Very good news for sellers that use Amazon logistics, and of course also for Amazon itself, and it is that at the beginning of the year the minimum inventory performance index to obtain unlimited storage has dropped to 400 points from 500 in the previous period. With this change, sellers will be able to restock without as many problems as in 2021, which has been a real headache for many amazophrenics. And, although the replenishment limit still stands and will continue, everything seems to indicate that 2022 has brought normalcy to Amazon warehouses.
In this article, written by Enrique Molina Esteban, CMO & Head of Europe Department of Innova Digital Export who deals with all kinds of casuistry every day, I will explain everything that happened in as much detail as possible, the reason why we specialists have been awake, and How has Amazon managed to overcome this crisis?In addition to giving you tips to optimize your inventory performance in the marketplace to the fullest.
New unit limit applied mid-2021
In mid-2021, Sellers discovered a new storage limit, in this case called “Resupply Limit”. With this limit, Amazon would mark a limit of FBA units in storage. Regardless of weight, measurements or other factors. For example, an account with a low level of turnover Amazon may apply a limit of 1,000 units to store in its warehouses.
Why did this new limit appear? Amazon explained it through its Webinars, and it is that a good number of Sellers were sending stock for 2 years, since they had unlimited storage per cubic meter, which we will explain below. And so, there was a saturation in European logistics centers. To the point that it was becoming more and more common to deliver pallets to logistics centers and that, when unloading, they communicated to the carrier that the warehouse was full. Refusing delivery.
For this limit by units, Amazon is not as transparent as with the limit by cubic meters that we will explain below. Amazon’s official explanation for calculating the unit replenishment limit is as follows:
To improve this limit, we do not have graphs of the evolution of our performance, but one day Amazon sets a limit of units to send, and the next day it may be a higher or lower limit. We do not criticize it negatively, it is simply the measure that Amazon has taken to prevent the most powerful Sellers from becoming owners of the stores. We even value this action positively, although in some projects a small or medium seller may be harmed. In any case, the minimum limit is 1,000 units, enough for a seller to take off in the beginning. Although if it is maintained, it would already be a problem in order to continue selling Prime products (For FBM this entire article would not apply, perhaps this clarification could be put at the beginning, that the article affects sellers who use Amazon logistics).
Storage limit per cubic meter still active
Also, the volume storage limit is still active. Within this limit, each quarter the performance index must be higher than the minimum threshold set by Amazon to achieve unlimited storage per cubic meter (Feet in the case of the UK).
How is the inventory yield ratio calculated?
There are several factors that can influence your Inventory Performance Index score; however, the most important ones depend on your actions:
one. Maintain a balanced inventory level between the inventory sold and the inventory on hand, while trying not to have excess inventory.
2. Avoid fees prolonged storage.
3. Correct problems of the listings.
4. Keep your most popular products in stock at the right levels to meet customer demand and increase customer satisfaction.
Amazon marks two checkpoints every quarter; If in at least one of them the performance index is higher than the minimum threshold set by Amazon at that time, Amazon will assign the seller the condition of unlimited storage for the next quarter.
Be careful… You will have the limit for cubic meters but you will still have the limit for units. Well, this is actually Amazon’s insurance to prevent Sellers from sending stock again years from now and thus saturating warehouses.
And I close the article with 2 big questions:
1) Why do we know that Amazon has fixed their problems?
– First of all, in Innova Digital Export We manage Seller accounts from various sectors (Food, cosmetics, toys, etc.), all of them with different characteristics, turnover level, etc. Thanks to this, we observe that in all of them the limit per unit has been significantly increased compared to mid-2021.
And, most importantly, we see below how on July 1, 2021 the threshold to achieve unlimited storage per cubic meter went from 450 to 500 points (very high threshold). And a few days ago they confirmed to us that the threshold for the first quarter of 2022 will be 400 points. A drop of 100 points very relevant. Therefore, in the first quarter of 2022 sellers are in luck.
2) What will happen in 2022?
Will Amazon give us the same trouble again this year? What trends are coming, what do you think?
I read you in comments.