Amazon appears to have slashed storage limits for many sellers over the last week ahead of the 2022 holiday season.
Several sellers we talked with had their inventory storage thresholds reduced by 10% to 25% in late October which has also affected their ability to replenish inventory. These sellers are faced with the choice of having to make expensive removal orders or hope that they sell through enough inventory quickly enough to allow them to replenish low-stock items.
Amazon had alluded to such restrictions being on the horizon in an August email to sellers in which they said “While all sellers using FBA will see their limits updated, this updated limit will currently restrict about 5% of sellers using FBA from being able to restock additional products due to their already having high levels of inventory.” A large number of sellers are reporting severe cuts (including many of the accounts we manage), and it is difficult to say if the new restock limit changes affected more than the 5% of sellers that Amazon had estimated it would affect.
Amazon, in the August email, had suggested sellers would be allowed to keep at least four months of inventory at Amazon, without any note of the storage size. However, in an email in October, Amazon said “…we are updating our restock limits to allow all sellers to have at least three months of oversize inventory in FBA“. It's difficult to say if the decrease in the allowable storage months of inventory was simply clarification for oversize inventory or if it indeed reflects that Amazon may have pivoted slightly on their original August email and decided to reduce storage limits further than estimated.
The slash in storage limits is peculiar given that earlier in the year, Amazon had stated it had excess storage capacity and was looking to shed space. At the same time, ocean freight rates have dropped up to 80% from last year, largely due to decreased demand.
Although overall demand from buyers for new inventory has decreased, many retailers have reported having excess inventory, largely due to supply chain issues during the height of the pandemic. Nike, for instance, reported that inventories grew 65% from last year. We've heard from numerous e-commerce sellers facing a similar inventory glut, and potentially, this bulge is being reflected in excessive inventory levels at Amazon warehouses and thus the slash in inventory limits.
Amazon has not mentioned when inventory levels may be increased again although presumably, it would be after the 2022 Christmas selling season.