What You Need to know About Amazon's New FBA Capacity Limits
Amazon is always making adjustments to its FBA storage limits and fees. This can be frustrating for Amazon sellers as they always have to stay on top of the latest policies and make adjustments to their sales and inventory strategies accordingly. These changes are just part of the cost of doing business on Amazon however, and as long as you are willing to put in the work, the adjustments that you make to your strategies will almost always benefit your business in the long run anyway.
With that in mind, I’m going to take some time in this post to go over the new Amazon FBA capacity limits that rolled out on March 1, 2023. Now that we’ve had a few weeks to process these changes and to see the effects that they may be having on Amazon businesses, some useful information has emerged on how we can optimize our inventory to work within these new FBA capacity limits.
How FBA capacity limits now work in 2023
Prior to these recent changes, Amazon had a system that included both weekly restock limits and quarterly storage volume limits. The new system is hoping to make storage limits less confusing, replacing the weekly restock limits and quarterly storage limits with a single capacity limit that will be set each month. This new system is called FBA capacity limits.
Monthly FBA capacity limits
In Amazon’s blog post announcing the new FBA capacity limits, the company stated that “we’ve heard the feedback that having weekly restock limits can make it difficult for sellers to plan how much inventory to procure and manufacture.” Amazon also stated that it understood that dealing with two different sets of limits that were measured differently in storage limits and restock limits was a source of confusion and frustration for many sellers.
Under the new system, Amazon suggests that the majority of sellers will now have larger capacity volumes than they did before. On your account, you’ll be able to see the capacity limits you have for the upcoming month on the third full week of every month. These limits will factor in inventory that you already have in Amazon’s FBA warehouses and shipments that sellers have created that haven’t arrived yet.
Along with the FBA capacity limits for the upcoming month, Amazon will also provide sellers with projected limits for the next two months as well. This will give sellers the chance to plan ahead, and also to potentially improve their capacity limits with changes to factors including their Inventory Performance Index (IPI) scores.
FBA capacity limits continue to be tied to IPI scores
As was the case with previous restock and storage limits on your Amazon seller account, your FBA capacity limits will still be affected by your IPI scores. Sellers with higher IPI scores will receive more FBA storage capacity than those with lower IPI scores. The top factors that make up your IPI score include:
Because IPI scores are so crucial to FBA capacity limits, I’ll go over some tips on how to improve your IPI numbers later in this post. You can also check out a previous post I made on this topic here: Why Your IPI Score Sucks and How to Fix It.
New accounts are not subject to FBA capacity limits
If you are just getting started as a seller on Amazon, you won’t have to worry about FBA capacity limits right away. While you should still be doing everything you can to keep your inventory stocked properly and to have a high sell-through rate on your products, you won’t actually be penalized for having a low IPI score or having too much inventory right away.
This is because Amazon needs some time to analyze inventory performance on new professional seller accounts. Once a professional seller account has been active for 39 weeks, it will be subject to FBA capacity limits based on that account’s performance.
Using the FBA Capacity Monitor
You can access the Capacity Monitor by visiting your FBA dashboard on Seller Central. This section of the dashboard will provide you with everything that you need to know about your FBA storage limits.
Product Type – The top of the Capacity Monitor allows you to choose from each of the following product types: Standard-size, Oversize, Extra-large, Apparel, Footwear, Aerosol, and Flammable. Clicking on one of these tabs will reveal your FBA capacity limits on those types of products.
Current Usage – On the left side of your Capacity Monitor, you will be able to see your current usage. You can see the number of cubic feet that you currently have in FBA storage, what your current capacity limit is, and what percentage of that capacity limit is being used. A large rectangle right below these numbers fills up in a different color that represents inventory, so you can always see at a glance how close you are to your limit and what your current maximum shipment is.
Capacity Outlook – The right side of the Capacity Monitor is where you can see your total capacity limit in cubic feet for the current month as well as Amazon’s projections for what your capacity limits will be for the next two upcoming months. These figures are color-coded so that you can see which capacity limits are estimates and which ones have been confirmed.
Requesting more storage space with the Capacity Manager
The best and most reliable way to increase your FBA capacity limits is by increasing your IPI score. But this process can take weeks, and sometimes sellers will require more space than their storage limits allow even if they have good IPI numbers. Amazon sellers now have another way to increase their storage space with Amazon’s new Capacity Manager.
Sellers can request additional capacity through the Capacity Manager, which can be accessed in the Capacity Outlook section of Capacity Monitor on the FBA dashboard. Additional capacity through this program will be allocated based on a bidding system called a reservation fee, which you can set when you request the additional capacity.
The bad news is that additional space is limited, so it won’t be too surprising to see high reservation fees required to lock up additional space. The good news is that sellers will earn performance credits based on sales that they generate through the additional storage capacity that they request. These performance credits will offset the cost of your reservation fee, and will give you the opportunity to earn back 100% of those costs
How to improve your IPI score
While there are a number of different factors that go into determining your IPI score, these factors can really be boiled down to two key metrics: inventory management and sell-through rate. If you can keep your Amazon store correctly stocked and sell through your products at a fast and reliable pace, you should have a high IPI score and the high FBA capacity limits that score comes with in no time.
Excess inventory can have a negative impact on your IPI score on Amazon, and it will also cost your additional money in monthly storage fees every month as well. Conversely, being out of stock on inventory can lead to lost sales and customer dissatisfaction. Try following these steps to keep your inventory in good order throughout the year:
Forecast Your Sales – One of the most effective ways to avoid excess inventory is to accurately forecast your sales. By forecasting your sales, you can order and send in the right amount of inventory to meet demand, without overstocking. There are several tools and software available that can help you with sales forecasting, including Amazon's Restock Inventory Report.
Monitor Your Inventory Levels – Monitoring your inventory levels is crucial to avoiding excess inventory. By monitoring your inventory levels regularly, you can identify any excess inventory and take corrective action. You can use Amazon's Inventory Dashboard to monitor your inventory levels and identify any excess inventory issues quickly so that you can take care of them promptly.
Clear Out Stale Inventory – There are a number of different ways to clear out inventory that isn’t moving as quickly as you’d like. Lowering prices may help increase sales, and using AI on your PPC bidding can help you automate the process of running advertisements to push certain listings. If lowering the price doesn’t work or isn’t a good option for your product, you could always have inventory sent back to you or disposed of instead of being hit with storage fees and IPI score penalties having it sitting in an FBA warehouse.
When you take everything into account, nothing is more relevant to both your FBA capacity limits and your IPI score than your sell-through rate. After all, if the inventory you are sending in is selling through quickly, you won’t need to take up very much storage space. And if you are approaching your capacity limits with a high sell-through rate, you are exactly the type of seller Amazon wants to give more warehouse space to as your products are consistently generating quick and reliable sales. You can improve your sell-through rate following these tips:
Optimize Your Listings – Optimizing your listings is essential for improving your sell-through rate. Your listings should be informative, accurate, and engaging. Use high-quality images, detailed product descriptions, and informative bullet points to showcase your products. Use keywords in your title, description, and bullet points to improve visibility.
Offer Competitive Pricing– Offering competitive pricing is another effective way to improve your sell-through rate. Use Amazon's pricing tools to compare your prices with your competitors and adjust your prices accordingly. Consider offering promotions and discounts to attract customers and boost sales.
Run Effective PPC Campaigns – A great advertising campaign on Amazon will not only generate sales directly from those advertisements, but also lead to more organic sales in the long run as customers on Amazon become familiar with your brand and your sales rankings and product reviews increase. You can learn more about the metrics behind Amazon advertising in my blog post: Mastering ACoS, ROAS, & TACoS to Maximize your Amazon Advertising Campaigns.
Final thoughts on FBA capacity limits
Amazon sellers often complain that their feedback isn’t heard and that Amazon’s systems and protocols don’t always accurately reflect their needs. And while this is certainly true sometimes, in this instance, it would appear that Amazon got it right. The FBA capacity limits system is far less confusing than the previous system with its cumbersome weekly restocking limits and quarterly storage limits.
While we don’t know when Amazon’s next overhaul to its FBA storage rules will come, it does seem pretty clear at this point that IPI scores and the metrics that they weigh are here to stay. I hope that the tips that I’ve provided in this post and in my previous post on improving your IPI score will help you to improve your numbers if this is something that your business has been struggling with. While making big changes to your systems and protocols can feel overwhelming, these efforts will pay off in the long run, especially as Amazon continues to reward sellers who perform well on their IPI scale.
With this in mind, I’d recommend that you be cautious when using Amazon’s new Capacity Manager to request additional storage space. This could become a very expensive practice due to the reservation fees involved. If you are considering requesting more space because you genuinely need that room and are confident that you will sell through that inventory quickly, this could be a great program for you.
But if you have a low IPI score and just want the extra capacity to use like the storage you are already using, it would be a much better idea to just stay patient and work on improving your IPI score. Once you have a better mastery of inventory management and sell-through rates, you’ll be more prepared to make good decisions on requesting a capacity limit increase.
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