Amazon's new policy will take effect next week, and sellers will be more interested in buying storage space

During the Spring Festival, Amazon officially announced a new policy on warehouse capacity management. The policy will take effect on March 1 next week. Compared with the previous shipping quantity restrictions, the new policy directly relaxes the shipping restrictions on many sellers.

However, most of them are still restricted. Paid capacity expansion was controversial before, but recently some sellers said it was "not bad" after trying it out. In order to ease the storage capacity restrictions, some sellers accelerated the registration of new accounts, hoping to take advantage of the "no restrictions on new accounts". In addition, the weight of IPI scores in the allocation of storage capacity has increased unprecedentedly, and coupled with the soaring storage fees, it is not difficult to see that Amazon is strictly controlling inventory turnover from multiple angles. Therefore, some sellers have proposed that this data should be added as a commission-related item for operations to optimize sales rates. What do you think?

Storage capacity is “unbound”, and sellers experience paid capacity expansion for the first time

According to the new storage capacity policy, Amazon will begin to announce new capacity limits on the third Monday of each month. Sellers can view them through the "Capacity Monitor" at the bottom of the Amazon logistics control panel within a week . Currently, Amazon's backend storage capacity for March, April, and May has been updated one after another. Many people are delighted to find that the storage capacity of some months directly shows "unlimited", and unlimited shipments can be made. Sellers who have been suppressed by storage capacity for a long time have finally been untied.

"The new policy is equivalent to relaxing restrictions. We did not limit inventory capacity in March." A seller told Ennet that his sales rate is good and his IPI score is high. The inventory capacity in the backend capacity manager has been updated to May, so he does not need to worry about inventory capacity issues in the next few months.

Some other sellers, although they cannot ship without restrictions, have enough storage capacity at the moment and do not need to buy more. " The storage capacity for March has been confirmed. Amazon has provided a lot of capacity at present, but this amount is not enough during the peak season. " said a seller.

According to feedback from the industry, the storage capacity situation after the implementation of the new policy is generally better than previously expected, which makes sellers feel relieved. However, for most people, although the storage capacity restrictions have been relaxed, they still exist. At this time, if the estimated storage capacity is not enough, they must apply for capacity expansion. In the new policy, "paying for storage capacity" is the most controversial point, and it will also be a function that sellers will use more in the future. So what is the experience of the first batch of sellers who purchased storage capacity?

Seller "amzWC" shared his experience. The storage capacity of his account in March was 1350.93 feet, which was far from enough, so he directly applied for 2000 cubic feet and set the maximum reservation fee to $2.69/cubic foot. In this way, a total storage reservation fee of $5380 was required. According to performance points, it was necessary to achieve sales of $60,000 to offset the reservation fee. The next day, the application was approved, the actual transaction price was $1.57/cubic foot, and the reservation fee was $3140. Only more than $30,000 in sales were required to meet the standard. The seller commented that it was "OK, not bad".

Some people also made operational errors.

One seller said that his original storage capacity in March was 2,136 cubic feet, but the actual occupied volume is now more than 2,600 cubic feet, which may exceed 460, and he will face an overage fee . So the seller quickly submitted an application for an expansion of 1,000 cubic feet, but he submitted it repeatedly in a hurry. At present, both applications have been approved and cannot be cancelled, so he can only work hard to sell goods next month.

Sellers are pleasantly surprised by the relaxed capacity and low threshold for purchasing storage capacity. However, the reality is that the amount of capacity expansion that an account can apply for each month is limited. Sellers must first clarify the maximum application amount, the specific deduction algorithm for performance points, and whether there will be charges for approved capacity that is not actually used. Let's highlight the key points below.

1. Limit the application capacity. Sellers can apply for additional storage capacity in any month of the next three months. They can submit up to 5 applications per month. The maximum capacity they want to increase is 20% of the initial limit or 2,000 cubic feet, whichever is greater.

2. The highest bidder gets the lowest reservation fee. Amazon will first approve the highest bidder for the reservation fee, and then proceed in order from high to low until the capacity is allocated. For all sellers whose applications are approved in the same week, regardless of the reservation fee they submit, the platform will charge the lowest approved fee, so the actual approved fee of the seller may be lower than the fee submitted at the time of application. If other applications for the same period are approved later with a lower reservation fee, the fee of the seller's approved application will also be reduced.

3. Set the validity period. When creating an application, you need to set the validity period. If the platform cannot approve the seller's application before the set validity period, it will not be considered.

4. Performance points calculation. During the requested period, sellers can earn $0.15 in performance points for every $1 sold with additional capacity, and the points can offset the entire reservation fee at most. Amazon's algorithm is to multiply the sales of the ASIN of the storage type that has obtained additional capacity during the approved period by the percentage of the approved additional capacity to the total capacity limit.

For example, if you are granted an initial capacity limit of 1,000 cubic feet in the US Standard Size storage type and are approved to add another 500 cubic feet, your total limit will be 1,500 cubic feet. Your applied capacity will account for one-third of the total US Standard Size capacity (500/1,500). Then, one-third of your US Standard Size ASIN sales will be eligible for performance points.

Amazon gives an example of an algorithm:

The Performance Points preview is updated daily. Once the capacity limit increase period begins, sellers can track the number of Performance Points earned in "Your Requests" in Capacity Manager .

5. How long does it take to get approval? Unapproved requests will be in a "pending " state. Amazon will periodically (such as every 3-4 days) evaluate the capacity of the operation center and approve the expansion application starting from the highest reserved fee when there is capacity available. Sellers can edit or cancel the request at any time before it is approved or expires, but it cannot be canceled or edited after the application is approved.

6. Approved capacity can be used as early as one month in advance . Approved additional capacity can be put into use as early as one month before the start of the request period, and sellers can create shipments and ship them to the operation center in advance.

For each period, sellers can use the maximum capacity in that period or use the capacity added in the next period in advance. For example, if a seller is approved to increase 100 cubic feet during September 1-30 and 500 cubic feet during October 1-31, then the seller will be able to obtain 500 cubic feet of additional capacity during September. However, please note that only sales generated during the requested period will be used for point calculation, and approved capacity used in advance will not be included in the calculation.

7. Even if the approved capacity is not used, you still need to pay for it. After the application for additional capacity is approved, even if the seller does not use the capacity, he still needs to pay the reservation fee; if the approved additional capacity is not used, it may also affect the IPI score of the account. This also reminds sellers to act within their means and avoid high fees due to excessive applications.

Sellers previously complained about the paid capacity expansion, believing that Amazon was charging in various ways. It is undeniable that Amazon wants to profit from it. In terms of reserved fees, the platform reminds sellers that the principle of approving applications is from high to low prices. By setting reserved fees, sellers can directly affect the possibility of application approval and quick approval. It is conceivable that when sellers want to increase storage capacity, such as preparing for Prime Day or Black Friday online promotions, Amazon's total capacity remains unchanged, and the reserved fees will inevitably rise under fierce bidding, and then they will roll up again.

According to sellers, the method of using sales points to offset costs to expand capacity has existed before. Some sellers have applied for it in previous quarters and eventually used sales points to offset all costs. During the peak season last year, a seller also applied for storage capacity in this way. Based on his personal experience, he advised his peers to apply early so that they would not be forced to pay a very high price in the end, or have to find an overseas warehouse to ship the goods and then transfer them. "Don't apply for too much storage capacity, unless it is easy for you to achieve the sales of the expanded capacity, otherwise you will be fleeced by Amazon."

However, compared with the previous situation where the warehouse capacity was completely locked in, the warehouse capacity reform brought about by the new policy is more recognized by the seller group. "Although I am also unhappy about having to pay to apply for warehouse capacity, compared to not being able to ship or taking the risk of shipping beyond the limit, I am more willing to pay for reasonable and compliant warehouse capacity, and as long as the sales volume is stable, the applied warehouse capacity can be free." said a seller.

In addition to paid capacity expansion, the new storage capacity policy has also triggered a series of other changes.

To take advantage of the new policy , sellers are registering a surge in new accounts

Amazon will give monthly capacity limits for different storage types, but the storage capacity between different storage types cannot be interchanged.

New professional sales accounts (using FBA for less than 39 weeks) are not subject to storage capacity restrictions, while those using FBA for more than 39 weeks will be subject to capacity restrictions calculated based on IPI scores, sales performance, etc.; the capacity limit for personal accounts is 15 cubic feet, and this number will not change or increase. If the seller's existing inventory plus in-transit shipments exceed the capacity limit, the seller will not be able to create new shipments; if the existing inventory in the warehouse exceeds the capacity limit, an overage fee will be charged.

According to this regulation, old stores with poor turnover will face a wave of excess fees and their inventory capacity will continue to be limited , but the advantages of new accounts are obvious, and sellers quickly seize this opportunity.

A seller revealed that due to the policy of unlimited inventory capacity for new players, many new stores have been registered this month.

Seller "Cross-border Backpacker" suggests that sellers who want to register a new Amazon store this year can register after April, so that they will not be restricted by inventory capacity when participating in Member Day, Autumn Member Day, Black Friday, and Cyber ​​Monday. If the old store has a hot-selling product but the inventory capacity is not optimistic, you can also use the new store to authorize follow-selling, and then use the old store to launch new products.

There are also many "kings" among the old accounts . In the process of communicating with sellers, the editor learned that some old accounts performed very well, some could ship without restrictions, and other accounts also had a large storage capacity. No matter before or after the new policy, there was no worry about insufficient storage capacity, and even the current capacity was only half used. A seller who had ample storage capacity in March said that now he not only does not need to worry about the problem of replenishing stocks in March, but can even put some newly developed SKUs on this account, and the corresponding impulse plan and early preparation for Prime Day will also be easy.

The new policy removes the quantity restrictions and uniformly measures by volume, which is beneficial to smaller products and is especially friendly to sellers of standard parts. Measuring storage capacity by volume will also, to a certain extent, encourage sellers to further optimize packaging and product lines.

The new policy also affects sellers’ operations in other ways. Some sellers have adjusted their operating strategies, saying they will focus on the site and make more reasonable use of Amazon’s site resources and traffic from the perspectives of product reviews, product bundled traffic (bundled promotions, virtual bundled traffic, frequent purchases, etc.), and product placement .

IPI weight increases, "inventory turnover rate" may be included in operational assessment

After March 1, the capacity limit of old accounts will be calculated mainly based on IPI scores and sales performance. Amazon said, "For sellers who continue to have high inventory performance index scores, we will adjust based on sales and available capacity and set higher capacity limits." This sentence points out the importance of inventory performance indicators in capacity considerations.

Industry seller "Yun Feiyang AMZ" pointed out that the new storage capacity policy has raised the importance of IPI scores to a new level, and it is assessed monthly. Among the four major elements of this indicator, the most important is the sales rate, that is, the inventory turnover rate. Considering the adjustment of various storage fees, more and more cross-border e-commerce companies will strengthen the assessment of inventory turnover rate in the new year.

He believes that in 2023, the proportion of inventory turnover assessment in monthly commissions should be greatly increased to form a trinity mechanism of profit, turnover rate and sales. If you want to control the operation of IPI scores through monthly performance assessments, sellers can formulate an inventory turnover rate indicator based on this score and link it with commissions. If it is a single store with different operations, according to the project commission, you can also download the monthly storage fee indicator in the background, during which there is a 30-day average daily storage quantity for each SKU, combined with the average daily sales volume.

It is imperative to pay attention to inventory turnover. Some sellers have stated that they will adjust their operating strategies this year and prepare to develop air-freighted and high-profit products to maximize turnover and reduce inventory risks.

On Amazon's US site, new storage fees have been implemented since February. In April, the storage utilization surcharge and the overage inventory surcharge also began to be levied or increased in price. Sellers with storage utilization rates exceeding 26 weeks directly face a doubling of monthly storage fees.

Not only the US site, but the European site has also followed suit.

From March 1, 2023, the monthly inventory storage fees for all standard-sized products (except dangerous goods) on the European site will increase. In the off-season from January to September, the storage fee for standard-sized products in the clothing, footwear and luggage categories will increase from £0.43 to £0.47 per cubic foot per month, and the storage fee for standard-sized products in all other categories will increase from £0.71 to £0.78; in the peak season from October to December, the fees for standard parts in clothing, footwear and luggage remain unchanged, and the storage fee for standard parts in all other categories will increase from £1.00 to £1.10.

Starting from May 1, the platform will also introduce a storage utilization surcharge in the monthly storage fee . The specific algorithm is the same as that of the US site, which applies to professional sellers with a storage utilization rate of more than 26 weeks, as well as products other than clothing, shoes and handbags. In the off-season, standard parts with a storage rate of more than 26 weeks face a storage fee increase ranging from 60% to 80%.

The difference is that Amazon will charge one storage utilization rate surcharge for inventory stored in Germany, France, Spain and Italy, and one storage utilization rate surcharge for inventory stored in the U.K. If a seller sells products in the U.K. and other European countries at the same time, he or she will be charged no more than two different storage utilization rate surcharges.

In addition , starting from May 15, the platform will increase the overage inventory surcharge (also known as the long-term storage fee) for inventory that has been stored in Amazon's operating centers for 331-365 days . The fee per cubic foot per month will increase from £0.90 to £1.11, and this surcharge will be charged for all product categories.

Amazon will also introduce a new tier, charging a fee for inventory aged 271-330 days, which was previously exempt from the surcharge. The fee will be directly aligned with the increased fee for 331-365 days , which is £1.11. For products stored for more than 365 days, the overage inventory surcharge will continue to be charged, and the fee will remain unchanged at £4.30 per cubic foot or £0.10 per item (whichever is greater). Affected by this, European sellers need to speed up the clearance of inventory aged between 9 months and 1 year before mid-May .

In contrast, the US site has a more stringent surcharge on overage inventory. Starting from April 15 this year , the US site will not only increase the fee for inventory stored for 271-365 days by more than 1.5 times, but will also start charging for all inventory stored for 181-270 days. Goods stored for more than half a year will face the fee, and sellers with a lot of redundant inventory are already rushing to clear out their stock.

Amazon's new storage capacity policy applies to the United States, the United Kingdom, France, the Netherlands, Poland, Germany, Italy, Sweden and Spain, covering almost all regions where storage fees have been raised this year. With the combined effect of the new storage capacity policy and the adjustment of storage fees, it is imperative for sellers to optimize storage capacity and manage inventory well . Canceling shipments that are not intended to be stored, increasing the sales rate of FBA inventory, and clearing or abandoning inventory can all improve inventory conditions.

For a long time before this, companies in the industry used sales as the gold standard for "becoming bigger and stronger", and often used "annual sales of 100 million" to describe the development of a company. In 2021-2022, the purchasing power of consumers in overseas markets has significantly decreased. In order to win customers, sellers have repeatedly lowered prices. At the same time, the platform has also allocated operating costs to sellers and made a number of cost adjustments. Last year, there were many companies whose revenues remained at the original level but whose profits fell sharply. In addition to companies with capital support, more and more sellers have turned to pay attention to profit margins.

In 2023, Amazon has made more detailed regulations on inventory management. On the one hand, it will increase its own revenue to cover costs, and on the other hand, it will screen high-turnover sellers through refined operation standards. Improving inventory turnover will become a focus of sellers' work this year. Will you adjust your operation strategy for this?

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