Amazon introduced FBA storage limits in 2018 to avoid having its Fulfillment Centers act as long-term storage warehouses for sellers. Amazon announced a new pilot program today (February 24) that offers certain sellers who have limits a way to bid for more space – and it’s designed to incur costs only if the inventory doesn’t move quickly.
An Amazon spokesperson told EcommerceBytes, “Based on feedback from our selling partners, we are testing a new feature to allow sellers to request additional storage space in our fulfillment network, and at no cost provided they use the additional space efficiently.”
Since the fall of 2017, Amazon has assigned sellers an IPI score, which measures their inventory performance. Those with a high IPI score have no storage limits. In 2018, Amazon set storage limits on sellers with an IPI score of under 350. During the pandemic, it dialed up the requirement and has since lowered it to 400.
Amazon sent an email today to sellers who have an IPI score of between 350 and 400 – which is a subset of the 10% of sellers who have FBA storage limits – informing them of the new program called Storage Limit Manager.
Amazon explained in the email, “many of you have told us that because of your unique knowledge about your products, planned launches or promotions, or other factors, you need more storage than we’ve allocated. We designed Storage Limit Manager in response to that feedback and to put you more in control.”
Sellers tell Amazon how much space they want for the second quarter (April 1 to June 30) and specify a “reservation fee” they’re willing to pay.
Amazon went on to explain:
“We’ll assess our capacity weekly and approve as many requests as space allows, starting with the highest reservation fee. For all sellers approved in a given week, the lowest reservation fee will apply, which means your reservation fee could be lower than you specified in your request.
“If your request is approved, your storage limit will increase for the second quarter. No fees will be charged to your account until after the quarter ends.”
Sellers can offset up to 100% of the reservation fee with performance credits. Amazon explained:
“You’ll earn performance credits for every dollar of sales that you generate using the additional space during the second quarter. These credits give you the opportunity to offset 100% of the reservation fee.
“The tool’s performance credit preview is updated daily so you can easily track the amount of credits you’ve earned.”
It will be important for sellers who are granted extra space under the program to monitor in real time their product’s sell-through rate throughout the quarter so they can take steps if it isn’t moving as they had expected it would.
Sellers whose initial inventory does move won’t be charged (and will be able to replenish inventory in that space throughout the quarter).
The program won’t affect sellers with an IPI of greater than 400, since they don’t have storage limits.
It’s worth pointing out that FBA storage limits are different than restock limits, which were introduced during the pandemic – not to boost efficiency at Amazon centers, but in part to keep employees safe while processing inbound shipments. Amazon started relaxing restock limits in the fall through the 1st of the year to the point they are nearly unconstrained, according to the company (let us know your experience).
Note that Amazon executive John Felton addressed issues such as restock limits and seasonal limits in a keynote during the company’s October Accelerate conference, which is worth watching on YouTube (starting at about minute 19).
Amazon told eligible sellers today that Storage Limit Manager includes a calculator to help them estimate the potential cost of their request and the sales needed to offset the fee. Let us know if you have any questions or feedback about the program.
