Amazon FBA Changes and What They Mean for Sellers in Q4
The fourth quarter (Q4) is one of Amazon’s busiest sales seasons, with Prime Day, Black Friday and Cyber Monday taking place one after the other. When it comes to Amazon and their policies, things are constantly changing. If you’re an Amazon seller, whether a beginner or a seasoned one, it’s important to keep tabs on all the new Amazon FBA changes especially during Q4.
In this article, we’ll guide you through the different changes Amazon have implemented in 2020 and the ways that it can affect your business for the Q4 holiday season. We’ll also give you some tips on how you can take full advantage of the holiday shopping season and improve your Q4 sales.
Amazon FBA Change #1: Amazon Increased FBA Fees and Referral Fees
In April 2020, all European marketplaces have seen an increase in fulfillment, removal order and referral fees. Especially in Germany and the UK, the rise of the fees is quite significant, with increases of up to 15%. New FBA referral fees and fulfillment fees have also been implemented in the U.S. marketplace as early as February 2020.
Standard size inventory fees for January to September jump from 69 cents to 75 cents per cubic foot. Good news is that inventory fees for October to December remain at $2.40 per cubic foot.
The high costs were mainly due to the free One-Day Delivery which was added to more than 6 million prime items. Another driving force behind this increase is Amazon’s $15 billion dollar investment in their fulfillment network.
Pro Tip: Log into your Seller Central account and use the Inventory Age and Inventory Health reports to get an idea which of your items may be subject to long-term storage fees.
If you aren’t careful, Amazon FBA fees can eat up your profit margins and cause you to lose money on your products. Here are some tips to avoid hefty storage fees:
- Plan ahead. Start small until you get a sense of how fast your items are selling. Send in items that are likely to sell in 6 months or less.
- Remove your slow-moving inventories before the cleanup dates (every 15th of each month) or send in inventory shortly after the inventory clean up date.
- Achieve and maintain right inventory balance through accurate Amazon inventory management strategies.
- Store you inventory at other locations – such as at a storage unit or at your garage.
- Take advantage of free removal promotion. Amazon has currently waived removal fees so make sure to make the most out of it.
Amazon FBA Change #2: ASIN-level Quantity Limits on FBA Inventory
In July 2020, Amazon introduced ASIN-level quantity limits for certain products on FBA to ensure that customers have a wide selection of products during the peak sales season. The good news is that most items will be given adequate space for over three months of sales. Should all your stock sell off, you can send in new inventory any time.
Another reason for this limitation is that Amazon wants to reduce stocks with high inventory levels but low customer demand. On a bright side, Amazon has also offered free removal for stagnant inventory in their fulfillment centers. By waiving the fee, you can easily remove stranded inventory and free up space at FBA warehouses.
According to their statement, “To help you avoid storage fees for products that have not been selling and create room for more productive inventory, we are offering a free removal fee promotion for a limited time. We will waive your fees for any removal order submitted for inventory in our fulfillment centers beginning July 14, 2020.”
Pro Tip: Log into your Seller Central account and head over to the Restock Inventory page and then check the Restock Report to see which ASINs have limitations. From there, you can decide how many items you can store in an FBA fulfillment center during the holiday shopping rush.
When creating a shipping plan that contains an ASIN with a quantity limit, be sure you don’t go beyond the required maximum quantity.
It’s also important to check your historical Q4 data to identify trends and see which inventory move off the shelves fast.
Amazon FBA Change #3: Amazon Raised the Inventory Performance Index (IPI) Threshold
In August 2020, Amazon has increased its IPI minimum threshold from 400 to 500.
IPI is a score Amazon assesses to determine how well sellers are managing their inventory. Although Amazon has kept in wraps how the IPI is calculated, there are 4 key factors that can affect your IPI score including:
- Excess inventory, reducing inventory and storage costs improves profitability
- Sell-through rate, increasing sell-through helps move more stock off the shelves
- In-stock inventory, avoiding out-of-stock items and lost sales
- Stranded inventory, ensuring you have stocks for purchase and delivery
You can score between 0 and 1000. The higher the score you get, the better. An average IPI you can see on Amazon is between 400 and 800. If your IPI score falls below 500, Amazon limits your ability to send more inventory and subjects you to higher storage fees, which is $10 per cubic ft on any excess inventory.
Pro Tip: Log into your Seller Central account and check your Inventory Dashboard to see your IPI score and rating for each IPI factor. If your score is below 500, spot any gaps where you can improve.
Remember, your performance will impact your storage limits for the shopping season and having limitations during this time may reduce your desired profit surge.
10 Q4 Inventory Management Tips
Below are 10 quick tips to help you stay on top of your inventory management throughout Q4.
You might also want to explore our 5 Amazon selling tips for a successful Q4.
Ship your products before the deadline
Make sure to get the majority of your inventory into Amazon before October ends. Once November rolls around, there are no guarantees on check in times.
Take stock of your inventory and find a happy medium
This means having a healthy number that allows you to re-order stock while still continuing to fulfill orders.
Keep tabs on the length of time of your inventory
Make sure you monitor how long your inventory has been stored in Amazon’s warehouses. Use SellerMobile’s Amazon inventory management software to keep track of fees.
Forecast inventory by checking your Q4 data
Pull out and analyze any inventory insights you have from last year or the previous years. Review sales trends and history for your top selling products to prevent costly stock outs.
Watch your competitors’ sales trends
If you don’t have enough reports to go by, check out the competition’s sales trends in order to make these predictions. You might also want to analyze your current inventory and sales and see what products are trending up in sales and rank.
Stock up until January
Gift shopping doesn’t end in December. Many shoppers use their Amazon gift cards to purchase their Christmas gifts on January.
Prepare for peak times
Chances are you will see increased demand from customers as well as tougher competition in Q4. Make sure to anticipate longer lead times, shipment delays and longer check-in times at Amazon. Get comfortable with making decisions quickly to prevent going out of stock.
Run Amazon advertising
If done correctly, Amazon ads can build brand awareness, increase traffic and improve conversion rates. It’s also a good way to get slow-moving products out.
Be smart on your repricing
Adjust your repricing strategies to follow the upward trends in November and December. Your goal is to find that nice middle ground which gives you enough profit and retains a good customer base.
Automate time-consuming tasks
Be sure to take advantage of our full-suite of seller tools and analytics to take the manual labor out of the process. With SellerMobile, you can keep all essential data in one place, predict days of inventory, restock at the right levels, and analyze storage fees among other things.