Amazon Breaking News: Potential Roadblock for Those Wanting to Launch Products in Q3 or Q4
The last few weeks, Amazon has been slyly dropping some “game changing” updates through its Seller Central News feed.
Last week the big news had to do with a sellers’ personal information being potentially exposed to all buyers.
Today, you might have seen a seemingly unimportant news article title on the feed that said; “Changes as we prepare for a successful peak.”
If you are like me, you might have just skipped over it since it didn’t seem important.
But then I received a DM from someone who linked it to me, and when I actually dove in, I had to do a double-take because this will affect TONS of sellers out there.
Regardless whether you’re an experienced veteran seller, or a brand new one, it’s going to affect you.
Why is this Happening?
First of all, here’s a theory on why this could be happening. As we reported on the Helium 10 Weekly News a couple of weeks ago, many sellers have been seeing significant delays to their replenishment shipments being checked in, especially in some of the Texas and California distribution centers. Items that were delivered weeks ago still have not gone into inventory.
For a Project 5K product, look at this shipment that was created on June 18, and delivered on June 23.
Normally, it would go into inventory by the next day (or day after). However, look at the history of it in Shipment events:
First of all, they show that it didn’t get delivered until July 1 for some reason. But beyond that, it still has not gotten checked in now 3 weeks after it really delivered! Let alone received, and put into active inventory. Other sellers are showing similar things, even from larger direct shipments from China.
The speculation has been that Amazon does not have the capacity to deal with all of the inventory that people have been sending in lately due to increased online sales. Today’s news announcement might lend some credence to this theory.
“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.”
In their statement, Amazon themselves say there is increased demand, and have scaled back on their own products they purchase to sell to accommodate more third party sellers.
“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.”
Here is the first ball to drop. You need to keep your IPI at 500 or better. That is your Inventory Performance index. This used to be on your main seller central Dashboard, but now the way to see it is by clicking here, or by going to the menu bar in seller central, hitting Inventory, then hitting Inventory Planning.
Factors that affect this index are having excess inventory, your sell through rate, the amount of stranded inventory you have, and your FBA In stock rate.
Here is the one from Project X which is low due to coffin shelf being out of stock
Here’s the part that is going to affect more sellers.
“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.”
Anyone having dejavu?
This is similar to what was happening during the peak of coronavirus and impacted a lot of sellers. This is especially going to affect those who send all their inventory directly to Amazon from China, as well as any sellers launching new products.
“You can view quantity limits for your products on the Restock Inventory page and the Restock report. We will continually review this and, when possible, make adjustments to allow for more of your products.”
Let’s break this down, and see what kind of limits we are talking about by looking at the Project X account
The above is for the egg tray. It says our maximum is 770 units to send in. That’s pretty decent. I actually usually do not have more than 300 in at any time anyway since I store these in my own warehouse so I can maintain good control on the inventory.
Let’s take a look at the coffin shelf that has been out of stock for a month.
Again, I do not send more than 1000 at any time on these so this should be no problem as well. But based on this, and the others I tested, I tried to see if I could reverse engineer the formula that Amazon is using to determine the amount. I could not come up with an exact formula, however for items that have been consistently in stock, it seems to be around 3.4-3.6X your last 30 day sales.
However, that’s only on a few accounts with an IPI score of less than 650. On an account that has a 750 IPI score, the amounts we could replenish was 5-12X what the last 30 days were.
Another one that only had a 500 score, still had maximum inventory of 10X of their previous 30 day’s sales. Whatever formula that Amazon is using, it is obviously based on a lot more factors than just your sales velocity or your IPI.
Regardless, even if it’s a mature product that is selling well, you need to check your restock report, to make sure that you can send the quantity you want to Amazon if you are one who orders the product to ship directly.
If what you have to order is more than your maximum storage capacity, you will have to consider sending some of your order to a 3PL Warehouse.
These Sellers Need to Be Careful
Where this REALLY affects sellers is on new products, slow selling products, or dormant products. It seems like for these, there is now a standard 200 QTY limit. This is the case on newer accounts, and established accounts that we tested.
If you add a new item to your account, you will not see it right away in the “Restock Report.” However, if you try to manually do a replenishment order, you will see that it limits you.
Here is how it looks if it’s a dormant product that has not had sales in the last few months:
Keep this in mind if you are trying to launch a product in Q3 or Q4. Very few manufacturers will allow you to have a MOQ of only 200, so you have to plan on splitting up your shipments, or biting the bullet and getting a 3PL to house the rest of your inventory.
As you start going through your first 200, the theory is that your limits will increase, but it would be EXTREMELY difficult and expensive to try to send your inventory 200 at a time via Ocean from your manufacturer in China. You would be running out of stock frequently.
Let us know in the comments what you plan on doing about this new roadblock. Will you try a 3PL warehouse? For Helium 10 users out there, would it help if we put your maximum order quantity in an easier to find place inside your Helium 10 dashboard?
As with any change Amazon makes, sometimes it will cause us some difficulties in the short term, but remember that this move is not the end of the world. You STILL will be able to launch new products, you just might have to be a little bit more creative with your supply chain.
- Prime Day 2020: What Did We Learn? - October 29, 2020
- 10 Steps to Prepare Your Products for the Holiday Season - October 19, 2020
- Project 5K – A Real Life Case Study On How To Get Started On Amazon with $5,000 - October 13, 2020