Amazon’s FBA program is a tremendous asset for brands who sell products on the platform. With FBA, retailers can outsource the heavy lifting of logistics such as warehousing, fulfillment, and distribution for a fee. In the last few years, sellers have expressed the need for more capacity, predictability, and control over their inventory. Amazon’s recent update helps sellers tackle those challenges and so much more.
Amazon just announced a new streamlined FBA capacity management system that will go into effect on March 1, 2023. With this new system in place, Amazon FBA will be turned into an auction where sellers can bid for additional storage space.
The system will now incorporate a single, month-long FBA capacity limit rather than weekly restock limits that can make inventory planning challenging for sellers. Now, capacity limits for the upcoming month will be announced in the third full week of each month via the Capacity Monitor in Seller Central and email notification. According to Amazon, the majority of sellers will now have access to greater capacity volumes than before.
With this new update, Amazon also announced they will provide estimated limits for the following two months to help sellers plan over a longer period. In a recent blog post highlighting the announcement, Dharmesh Mehta, Vice President of Amazon Worldwide Selling Partner Services stated, “We will forecast how much space and labor we expect to have to provide these estimates, but these estimates may vary up or down based on how efficiently sellers are using their capacity, as measured by the Inventory Performance Index (IPI) score.”
With the new Capacity Manager in place, sellers will also be able to request additional capacity based on a reservation fee that they specify. Mehta noted…
“Requests are granted objectively, starting with the highest reservation fee per cubic foot until all capacity available under this program has been allocated. When additional capacity is granted, sellers’ reservation fees are offset by earning performance credits from the sales they generate using the extra capacity. Performance credits are designed to offset up to 100% of the reservation fee, so sellers don’t pay for the additional capacity as long as their products sell through.
Our goal is to provide sellers with more control over how much space they can have while limiting unproductive use. We’ve piloted this feature with certain US sellers, and we’re excited that with this launch, we will expand it so all sellers can request higher FBA capacity limits.”
The recent announcement also highlighted how Amazon will set capacity limits and measure sellers’ inventory usage in cubic feet (vs. number of units), which better represents the capacity sellers’ products use in our fulfillment centers and transportation vehicles. As many sellers prefer to plan in units, Amazon will continue to show inventory usage in units but will also provide an estimate of how many units specific cubic volume capacity limits are likely to permit.
Tinuiti’s Take on the New FBA Capacity System
Change is certainly on the horizon. Let’s hear from Tinuiti’s own Bjorn Johnson on tips for how you can prepare for the FBA change coming March 1st.
“These changes are likely to be impactful, especially to sellers with larger products. Amazon reverting to cubic foot-based storage limits is likely to reintroduce previous issues for these clients in maintaining healthy inventory levels. Their difficulties look to be exacerbated by the addition of the bidding system. In order to keep their already high-fulfillment-fee products in stock, they’ll need to bid on large amounts of space. On the other hand, sellers with smaller products are likely to be able to store more units than before, and have the flexibility to bid on smaller amounts of space. The decision from Amazon looks like a clear effort to encourage small, light, easy-to-ship and fulfill products.”
– Bjorn Johnson, Operations Manager at Tinuiti
Want to Learn More About the New Auction System for FBA Storage Space?
We will continue to keep you informed as we learn more about the new FBA capacity system. If you’re interested in learning more about our Amazon offerings or if you have any questions concerning FBA, contact us today.