 90 day sell through rate 
3. Stranded inventory 
4. In stock inventory 

But okay that’s all well and good if the limits are being lifted for July but what do we do in the meantime? 

What are your options as an FBA seller hit with these reduced storage limits? 

Restock your FBA Inventory Regularly

This is really the most straightforward solution. Say you normally sell 20 units a day, so 600 a month, and would usually ship Amazon 1,200+ units at a time – giving you enough stock for 2 months. Well now you might have to send only a months’ worth of stock to Amazon’s fulfilment centres and simply send them shipments more often. 

But one very important point – this doesn’t mean you should be reducing your order size with your supplier! 

If you normally order 2,000 units at a time, don’t cut that in half because you’re sending much less to Amazon! Even if this doesn’t increase your price per unit with the manufacturer it will definitely increase your shipping cost per unit and therefore cut into your margins. 

Especially now where freight charges are still extremely high and show no signs of coming down anytime soon. 

But I know what you’re now thinking, “but Andrew what am I going to do with 1,000 units of additional stock that I can’t send to Amazon?!” 

Two good options for FBA Sellers

You either store it yourself temporarily, which means no additional costs, or you pay storage fees at either an Amazon prep center or better yet simply ask your freight forwarder to store it for you and ship to Amazon when needed. Most good freight forwarders will be more than happy to arrange this for you. If you need a recommendation, then speak to either Woodland Group or Westbound Global. Ryan, the director of Westbound, is an Amazon Sharks member and he has a wealth of knowledge in the fulfilment industry, so you’re in good hands! 

Now of course this will mean extra storage costs but it shouldn’t contribute a lot to your overall product cost and it’s worth it to know you have stock ready to go in the UK when needed. Please don’t be penny smart pound foolish here and save a bit of money in storage fees only to run out of stock and miss out on weeks of sales! 

While this may seem like an easy solution, unfortunately it won’t help in all cases. 

For one thing if you sell very high quantities, say 1,000 units a week, then while in theory you could ship to Amazon weekly, 1,000 units at a time, in practice you could easily run into delays with your stock being unloaded at fulfilment centres. And there’s no easy way around this. It’s hard to guess how long it’ll take and even then it’s not as if you could time it by shipping beforehand as you won’t even be able to create the shipment! 

Similarly, if you have a lot of products on Amazon then it’s going to be very hard to keep them all adequately stocked. 

If you fall into one of these two situations then don’t despair – there are still a few more options that you can try. 

Request an Inventory Limit Increase

You can do this via your account manager (if you have one) or simply through seller support. I’ve been told by a few people that this worked for them but honestly I’m very sceptical. Anyone who has dealt with Amazon seller support knows how inconsistent they are and unless you get very lucky I suspect any request to increase your inventory limits will be met with a generic reply about them being lifted on July 1^st. 

But still, you don’t really lose anything by trying so give it a go. 

If it doesn’t work then one final option is: 

Amazon Seller Fulfilled Prime instead of FBA

I haven’t covered this programme yet on my blog for one simple reason – I’m actually not a huge fan of it! 

Honestly it reminds me too much of the dark eBay days of handling all the postage and packaging yourself. I happily pay Amazon’s FBA fee for them to take care of all of that for me. 

BUT it is a worthwhile option for products that aren’t suitable for FBA – slow moving products or when you don’t have a lot of sales history and can’t send in enough stock to Amazon. 

And in that way it’s a perfect temporary solution to the inventory limit problem so many sellers are now facing. 

There are some eligibility requirements, which you can read more about here: Seller Fulfilled Prime 

If you do go down this route then you can either fulfil the orders yourself or if you want to be completely hands-off there’s still the option of using a fulfilment centre in conjunction with SFP. 

On that note I’m planning to test a few Amazon specific fulfilment centres / prep centres and I’ll have a dedicated blog post on this, as I know it’s something a lot of people are interested in. 

If you’re in the very unfortunate position where shipping stock in regularly isn’t feasible and you also don’t qualify for seller fulfilled prime, then unfortunately there’s not a lot you can do. 

You should of course prioritise your best selling SKUs and you’ll simply have to hope for the best when it comes to the prep centre check in times. 

And it goes without saying that you shouldn’t launch any new products during this time as it’s too risky when you consider the opportunity cost of using up your storage limits. 

One final tip would be to pause / lower your PPC campaigns and rely completely on organic sales. That way you can potentially avoid running out of stock and then even if you do, at least you had more sales at higher margins… 

Any long time blog reader will know that I’m the biggest fan of Amazon you can find. I simply love the private label business model and switching over from eBay has been one of the best business decisions I’ve ever made. But that doesn’t mean I won’t be honest with my blog readers and I have to say that no notice being given for this was unbelievable. 

There should have been at least two weeks to give sellers enough time to plan and manage their stock. The fact that people had shipments that were already on their way and were then rejected because they would’ve pushed them over their inventory limits is ridiculous. 

But at the same time it’s important to always calmly assess such situations and decide the best thing to do for your business. The good news is that it should all be under control by July 01^st. I know a lot of people are dubious about this but the timing fits perfectly, just after Prime Day when a lot of warehouse space will open up, so I’m optimistic. 

If you have any tips or thoughts to share then feel free to comment below or email me directly on help@andrewminalto.com and I’ll personally get back to you.

Otherwise, until next time! 

All the best,

Andrew 

Amazon Lost Thousands of Pounds of Stock! How/Why does Amazon Lose your Inventory?

I’ve always said that the worst thing you can do when you’re looking to start an Amazon FBA business is read the Amazon seller forums – it seems that only unhappy sellers go there as it’s full of negativity and horror stories! 

Which makes sense, after all most of us are too busy selling and making money to post about it on the seller forums. And that’s just how it is with online reviews a lot of the time. Just take a look at PayPal’s Trustpilot score for evidence of that. 

So that’s why I always recommend steering clear of those forums as they can be very off-putting and most of all misleading. 

Now one of the more common horror stories you see on there is about lost inventory and that can be very scary for new sellers. After all, we’re sending stock into Amazon to sell it and make money, not for them to lose it!

So in today’s post let’s cover how and why Amazon loses stock and what you can do about it. 

Amazon Lost Inventory: How Does it Happen?

Obviously, this problem only occurs with FBA inventory as that’s sent to Amazon to store and fulfill, unlike if you’re fulfilling orders FBM which Amazon never handles. 

FBA Stock can be lost by Amazon at 4 different times: 

When you initially ship it to them and it’s checked in 

This is usually an incorrect quantity, such as you sending 100 units in a box and Amazon checking in 90. Or it could be part of the fba inventory missing, such as you sending in 3 boxes of 30 units each and 1 box going missing. 

During fulfilment centre operations

When it’s being stored or transferred between fulfilment centres. You’ll be informed of any inventory damaged or missing in this way via the Inventory Adjustments Report. 

From customer returns 

When Amazon refunds a customer or replaces an item before receiving the return. 

During removals 

When you request a removal of stock from Amazon back to you and it’s either lost or damaged during shipping. 

What to do if Amazon loses Amazon Seller’s inventory? 

If you’re in the unlucky and rare position of Amazon losing your inventory, then you have to make a claim to them for reimbursement. 

“If an item you send to us as part of the Fulfillment by Amazon (FBA) service is lost or damaged at a facility or by a carrier operated by Amazon or on behalf of Amazon, we will replace that item with a new item of the same FNSKU or we will reimburse you for it.”

Now immediately this rings alarm bells as how much does Amazon reimburse you? What value do they place on your inventory? 

Because if it’s your cost price then of course that means you’re losing money, at least potential money, from the sale. 

But thankfully that’s not the case and Amazon says they will “reimburse you for the estimated proceeds of a sale of that item” for a shipment to Amazon or a fulfilment centre operations claim.  

What exactly does estimated proceeds mean? Well put simply it’s the net amount you would’ve received had you sold the item on Amazon. So:

Sale Price – (Referral Fee + Fulfilment Fee) = Estimated Proceeds 

You’ll actually be slightly better off as Amazon doesn’t charge VAT on top of the fees BUT they also apply some of their own calculations to the sale price and it might not be exactly what you’re expecting. 

From my experience for private label products it’s a lot more consistent as there’s normally just one seller and a fairly constant price. For other branded products with multiple sellers then Amazon takes a few factors into account to work out a fair selling price. 

These include: 

• Your current list price for the item on Amazon
• The average price at which you have sold the item on Amazon over the past 90 days
• The average current list price for same item by other sellers on Amazon
• The average price at which other sellers have sold the same item over the past 365 days

If there’s not enough data for these 4 points then Amazon will instead estimate a sale price using a “comparable product”. 

Of course this sale price reimbursement only applies to inventory lost when Amazon are checking it in, while it’s being held in their fulfilment centres, or for a removal order where the inventory was in perfect sellable condition. If you were removing inventory due to faults or damage of some kind (not through Amazon’s fault) then Amazon will apply a discounted sale price. 

If you ask me that’s all fair enough and to be expected. If for whatever reason you don’t agree with Amazon’s valuation amount, you can file a claim to dispute it within 90 days. 

And that brings us to an important point: 

When can an Amazon Seller make a reimbursement claim? And what’s the process? 

The exact process and timeframes for making a claim to Amazon for lost inventory depends on which one of the 4 options it falls under. We’ll quickly run through them one by one. 

1. Shipment to Amazon claims 

You can only make a claim once your shipment is eligible for investigation, which generally will be at least 30 days after it’s received (as Amazon asks for time to be able to locate all inventory). You can check this by going to your shipment summary and checking the reconcile tab.

You also can’t make a claim after 6 months from the date your shipment is received, but I don’t think anyone is going to wait that long to get their money! 

So to sum it up, for shipment to Amazon claims the claim window is after 1 month but before 6. 

2. Fulfilment centre operations claims 

There’s a very simple claim window for any items reported lost or damaged by Amazon. You can submit a claim from 30 days to 18 months after it’s reported in your inventory adjustment report. 

3. Customer return claims 

You can make a claim for a refund or replacement that Amazon issued on your behalf 45 days after the refund / replacement, up to 18 months after. Of course this only applies if the item is never returned to your inventory. 

Lastly we have: 

4. Removals claims 

For inventory lost during transit, i.e. after it’s left Amazon’s fulfilment centre but before reaching your return address, you can make a claim 14 days after the last confirmed movement of your removal shipment, which basically means 14 days with no update to the tracking / shipment at all. 

For inventory that you receive damaged, you can and should make a claim immediately. 

Again, the upper limit is 18 months for removals claims. 

So there you have it. A fairly simple and straightforward process in theory but of course we all know it can turn into a big headache in practice, as is sadly the case with a lot of times where we have to contact Amazon seller support. 

However despite what the seller forums will make you believe this is still a very rare occurrence and I personally haven’t had any problems at all after sending in and selling thousands upon thousands of units. 

But is there anything an Amazon Seller can do to prevent it happening in the first place?  

Sadly no, these types of things do happen in fulfillment and there’s not a lot you can do to avoid it. It occurs more commonly in Q4, which is obvious, as that’s the busiest season with longer wait times to check-in inventory, and maybe anecdotal but I also suspect it happens more commonly when you ask Amazon to prep and label your inventory. 

I don’t have any hard data to back this up, only what I’ve seen from my blog readers. I do always suggest labelling yourself anyway as it’s not worth the fee Amazon charges, especially when you can usually always get this done via your supplier for free! 

I’ll end today’s post with one final warning – always put the correct weight and units for any shipment to Amazon’s FBA centres. 

I see people saying “oh they never check that anyway” so often, but why risk it? If you do have to make a claim and any such info is incorrect, Amazon can use that to dispute your claim. They’re very much like an insurance company with this – anything wrong with the details you’ve given them, even if it seems completely unrelated to stock going missing, and they can refuse to pay out. 

So please make sure you enter everything correctly when creating a shipment to Amazon and save yourself possible headaches in case something goes wrong. 

As always, if you have any questions or comments then get in touch with me at EMAIL and I’ll personally get back to you. 

Otherwise, until next time! 

All the best,

Andrew