1. What you need to know about the new Amazon FBA Capacity Management System
On January 17th, Amazon announced an overhaul to how it allocates storage space to FBA Sellers – here’s what you need to know…
Amazon say the new system will:
Give most sellers greater capacity limits, provide more predictability, and greater control to get more capacity when sellers need it. These changes provide sellers more visibility and control over capacity limits in order for them to better plan and manage their inventory and supply chain.Amazon announcement
So what will the new System offer?
There are 4 new features:
1. A single, month-long capacity limit
No more weekly restock limits, and no two sets of limits – separate storage and restock limits are no more. Instead, one single monthly limit will fix how much inventory you can send and store with FBA.
To set the limit, Amazon will consider inventory already held in its fulfilment centres, plus pending shipments (created, but not yet arrived).
Capacity limits for the upcoming month will be announced in the third full week of each month – you’ll find yours in the Capacity Monitor in Seller Central, and will also receive an email notification.
Amazon say the majority of Sellers will access greater capacity volumes with the new system.
2. Estimated capacity limits to help forward planning
Designed to help Sellers plan 3 months in advance, Amazon will provide estimated limits for the following 2 months.
It appears that these estimates will be based on how efficiently Sellers are using their existing capacity, measured by their IPI score (Inventory Performance Index).
3. The opportunity to bid for more storage space
Planning a big push, or expecting a run on a product?
You can bid for more space by submitting a reservation fee that you’re willing to pay for the extra space, which is limited to the greater of up to 20% of your initial limit or 2,000 cubic feet.
You might not get what you want, with space allocated “objectively” based on bid levels.
Conversely, if you do, you might not need to pay the reservation fee at all if you use the space wisely, with performance credits on offer for sales made using the extra space which can offset up to 100% of the reservation fee.
Is it good news for Sellers? Read more below.
4. Capacity Limits to be measured in Cubic Volume…
… Instead of by number of units.
By setting capacity limits and measuring inventory usage in cubic feet, Amazon hope they’ll provide a better representation of the real capacity used by a Seller in its fulfilment centres and transportation vehicles.
We know many Sellers prefer to plan in units, so we’ll continue to also show inventory usage in units, providing an estimate of how many units specific cubic volume capacity limits are likely to permit.Amazon announcement
Will overage fees still apply?
Yes. This new system is all about improving Amazon’s efficiency in terms of its use of space, as well as its ability to better monetise its fulfilment centres, using an auction model to deal with supply vs demand issues.
So if you’re storing more than your allocated capacity (not including open shipments), you’ll be charged.
How will Amazon calculate capacity limits?
FBA capacity limits will be based on a Seller’s IPI score, plus other factors including sales forecasts for their ASINs, shipment lead time and fulfilment centre capacity.
How do I access the new FBA Capacity Management System?
To access the system, see the capacity limits which will take effect on your account from 1 March 2023 and view estimated limits, go to your FBA Dashboard.
Need some expert guidance to ease into the new system?
2. Is the new bid process for extra FBA warehouse space good news for Sellers?
On 1 March 2023, Amazon’s new FBA Capacity Management System comes into place, complete with auction-style bidding for extra warehouse space when you need it.
It’s being introduced partly in response to kickback against the current method of allocating warehouse space which, though supposedly based on a Seller’s IPI score and sales performance, has become increasingly erratic and restrictive of late – even imposing uncalled-for ceilings on some Sellers’ revenues.
But, with 90% of top Sellers using FBA, it was clear that change was needed and so a new Capacity Management System is certainly good news on that front.
Where things might become a little more complex is around the new auction process, where Sellers can bid for extra space on top of their allocations.
As explained by the Capacity Manager Help page:
If you have FBA capacity limits but could use more capacity for products that you expect to be popular with customers, you can request an increase to your capacity limits.
In your request, specify the following: How much additional capacity you want for the specified period (up to 20% of your initial limit or 2,000 cubic feet, whichever is greater) and the maximum reservation fee that you’d be willing to pay for the extra capacity.Amazon
Like any auction, Amazon will objectively assign extra space to the highest bidders first, and then continue in order until all space is gone.
That means that there is a chance that you might not get all – or any – of the space you’ve requested if your bid isn’t strong enough.
But if you do win space, not only could you get access for up to a month in advance so you can get your products pre-positioned, but you could also earn back up to 100% of the reservation fee you bid through a performance credit bonus.
You’ll earn a $0.15 performance credit for every dollar of sales that you generate using this additional capacity during the period requested. We designed this credit to give you the opportunity to offset 100% of the reservation fee, if you use the additional capacity productively.Amazon
There’s also the chance that the extra sales could boost your capacity allocation on a more permanent basis, thanks to a higher IPI score and stronger sales performance.
So is it good news for Sellers?
Well, yes, it can be – if done right.
Yes, there’s another layer of complexity that could result in lost margins and yes, there’s a chance that it will make things trickier in peak periods.
But, as with everything Amazon, the key to finding success in the new system will lie in the strength of your pre-planning, and efficient forecasting that enables you to offer winning bids for needed space with confidence.
Want to make sure you’re winning at the new FBA Capacity Management System?
Our team of fulfilment strategists are on hand to give you the help you need, from assistance with forecasting to logistics contingency planning for peak sales periods.
3. Is a “Buy with Prime” rollout on the cards?
Much excitement for Amazon Sellers who’d love to build their direct-to-consumer presence online with the news that Amazon’s “Buy with Prime” option is being made widely available to US merchants from 31 Jan 2023.
Previously available by invitation only, “Buy with Prime” offers consumers all the benefits of a Prime purchase from a merchant’s own online store (fast, free delivery, a seamless checkout experience and simple returns process).
What’s so good about “Buy with Prime” from a Seller POV?
Internal data released by Amazon has shown that “Buy with Prime” can increase shopper conversion by an average of 25%, by allowing them to complete their purchase via a fast, simple shopping experience that they know and trust.
Plus, the Seller gets to build a customer relationship and experience directly on its own channels, strengthening its presence on its owned platform.
AND, it will now come with…
“Buy with Prime”, now with “Reviews from Amazon”
To further strengthen and improve the shopping experience for consumers on a Seller’s site, “Buy with Prime” will also come with “Reviews from Amazon”, which gives Sellers the ability to display ratings and reviews from Amazon customers on their own online store/s for no additional cost.
When an Amazon shopper leaves a rating and/or review for the Seller’s product on Amazon, the same rating and review will now appear on the Seller’s online store wherever Buy with Prime is enabled – an extra layer of trust akin to TrustPilot that will help to inform purchase decisions and boost shopper confidence and conversion.
This is all great! So when is it coming to the UK?
Sadly, we don’t know yet – but a widespread US rollout makes it likely that, if all goes well, it won’t be too long before Amazon make the feature available in its other markets.
We’ll keep you posted!
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4. Wondering how to best fit Amazon into your wider digital strategy? Our next webinar’s for you…
Join us at 10:30am on 23 February 2023 as we take a deep dive into why, where and how you can slot Amazon perfectly into your wider digital strategy.
An e-commerce veteran with more than 25 years spent working for agencies, brands and major retailers, Venture Forge CEO ANDY BANKS will be leading the discussion, supported by an expert panel brimming with Amazon know-how, featuring:
James is Head of E-commerce at Furniturebox, one of the fastest-growing companies in the South West.
Furniturebox is an online-only furniture seller, selling through its own website and marketplaces. James has been in the e-comm world from the start working in various tech roles and is now dedicated to growing revenues for Furniturebox by leading the marketplace and e-commerce teams.
Nic has over 20 years’ experience in digital marketing and e-commerce in both agency and in-house roles. He works with a wide range of clients’ e-commerce platforms, including Virgin Holidays, Aldi, Allied Carpets, Homebase and Next, alongside start-ups and smaller businesses.
More recently Nic has worked in-house, developing digital marketing and e-commerce solutions for companies spanning household goods, outdoor furniture, sports supplements and home decor.
This webinar will be FULL of value for anyone selling on Amazon and places will be limited – we’ll be sharing the link to our LinkedIn page soon, so follow us to make sure you don’t miss out!