FBA-mageddon: The full story.
I almost never do posts on “Amazon policy changes” or “new FBA fees” or related topics. Overall strategy and tactics is where the money is, not “news” or defensive positioning.
That said, Amazon did something big last week that affects FBA sellers in a pretty big way.
Is this “FBA-mageddon”, or all hype?
Let’s get into it.
Amazon starts restricting many items from being sold FBA
Last week Amazon sent the lives of many Fulfillment by Amazon sellers spiraling into chaos when they started rejecting a significant percentage of ASINs from being sold FBA.
Sellers who were creating listings were finding as much as 40% (the biggest number I’ve heard – I’m sure there’s higher) of their inventory rejected by Amazon. The message looks something like this:
“You are already at the maximum inventory allowed for this product, due to capacity or other restrictions. This product must be removed from this shipment.”
Why Amazon is doing this
Amazon apparently has a large problem with slow-moving inventory filling up its Fulfillment by Amazon (FBA) warehouses. They’re simply running out of room.
As the theory goes, Amazon is trying to restrict low-demand items from entering FBA warehouses. Amazon wants high turnover, rather than FBA warehouses turning into cheap storage facilities for items that rarely sell.
The facts as we know them:
Refraining from sending low-demand items to Amazon is not the answer. There’s way more to this.
Amazon is rejecting books (and more) for which sellers have never shipped to FBA. (Meaning ASIN quantity limits of “zero” are a very real thing.)
Amazon is rejecting books (and more) with a strong “best seller rank” (aka sales rank). This undermines the theory that the FBA restrictions are based solely on keeping slow-moving inventory out of its warehouses.
Amazon is restricting low-demand books with no existing FBA offers. Indicating Amazon wants items that fall under a certain demand-threshold out of FBA warehouses altogether. A bad sign for those of us who do serious business in long tail FBA inventory (most of my shipments have an average rank of worse than 1 million).
There are anecdotal reports of Amazon restricting well -ranked books with NO current FBA offers. We can’t put a ton of stock into this (like I said, they’re anecdotal so file under “gossip”), but this even further undermines the above theory.
My personal experience
So far, non-existent.
I just sent off a shipment of about 90 books, and none were rejected. And its worth noting the average rank for this shipment was 1.1 million (not exactly high-demand).
When you combine this with my inventory health report (covered below) showing zero restricted ASINs, it could lend to the theory some sellers are being favored over others (I don’t want to get any rumors going, it’s totally anecdotal and merely something to keep an eye on).
My sell-through rate (presumably something Amazon would look at) isn’t amazing, but I’m certainly not storing tons and tons of dead weight in their warehouses either.
A big thing remains to be seen: What will happen to any “restricted” inventory when it hits the FBA warehouse? My fear is that “no news is not good news,” and these items will immediately go “unfulfillable.”
Questions now are:
- Are these restrictions permanent? Or are we in the “working out the kinks” phase?
- Are they tied solely to ASINs, or is Amazon algorithmically limiting them based on multiple factors, such as which warehouse you’re shipping to, your overall inventory sell-through rate, or even on the demand for certain book subjects?
- Is Amazon going to start sharing FBA restrictions with third-party apps (i.e. our scanning apps), so we can know FBA eligibility before making a purchase?
- Is Amazon going to reveal their secret-ASIN-restriction-formula, so we can assess how these restrictions will impact our FBA business overall, instead of on an item-by-item basis (as would be the case if they implemented #3).
Amazon’s second-biggest blunder
What concerns me second-to-most about this (I’ll get to the #1 thing in a moment) is the lack of communication from Amazon. They either don’t know or don’t care how seismically disruptive it is for sellers having a massive percentage of FBA inventory they’ve invested in unable to be sold.
To put it colloquially: Not cool. Not cool at all.
Amazon’s biggest blunder
The worst thing about this isn’t the FBA restrictions at all (we could theoretically cope with this), its that we aren’t made aware of the restrictions before we purchase inventory.
So far, Amazon is apparently unwilling to share this information with third party apps (like scanning apps), so that we can determine an item’s FBA-eligibility before making a buying decision. (If Amazon is sharing this data with scanning apps, it has not been incorporated into any of them yet).
This is a pretty massive oversight.
On one hand, some have gotten conspiratorial and said: It’s in Amazon’s interest to not tell people an ASIN is blacklisted, which would deter them from purchasing (and thus selling the item on Amazon). As such, Amazon is essentially tricking people into purchasing inventory they can’t sell, thereby forcing them to sell it merchant fulfilled.
I don’t agree to this theory because, like any good company, Amazon is always four steps ahead. While they will find many of us will cope by selling the items anyway, they have to know a much larger percentage will do one of two things:
- Take their business to other channels, like eBay / Half.
- Get out of the FBA business altogether.
Both of which hurt Amazon.
One thing I know: There is zero-percent chance I’m going back to merchant fulfilled.
Hard to believe Amazon could be this shortsighted, but….
I believe Amazon thinks this move will solve one simple problem: limiting the number of low-demand items in their warehouses.
If that’s how simplistic their forecasting is, it’s surprisingly myopic for a company so forward-thinking.
Instead what this his done has thrown many seller’s FBA business into complete chaos, buying inventory totally blind, and sending everyone into a tornado of uncertainty that is totally unsustainable.
And this isn’t the kind of “inconvenience” that a seller just adjusts to over time and won’t even notice in a few months (many businesses make big changes, knowing their customers will be temporarily uncomfortable, but won’t even think about it 3 weeks later) .
This change has a massive impact on the most important thing of all: Our bottom lines. If 40% of our inventory is getting rejected, that’s a 40% blow to our margins. Most sellers cannot – and should not – absorb this.
Big mistake, making it unprofitable for a big chunk of people (i.e. third party sellers, who, speaking of 40%, make up 40% of Amazon’s profits) to do business with you.
What does this mean for FBA sellers who sell books on Amazon?
Many (probably most) of you sell more than books. But let’s discuss specifically how this will affect Fulfillment by Amazon (FBA) booksellers – both the good and the bad.
It’s too early to say if this affects FBA booksellers more than, say, people who sell toys.
My theory is that it does, based solely on the math: A higher percentage of books have low demand (i.e. don’t sell very often) vs. toys (which have a higher percentage of ASINs that sell semi-regularly).
If the theory holds that Amazon is restricting ASINs base primarily on how long they’ll sit in an FBA warehouse (while there’s evidence to the contrary), it will affect a much larger swath of the book market than other categories.
The reason is simple: Books are simply a much larger category, and finite subject matter makes any one book inherently not a “mass market” item. The demand for books is simply spread across a much larger catalog.
More on the good news/bad news with books
This affects FBA booksellers in a negative way in that most sellers I know go wide rather than deep – selling single copies of thousands of books vs. multiple copies of single SKUs. So these restrictions simply affect a larger number of SKUs, making it almost impossible to build our inventory around avoiding restricted ASINs.
The flip side is that when a book is restricted, it represents a smaller percentage of our inventory, and a probably insignificant investment (though in aggregate, it will add up to something significant).
(Just be glad you’re not selling private label products [or be un-glad if you are]: Many are finding their products are rejected by FBA only after they’ve invested in a pallet shipped from China. Makes our problems look tame).
What some sellers are doing to cope
Several sellers online have talked about the new field in your Inventory Health Report headed “ASIN limit.”
The idea here (thanks Ryan Grant) is to download your Inventory Health Report, paste the text file into Excel or a Google doc spreadsheet, and review the column headed “ASIN limit.” You can sort the data in that column from high-to-low to give you a glimpse of how many items in your FBA inventory are affected.
How does this help? It lets you see what items in your current FBA inventory are restricted, to give you an overall sense of how this will affect your business.
I just did this. How did I fare?
The column in my report was blank.
From what I’ve read elsewhere, this is a common occurrence. From what I’ve also read, it does not mean you won’t find some FBA items restricted. It just means Amazon hasn’t gotten around to telling you yet.
What you should do to combat these restrictions
I always err on the side of not burdening Amazon’s Seller Support with general complaints. So I’m not recommending you do that here.
But this is serious, and I’m recommending contacting them not with “complaints,” but legitimate questions:
- Asking why you have not received any communication from them on these changes.
- Requesting full disclosure on their ASIN restriction formula so you can adjust your inventory purchases accordingly.
- If this is permanent, asking when these ASIN restrictions will be communicated to third party apps.
There are enough Amazon sellers reading this that if we all contacted Seller Support, it will have an impact – not in reversing any restrictions (for which I’m not hopeful), but greater transparency.
Why I’m not panicking yet
Why I might panic on your behalf, I’m not personally panicking yet for two reasons:
- Amazon’s hasn’t restricted any of my FBA inventory yet.
- My FBA inventory is showing no restricted ASINs. More than likely Amazon hasn’t gotten around to me yet, but my fingers are crossed I’ve been selling via FBA long enough that I’m in their good graces (naive, but I’m clinging to this).
You probably want to vent, so share your inventory restriction stories below.
It will feel good to let it out.
“More on this situation as it develops.”
PS: Even better, if you’re a large or large-ish volume seller and are not seeing restrictions, please comment below. This will get a closer to answering the question of whether this is specific to certain sellers.