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Amazon Explained: What is Fulfilled by Amazon (FBA)?
Amazon offers a unique service that has helped create massive amounts of savings for its users since its launch in 2006. FBA, or Fulfillment by...
2 min read
What is happening:
Amazon replaced their “per item” limit on FBA warehousing with a “per client”, i.e. per Seller Central account, limit.
Note that the limits are quite low, even for established brands. The announcement was made by Amazon on April 22, 2021, and it was effective immediately so took many brands by surprise. Since then, we see the Restock Inventory Limits change multiple times in a day and drastic reductions of allowable units by 60% recently, and we believe that this erratic behavior was most likely driven by the Prime Day & Week event that occurred on June 21.
Why the policy change:
- Amazon doesn’t have unlimited storage, and they’re prioritizing that space for themselves (1P Vendor Central sales) and high-volume/high-profit brands.
- The Seller Central FBA capacity constraints and congestion with receiving in products and shipping orders also impacted consumers, especially in mid-2020; plus, some of the most popular products on Amazon were out of stock and unavailable for purchase.
- Stricter safety and genuine product concerns by Amazon has Increased the number of ASINs stranded or taken down due to FBA policies like “FBA prohibited products”, “Expiration-dated FBA inventory”, and Dangerous goods (Hazmat)”.
- In addition, to restock quantity limits, FBA’s requirements for Prepping & Labeling are more common and increasingly inconsistent.
How to counter the Restock Policy and Prep & Label requirements:
In Seller Central, you can see your current stock limits, these amounts can fluctuate daily, if not more often.
Some challenges and considerations/solutions:
- If you are a new brand or new to selling on Amazon via FBA, then your limit will be low initially, around 1,000 units, even if your products are top-rated.
- Do not send the full capacity because you do not know which ASINs will sell the fastest, and you could be stuck with many slow-moving ASINs while your top sellers are out-of-stock. We suggest the initial shipment be around 60% of the units available to replenish the top-sellers quickly.
- You need to replenish after the first sales timely, so monitoring the restock limit is crucial to have capacity at FBA to send more.
- If you are an established brand or selling on Amazon via FBA for a long time, then you may see a higher limit than the standard 1,000 units, but it will fluctuate up & down frequently.
- If stock is already shipping to Amazon, and the limit drops, then the best option is to lodge a case with Amazon Support requesting an increase in the restock limit.
Wise to develop a backup plan
Podean recommends every Brand on AMZ US Seller Central set up an alternative ASIN under Fulfilled by Merchant (FBM) as a backup to Fulfillment by Amazon (FBA), which you are already using. The items may not arrive in the typical Prime timeframes*, but you can satisfy the demand. You could use your D2C fulfillment from your warehouse or a third-party logistics company (3PL).
FBM lessens the negative impacts described earlier under the “Why the policy change” section, plus mitigates other unforeseen FBA events and AMZ policies that put brands at a disadvantage operationally:
- Create an alternative SKU, like “SKU-FBM”, for the same ASIN in the backend of Seller Central
- Determine the best option to pick, pack, and ship an order, most often a single SKU, directly to a consumer that is efficient and cost-effective; often, the choice is the process for your DTC website
- Look at Seller Fulfilled Prime (SFP) as a version 2.0
If you’d like to discuss this issue in more detail with a Podean expert, please contact us.
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