Back in 2018, Amazon disclosed that more than 50% of its total sales actually come from third party sellers. Since then, ecommerce sales have continued to grow exponentially over the last few years. Most notably, increased sales have been seen through the Amazon marketplace.
When it comes to the various methods and platforms from which brands can sell their products, Amazon has become the largest due to the FBA (Fulfilment by Amazon) program. The perks to this program is that global sellers can send their inventory to Amazon fulfillment centers, and Amazon will handle the distribution, warehousing, as well as, shipping. Due to its robust capabilities, many businesses rely heavily on this logistical solution. Amazon even places ranking priority on products which are in FBA fulfillment centers.
The FBA program is not new to Amazon. Several businesses have been using this system for years, which has allowed them to grow and scale using this system. When the pandemic began, the FBA system was impacted by a very large increase in demand, and a reduction in manpower in fulfillment centers. To reduce this logistical load on the fulfillment system, Amazon began reducing the amount of inventory that sellers could actually send to Amazon with ASIN-Level restrictions they began to impose. This was a drastic hit to sellers who relied on the program, and who were experiencing record breaking demand for their products. However, by the first quarter of 2021, sellers began to adapt to the restrictions and inventory limits started to increase.
On April 22, 2021, Amazon officially announced “FBA products will no longer be subject to ASIN-level quantity limits. Instead, restock limits will be set at the storage-type level, offering you more flexibility in managing your shipments”. The announcement has been gaining traction as many sellers found that it would further reduce available warehouse space, and because the new policy took effect immediately. Whether or not it is widely accepted, sellers have no choice and now have to shift strategy to accommodate.
So, what does this mean for you as a seller? We wanted answers, so we met up with CEO of Marketplace Pulse, Jouzas Kaziukenas to find out more.
Does this affect sellers on every level?
“Quantity limits are individual to each seller, but apply to all sellers. Bigger sellers would have bigger limits, but then they are also selling more and thus must keep more products in stock.”
Which sellers are affected the most by this change?
“I don’t think sellers are affected differently, but sellers’ ability to adapt to changes is not equal. For sellers with experience and tools to manage tight supply-chains, the change is easier to adjust to. For those that are doing most tasks manually, keeping check of quantity limits is going to be considerably harder.”
What does this mean for sellers who have a large selection of SKUs all selling at different volumes?
“Amazon hasn’t disclosed the formula they use to calculate quantity limits. Thus it is hard to tell how the new quantity limits differ from the previous ASIN-level limits, and whether managing a large selection of SKUs is easier or harder now.”
What are the advantages/disadvantages of the new seller level quantity limits?
“The restrictions are meant to keep more Amazon warehousing space free from not-selling items. Amazon introduced quantity limits last year because it couldn’t keep up building more warehouse space with increased sales demands. The changes help to keep the fulfillment operations running and having space for products that are selling. Previously, it was happy to accept a few for not-selling items through long term storage (LTS) fees and others.”
How can sellers prepare now for the change?
“The change was immediate so there was no time to prepare. Overall, selling on Amazon is getting more complex on multiple levels and the way sellers manage supply chains, warehousing and fulfillment is getting more complex too. Investing into tools and experience around that is the only way to be adaptive to future Amazon changes.”
How do you think this will impact sellers on high inventory stock seasons like Amazon Prime Day, Black Friday, etc.
“Amazon is yet to reveal how they will adjust space allowance for sales events like Prime Day. For example, maybe products participating in the deals will be allowed extra quantity limits.
Will this move more sellers over to FBM?
The benefits of having a Prime badge will keep most sellers on FBA for the foreseeable future. However, both for selling on other channels and to ask as a backup for FBA, sellers should think of having an additional warehouse.”
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Juozas “Joe” Kaziukenas is the founder of Marketplace Pulse. Joe wears multiple hats in the management of Marketplace Pulse, including writing most of the articles. Based in New York City, he is the advisor to other startups and entrepreneurs. Want to learn more? Visit Marketplace Pulse.