Inventory Restrictions on Amazon? You're Not Alone.
Beginning in May of this year, many of our clients began to notice severe and sudden inventory restrictions. We've noticed this has been a widespread issue among all product categories and more of a concern for clients selling via FBA. There have been no signs of a resolution and frustrations are mounting. Here we share our insight into the latest round of inventory restrictions on Amazon.
Some Back Story and Speculation
As we mentioned, there's no end date to these aggressive restrictions. When reaching out to Amazon Support, responses have been vague and eerily reminiscent of those received during the onset of the pandemic.
Brands usually face inventory restrictions when they're in poor standing due to a low Inventory Performance Index (IPI). Since this isn't the case for our clients, we've deduced there must be a driving factor for this outside of any brand's control.
Considering this began shortly before Prime Day, many question whether this is Amazon's way to give its own products an advantage. However, now that Prime Day has come and gone and inventory restrictions remain, brands are left with looming uncertainty.
So, What Does This Mean?
As mentioned, our FBA clients are feeling the pains of these limitations the most. And many are wrestling with the possibility of trying a different fulfillment method. However, it's not that simple, and doing so can be very expensive.
The go-to alternative for an FBA seller is Fulfilled by Merchant (FBM). But there's a reason these clients use FBA—mainly Amazon's fulfillment centers handle refunds and returns through this method. Switching to FBM would put this responsibility on the brand and it's not a decision that can be made or executed overnight.
Another reason brands favor FBA versus FBM is Prime eligibility. Should a brand be forced to use FBM due to inventory restrictions, their sales will decline after losing Prime placements. Now brands are put in what seems like a lose-lose situation.
Earlier in this post, we referred to a brand's Inventory Performance Index. Since Amazon claims there haven't been changes to how they calculate inventory levels, we defer back to our clients' IPIs and what we can control. We've been working to ensure their IPI is healthy and well above 450. Although we've seen this help in some cases, any increases have been minimal. Another tactic some of our clients have turned to is creating removal orders on non-priority products or slow sellers. This way they have more room for top-selling inventory. Finally, although FBM is a last resort for many, some clients have created FBM SKUs as something to fall back on should it come down to it.
As always, following Prime Day, we work with our clients to forecast inventory through Q4. This year, we've had an increased focus on stock limitations and send-in dates ahead of the holidays. We continue to reach out to Amazon Support and encourage anyone else experiencing this to do the same.
Although Amazon’s landscape is ever-changing, one thing is for certain, there will always be complex challenges to navigate. That’s why it’s crucial to lean on a strategic partner you trust. At Marketplace Strategy, we work closely with our colleagues at Code3 to ensure our clients’ omnichannel presence is top-notch. This has been increasingly important as major platforms like Amazon shift and impacts our clients' workflows.
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