Amazon FBA is tightening storage capacity limits, making efficient inventory management more crucial than ever for sellers. Storage capacity limits can block FBA inbound shipments, causing fulfillment delays and out of stock inventory, which negatively impact Amazon customer experience. To navigate these changes, sellers must not only adopt best practices for requesting capacity increases but also carefully consider the financial implications of Amazon FBA’s reservation fees associated with requests. When additional FBA capacity is unavailable, leveraging alternative solutions like Amazon Warehousing & Distribution (AWD) and Merchant/Seller Fulfilled programs becomes essential for maintaining and growing business on Amazon. In this post, we will discuss how to efficiently manage your Amazon FBA capacity, request increased capacity, and explain fulfillment alternatives if FBA capacity cannot support customer demand.
How to Efficiently Manage Your Storage Capacity
With FBA inventory capacity limited, Amazon Sellers must strategically manage their awarded FBA storage capacity efficiently. What is considered efficient may vary based on your brand's current strategy. The strategy may focus on maximizing revenue, profit, or maintaining key product availability. Reflecting on your internal priorities will help you decide if you should chase top-line sales, focus on the bottom line, or sacrifice the availability of one SKU for another. Along with trade-off decisions, there are also best practices that can maximize capacity, regardless of your business's strategy.
Delete Abandoned or Pending FBA Shipment Drafts
The easiest way to free up storage capacity is to delete drafted shipments. Abandoned shipment drafts in Send to Amazon or Manage Shipments can absorb storage capacity. Deleting these draft shipments can quickly free up additional FBA Storage Capacity.
Review Demand For Improved Stocking Habits
Many product categories have seasonal demand, and almost all categories see some impact from increased holiday demand at the end of the year. Understanding these trends in demand for your business will help you stock inventory when it is needed. Missing this demand by having a product low stock or out of stock hurts your business. However, sending in inventory too early, before demand hits, can also cause issues with capacity limits and resulting out-of-stock situations. This is especially the case if inventory levels are not evenly stocked across your catalog.
Understand Different Categories of Storage Capacity
Amazon FBA awards capacity by storage category. Understanding these categories can help you utilize all the storage capacity that is awarded to your account. You may face a storage limit in one category, while additional capacity is available in another. In some cases, it may make sense to reorganize SKUs in your catalog to utilize available storage capacity. Amazon FBA storage categories include Standard Size, Oversize, Apparel, Footwear, Extra Large, and Dangerous Goods. These categories also have unique FBA fulfillment fees, which should be factored into margin and cost considerations. Typically, Standard-size storage has the most storage space awarded, followed by oversized, with other categories having significantly lower awarded storage capacities. Note that dangerous good storage, which includes Aerosol, Flammable, and Hazmat storage, requires account-level approval for storage access.
Understand Your Catalogs Unit Storage Dimension
Most businesses stock and sell products that have varying dimensions. Knowing which products take up the most cubic square feet per unit is key to making good stocking FBA decisions. For example, if a large dimension product sells through slowly, it may make sense to reduce the stock of that SKU to free up space for a smaller dimension product that sells through more quickly. Focusing on and prioritizing sell-through of your largest dimension inventory is a great way to free up storage space for more space and storage efficient SKUs. To pull reporting for SKU level storage volume navigate to fulfillment reporting, payment and select Monthly Storage Fees.
Run Advertising and Price Promotion for Stocked Inventory
Driving sell-through of inventory will help free up Storage Capacity for future shipments. Products with a high amount of inventory stocked should be supported with a mix of advertising types targeting all phases in the marketing funnel (awareness, consideration, and conversion). If the purchase conversion rate is low, consider testing pricing discounts like sale pricing and coupons. Also be sure to utilize all available merchandizing tools for your listings to encourage discoverability and drive traffic. Sustaining and improving sell-through of stocked FBA inventory is the best way to increase your storage capacity over time.
Request an FBA Storage Capacity Increase
Amazon provides sellers with the ability to request increased storage capacity through the Amazon Capacity Manager. On this page, sellers can see their current and upcoming FBA storage limits of all storage categories for the next 3 months. Monitoring this page along with known seasonal trends in demand is key to knowing when FBA storage increase requests will be needed to support your business. Storage increases come at risk of additional cost if not done responsibly, so be sure that you are fully utilizing existing storage capacity before requesting an increase.
To request an increase, click “Create new request” in the Capacity Manager. Note that you must select the storage category you are requesting an increase for in the Capacity Manager before clicking “Create new request”; a request form will then display. In the request form, you select the period for which you are requesting increased capacity for, which is typically a month period. You then request the volume increase you are seeking. This amount is the additional volume you want added, not the increased new total capacity. Next, you will submit the Maximum reservation fee you are willing to pay per cubic square foot for the storage expansion. Understanding reservation fees and performance credits, which are used to discount reservation fee costs, are key to scaling your storage responsibly.
How Amazon FBA Capacity Reservation Fees Work
No Upfront Payment: You do not pay the reservation fee upfront. If your request is granted, the fee is only charged at the end of the specified period, minus any performance credits earned.
Lowest Fee Guarantee: If other sellers are granted space at a lower reservation fee for the same period, your fee will adjust downward to match the lowest granted fee for that period.
Fee Calculation: The reservation fee is calculated based on the additional cubic feet granted and the price per cubic foot you bid.
How Amazon FBA Capacity Performance Credits Works
Offsetting Fees: For every dollar of sales generated using the extra capacity, you earn $0.15 in performance credits. These credits are applied to your reservation fee, potentially offsetting it entirely if you sell enough inventory stored in the additional space.
Sales Attribution: Only sales of ASINs in the storage type for which you received the increase, shipped during the specified period, count toward performance credits. The sales amount is prorated by the percentage of your total limit that the additional capacity represents.
Example: If your total limit is 1,500 cubic feet (1,000 initial + 500 additional), then one-third of your sales for that storage type count toward performance credits.
Full Offset Possible: If your sales are high enough, performance credits can offset up to 100% of your reservation fee, meaning you pay nothing extra for the additional capacity
Amazon provides tools to help sellers review and decide what reservation fee is appropriate. In the increase form, sellers can download a Reservation Fee calculator that estimates what fee should be submitted based on a variety of factors, including sell through and increase amount. The calculator provides an estimate of what change in sell through would result in uncovered reservations fees and what the cost would be. The calculator is a great tool to help sellers accurately weigh reservation fee risk. Amazon also provides a “reservation fee history” report in the form for download. This shows what reservation fees have been accepted recently by category. The historic reference is useful for gauging whether the reservation fee calculated in the calculator is competitive.
After you decide and submit your Maximum reservation fee, the final thing to input in the request form is the Expiration of Request. Once the request is submitted, you cannot alter the submitted reservation request. Decide the Expiration date of the request based on the urgency of your storage situation. Setting the expiration date to a shorter period like one or two weeks will allow you to start with a low reservation fee on the initial request with increased fees on future requests if the first is not successful.
Once the request is submitted, it can be viewed on the historical capacity requests page. Make sure to note the expiration date you submit. If your request is not approved by the expiration date, you can always submit an updated request at that time.
If you are awarded additional inventory storage capacity, be sure to monitor the usage of increased capacity and reservation fee reimbursement in the upcoming period, before submitting additional storage capacity increase requests. Sellers can add substantial FBA costs for their business if storage is requested irresponsibly.
Alternative Options for FBA Storage Capacity Issues
If you are unable to address storage capacity issues through improving stocking habits or storage increase requests there are other fulfillment alternatives that you may want to consider. Amazon Warehousing and Distribution or AWD is a great option for staging inventory upstream of FBA fulfillment so that smaller and more frequent shipments can be sent into FBA as soon as storage capacity is available. While AWD cannot directly increase your FBA storage capacity and can improve the speed in which availability capacity can be utilized and stocked. Merchant or Seller fulfillment is another option for maintaining product availability on Amazon if the SKU cannot be stocked in FBA fulfillment centers. If sellers are not equipped to pick and ship Amazon orders directly, third-party fulfillment services are a great option to supplement their fulfillment strategy.
FAQ - Increase Amazon FBA Storage Capacity
Where can I view my current and upcoming FBA storage capacities?
Storage capacity for all categories for the current and upcoming period can be found on the Capacity Manager page in Seller Central.
Why is Amazon blocking me from creating a replenishment shipment for FBA fulfillment?
Amazon can block inbound shipments for a variety of reasons. But if storage capacity is referenced in the shipment block notification, you likely need to free up or expand your storage capacity in order to move forward with the shipment.
How do I learn what storage category a SKU falls under and how much cubic square feet a unit takes up in storage?
Sellers can collect SKU level storage volume information and storage utilization from the Monthly Storage Fees report located under Reporting > Fulfillment > Payments > Monthly Storage Fees.
What is a FBA reservation fee?
The reservation fee is the amount you are willing to pay per cubic square foot for the storage expansion. The fee is submitted to a dynamic bid environment where the highest bidder is awarded the storage expansion. The submitted reservation fee is the maximum amount charged. Amazon charges the lowest cost possible based on the bidding environment.
What is a FBA performance credit?
Performance credits are used to offset and discount FBA reservation fees. Every dollar in sales driven in the request storage category in the period following the request provides $0.15 in performance credits that go toward discounting Reservation fee cost. If expansion is requested responsibly, it is completely possible for performance credits to fully offset the cost of the reservation fee.
I’ve submitted a FBA storage capacity request, how long does Amazon take to review it?
The timing of Amazon’s review of your request will vary based on your submitted expiration date for the request. It is possible that Amazon will review and approve your request in as little as 2 or 3 days following submission.
How can I free up additional FBA storage capacity?
Price promotion and advertising are both great options to improve sell-through and free up storage space for future shipments. If price promotion and advertising fails, removal orders are also an option, but only as a last resort as removal comes with additional FBA fees and you may be blocked from inbounding additional inventory for the removed SKU in the future.
Conclusion
If requests for increased storage capacity are made responsibly, the recent changes to the FBA fee structure do not necessarily result in higher costs for sellers. Instead, these storage limits encourage a sharper focus on efficient inventory management, prioritization of sell through and a more in depth understanding of catalog SKU level storage volume. While these limitations may initially appear as a hurdle, they present an opportunity for businesses to refine their Amazon inventory practices, ultimately driving greater efficiency and offering a clear incentive to minimize monthly storage expenses. At Goat Consulting, we help our clients gain an in-depth understanding of FBA fulfillment and storage strategy. We help create a tailored strategy for Amazon fulfillment to meet both growth and profitability goals for our clients. If you are interested in learning how Goat Consulting can help your business thrive on Amazon, click the Contact Us Button below and start a conversation with us today.
About the Author - Eric Sutton
Eric is the Operations Manager of Goat Consulting and is thankful for the opportunity to work with and learn from brands and manufacturers of varying sizes and categories. Eric recognizes that the Amazon marketplace can be a complex environment where merchandising and distribution can be impacted by a variety of factors and parties. He enjoys helping our clients gain a better understanding of their brand's current position in the marketplace and finding creative ways to implement the client's ideal brand image. If you have a question about updating the content displayed on your product detail page, Eric can help identify what factors may be impacting the publication of the content and provide instruction on how to improve the rate of correct display. If you have any questions or need assistance with improving your brand's image on Amazon, please reach out using the Contact Us form.