- Amazon told sellers on Monday that it's putting in more stringent, first-time storage restrictions in its warehouses to prepare for the holiday shopping season ahead of time.
- The changes include quantity limits for certain products and higher storage efficiency requirements for sellers, the note said.
- The move shows how Amazon wants to get ahead of the shopping surge as COVID-19 makes it difficult to predict the demand spike during this year's holiday season.
- Visit Business Insider's homepage for more stories.
Amazon is making a few first-time changes to its warehouse policy to make sure it has enough storage space ahead of the upcoming holiday shopping season.
In a note sent to third-party sellers on Monday, Amazon said it's putting in more stringent warehouse restrictions to prepare for the demand spike expected later this year. The changes include quantity limits for certain products and a higher efficiency requirement for sellers storing their products in Amazon's warehouses through the company's Fulfillment by Amazon service.
The restrictions, coming for the first time during the "peak" holiday season, are intended to help Amazon stock up on the best-selling products and avoid clogging up its limited warehouse space with slow-moving inventory. The changes were first reported by CNET.
"Even though it's July, we're preparing early for the holiday season to meet sustained increased demand, and have already reduced our own Retail product ordering to accommodate more of your products and help you continue to see sales growth," the note said.
The new quantity limits will "maximize selection for customers during peak," the note said, as sellers will prioritize storing best-selling products. Most products will still have enough storage space available for over three months of sales, the note said.
To improve warehouse efficiency, Amazon said it's raising the minimum requirement for Inventory Performance Index, a measurement system Amazon introduced in 2017 to quantify how quickly sellers are moving their products in and out of the warehouses. Amazon said sellers failing to keep an IPI score of 500 or above will face additional quantity limits, although most won't be affected by this change.
On top of that, Amazon said it's waiving the product removal fees from its warehouses starting on Tuesday. Amazon typically penalizes sellers that fail to use its warehouses efficiently, and requires an extra fee for long-term storage or a removal of certain products that clog up space.
The move underscores the urgency Amazon is moving with as it continues to face unpredictable demand from the COVID-19 pandemic. During the March and April period, Amazon experienced long shipment delays and put in heavy warehouse restrictions to meet the order spike from shoppers sheltered at home. The company recently delayed its annual Prime Day shopping event for the third time amid concerns of another round of demand increases as COVID-19 cases are on the rise across the US.
In an email to Business Insider, Amazon's spokesperson confirmed the changes, saying the goal is simply to give sellers using Amazon warehouses enough storage space during the holiday season.
"Our commitment to our selling partners has never been more steadfast and we are taking steps now to help ensure all sellers using Fulfillment by Amazon have space for their products," the statement said.
Here's the full note Amazon sent to sellers:
Given the unprecedented challenges the COVID-19 pandemic has placed on all of us, we are preparing early to deliver a great holiday season for our customers and selling partners—building out capacity as quickly as we can so we can deliver products customers need and want directly to their doorsteps and help you continue to grow your business.
We've been investing heavily for many years to support selling partners like you, and over the course of 2019 and 2020, we'll invest more than $30 billion to build capacity, tools, services and programs for sellers, as well as to hire more people. We're on track to open 33 new fulfillment centers in the US this year, which will increase peak fulfillment center standard-sized product storage capacity by nearly 35 million cubic feet more than last year.
Since the pandemic hit, COVID-19 has impacted supply chains around the world, and we've all had to make fast adjustments. Amazon hired more than 175,000 employees and invested billions of dollars in COVID-related initiatives to help meet increased customer demand and protect the health and well-being of our employees as they pick, pack, and ship your products to customers. As a result, selling partners have had record sales on Amazon and continue to account for more than 50% of units sold in our store.
Even though it's July, we're preparing early for the holiday season to meet sustained increased demand, and have already reduced our own Retail product ordering to accommodate more of your products and help you continue to see sales growth.
To ensure we're ready to best serve all of our selling partners and customers, we are introducing the following adjustments as we begin our ramp into peak:
Inventory Performance Index threshold change
We are working to manage inventory performance to ensure all products have space available during peak. To enable this, we are changing the IPI minimum threshold requirement to 500. Sellers below 500 will be subject to limits effective August 16, 2020 through the end of the year.
The majority of sellers will not be impacted by this change. Most sellers with IPI scores below 500 will have more storage space than last year.
You can improve your IPI by following guidance on improving sell through or reducing your excess and stranded inventory in the Inventory Performance Dashboard 3.
Quantity limits
To maximize selection for customers during peak, we are introducing ASIN-level quantity limits on products in FBA. Most products will have enough space available for over three months of sales.
You can view quantity limits for your products on the Restock Inventory 6 page and the Restock report 5. We will continually review this and, when possible, make adjustments to allow for more of your products.
Free removals promotion
To help you avoid storage fees for products that have not been selling and create room for more productive inventory, we are offering a free removal fee promotion for a limited time. We will waive your fees for any removal order submitted for inventory in our fulfillment centers beginning July 14, 2020.
To create a removal order, please visit Inventory Age 1 and choose Create removal order from the menu next to any FBA item in your inventory.
For further guidance, you can review frequently asked questions on this Help page 1.
While no one has a perfect playbook for how to respond to COVID-19, our commitment to supporting your business has never been more steadfast. We will continue to make adjustments to best support your business and keep you informed along the way. We appreciate your partnership as we improve the efficiency of our fulfillment network to prepare all selling partners for a successful peak season.
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