Feb 02 , 2023
Starting March 1st, 2023, Amazon will allow sellers to go beyond the allocated warehouse space by bidding for a higher reservation fee, thus turning its FBA service into an auction. With Amazon’s New Capacity Manager, sellers can ask for more capacity based on a reservation fee set by them.
According to Amazon, they have already tested this update with previously selected U.S. sellers and their goal is to “provide sellers with more control over how much space they can have while limiting unproductive use”.
If you currently have FBA storage limits but could use more capacity for products that you expect to have high profits this year, keep reading, in this article we will go through each aspect of this new Amazon update.
How does this new streamlined FBA capacity management system work?
1. Sellers specify a reservation fee per cubic foot of additional storage capacity.
2. Amazon will grant the request objectively by starting with the highest reservation fee per cubic foot until all allocated capacity has been granted
3. After additional capacity is granted, sellers’ reservation fees are offset by earning performance credits from the sales they generate using the extra capacity granted.
How much storage capacity you can request?
In your request, you can request up to 20% of your initial FBA capacity limit or 2,000 cubic feet and you also have the option to specify the period of time and maximum reservation fee you’re willing to pay for that extra capacity.
What type of selling accounts can’t request an additional storage limit?
- Individual selling accounts are already limited to 15 cubic feet of FBA capacity.
- New professional selling accounts that have used FBA for less than 39 weeks.
How can sellers recoup some or all of the fees paid for the extra capacity?
Amazon sellers can earn a $0.15 performance credit for every dollar of sales that they generated using the additional capacity granted during the period requested. This gives sellers the chance to offset the entire reservation fee if they manage to sell the additional capacity efficiently.
How often will Amazon grant storage limits?
Amazon will estimate current fulfillment center capabilities about twice a week and grant storage limit increases when available.
Even though this new Amazon update aims to give sellers more control over their FBA storage capacity and generate more sales, it isn’t a secret that it adds more complexity to the FBA capacity management system. Not to mention that this “pay to win” model will negatively impact the sellers’ margins as there will be many other business owners bidding higher for extra capacity storage.
That is why unless you consider that the additional storage space is something necessary to increase your profits, we recommend not bidding higher just because it is a new Amazon update.Request a consultation