Why Have Amazon Sellers Suffered a Significant Drop in Restock Limits?

Many sellers have seen sudden restock limit decreases of up to 70% despite strong sales!

What’s going on?

There’s been chatter among sellers and influencers about Amazon revising restock limits in the US marketplace. The restock limit reductions reportedly range from 6% to 70%, putting affected sellers at risk of going over the limit earlier than expected – or suddenly being pushed over limit with this new drop.

For instance, one seller saw a 10% decrease on Monday, August 30th, and another 25% decrease a few days later. Others weren’t so lucky and suffered a huge blow with a 70% restock limit reduction overnight!

Why is this happening?

There could be many reasons why this is happening. Many speculate that Amazon is simply overwhelmed right now, so they resorted to pulling the “Oh, shit!” lever on FBA sellers.

As we all know, Amazon’s algorithm calculates inventory limits using various factors. But every so often, they will lower sellers’ max inventory capacity considerably without warning.

One particular time that they did it was in May. And the reason behind that move was to help speed up check-in times before Prime Day.

If Amazon tends to reduce restock limits before key selling dates, we have good reason to think that the decreases we see today are part of their plan to:

• Restrict the volume of shipments coming in this month to accelerate check-in times before Q4.
• Conserve warehouse space to accommodate the expected inventory influx of certain products and categories to meet customer demand this holiday season. If your restock limits have been dropping despite good sales, look into your utilization percentage and quickly move excess inventory to free up storage space where possible.

It seems the recent decreases are not based solely on sales performance metrics, which explains why some top-performing sellers are also affected.

Underlying Causes

If we dig deeper into why Amazon’s pulling the lever again, we’ll find that continuing pandemic repercussions may be a culprit: current global supply chain problems, warehouse labor shortages, and skirmishes, and possibly even Hurricane Ida may all be factors at the root of our restock limit issues.

It is likely that Amazon is still dealing with the backlogs left by recent slowdowns at China’s terminals and labor disruptions due to typhoons and COVID. And let us not forget the ripple effects of past supply chain disruptions (Suez Canal, driver shortages, etc…) that are still being felt. Therefore, Amazon is, perhaps, trying to avoid overwhelming their warehouses further with too many shipments before Q4.

None of them are within our control as sellers, which is frustrating. But that doesn’t mean we can’t do something about it.

Here’s a couple of tips to overcome lower restock limits:

1. The Golden Rule in avoiding stockouts: Don’t let anyone have all your stuff! 

In more familiar terms: Don’t put all your eggs in one basket. There’s a lot of uncertainty right now, from sudden restock limit decreases and port shutdowns to warehouse labor disruptions. Having a backup plan – or several – is more critical now than ever.

If Amazon rejects your inbound shipment because you’re suddenly over the limit, but you don’t have a backup warehouse or fulfillment center, you’ll stock out and lose sales. Having a third-party fulfillment center allows you to switch to FBM quickly and continue fulfilling orders from there. This also helps to maintain your restock limits while stocked out at FBA, as we’ve covered in our comprehensive Amazon restock limits article.

You also need a backup plan for your import/export and warehouse to FBA logistics. If you put all of your newly manufactured inventory on one boat and that boat gets stuck at port for 3 weeks, your stockout risk is high. But if you have held back an inventory reserve with your supplier that you can air freight in case of such an emergency, you can avoid stocking out while avoiding expensive air freight if your ocean shipping goes to plan. This is also known as CYA: Cover Your Ass.

Similarly and commonly, if you are used to sending all of your inventory LTL from warehouse to FBA and Amazon neglects to check it in for 4 weeks (it’s been known to happen), what do you do? In that case, if you reserve some inventory at your 3PL, send a smaller amount or inventory Small Parcel Delivery (SPD) as loose cartons get checked in faster than LTL.

Making contingency plans like this provides you the flexibility you need within the chaotic conditions under which we’re selling.

2. Run flash sales

As mentioned earlier, Amazon wants to relieve its overcrowded warehouses. So, they’re likely using excess inventory and utilization percentage as influencing factors for calculating restock limits and really forcing sellers to trim the fat in every way possible before the Q4 crush.

If you suffered a significant restock limit decrease due to overutilization, use excess inventory to run flash sales. This tactic will help you clear up needed storage space and improve your sales velocity and sell-through. Alternatively, consider liquidating your excess inventory if you’re in an emergency situation and don’t have the time to run a flash sale.

The bottom line is: there are things you can do to be more prepared for situations like these the next time they come around.

The thing you should not do is abandon your focus on sell-through and proper inventory management practices that improve your IPI score and restock limits just because every now and then Amazon itself throws those rules out the window.

That would be like giving up on successful PPC and ranking strategies because every now and then Amazon suspends a best seller.

Keep doing the things that work, follow successful inventory management practices on Amazon, and prepare for those times when Amazon breaks its own rules. The game is always changing on Amazon. That is the only constant we can be sure of. Our job as entrepreneurs is to roll with those punches better than our competitors do.

Have a backup plan, don’t let Amazon be your only distribution channel, and, finally, have a backup plan to your backup plan.