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Amazon Announces Auction System For FBA Storage Space [What Sellers Need To Know]

amazon-announces-auction-system-for-fba-storage-space-[what-sellers-need-to-know]

Amazon’s FBA program is a tremendous asset for brands that sell products on the platform.

FBA allows retailers to outsource 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 become 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, which can make inventory planning challenging for sellers. 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, most sellers now have access to more significant 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 more extended 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 can also 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 given, 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.

We aim to give sellers 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 based on cubic feet (instead of several units). To calculate the cubic footage of your products, use a cubic feet calculator and enter the dimensions (length, width, and height). This will give you the volume in cubic feet, better reflecting the space your products occupy in fulfillment centers and vehicles. As many sellers prefer to plan in units, Amazon will continue to show inventory usage in units but will also estimate how many units specific cubic volume capacity limits are likely to permit.

Tinuiti’s Take on the New FBA Capacity System

Change is undoubtedly on the horizon. Let’s hear from Tinuiti’s own Bjorn Johnson on tips for preparing for the FBA change coming March 1st.

These changes will likely be impactful, especially to sellers with larger products. Amazon reverting to cubic foot-based storage limits will likely reintroduce previous issues for these clients in maintaining healthy inventory levels. Their difficulties look to be exacerbated by the addition of the bidding system. They must bid on large space to keep their high-fulfillment-fee products in stock. 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 inform you as we learn more about the new FBA capacity system. If you want to learn more about our Amazon offerings or have any questions concerning FBA, contact us today.

This originally appeared on the Tinuiti Blog and is available here for further discovery.
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