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Amazon’s Restock Limits called for a new Repricing Strategy

by Cardy Chung
10 Jan 2022
On April 22, 2021, Amazon implemented a new policy named the ‘restock limits’ for its FBA sellers. This new policy has replaced the previous ASIN-level quantity limits policy, with the goal of giving sellers more flexibility in managing their inventories and shipment.

What is Amazon’s Restock Limits?

The restock limits is a cap that Amazon sets for its FBA sellers on how many units can be sent and stored in Amazon’s warehouses. The inventory limits are calculated based on the type of storage category, as well as past and forecasted sales. In order to avoid manipulation of restock limits by changing storage type, Amazon will be the one that decides which category an item belongs to based on its characteristics. The 4 categories of storage include standard, oversize, apparel and footwear. The limits are only applicable for a given time period and will be updated weekly.

Possible Problems for Amazon sellers

For Amazon sellers that have relied solely on the FBA service, they will now be unable to send any of their items to Amazon’s warehouse that exceed these limits. They would need to first clear out their previous inventories before sending in new ones. A solution for this problem is to use both FBA and FBM, which is what most Amazon sellers have begun do now. They only send items that have high turnover to Amazon’s warehouse and keep items with lower sales rates in their own warehouse. Using this method, sellers can still ensure that their hot-sale items have a quicker and cheaper shipping option for customers under FBA. However, this also adds more complexity to inventory management.

What is Fulfilment by Amazon (FBA)?

Fulfilment by Amazon or FBA in short is a service offered by Amazon for sellers to sell without worrying about shipping and warehousing. It fully automates the process of order fulfilment for sellers. They simply need to send their products to Amazon’s fulfilment centres to be packaged, stored and shipped as orders are received. Amazon will take care of all the necessary services, including customer support, refund and returns. It helps sellers save time by only needing to focus on making sales.

What is Fulfilment by Merchant (FBM)?

Fulfilment by Merchant or FBM in short is an order fulfilment method done by the sellers themselves rather than Amazon. The sellers list their products on Amazon for sale but rather takes charge of the packaging, warehousing, delivery, customer support, returns and refund services themselves. As the name suggests, the order fulfilment is done by a ‘merchant’. This ‘merchant’ can either be the seller or a third-party logistics provider (3rd PL). Under this method, sellers would have more control over their business operations as they managed their inventory and all other services themselves.

What does it mean for Repricing?

The existence of restock limits forced most FBA Amazon sellers to switch to a combination of FBA and FBM. This calls for a change of repricing strategy as well.

Most repricing tools use a repricing strategy that compares and adjusts price based on ASIN. Whether it being a velocity-based repricing tool or a competitor-based repricing tool, all products of the same ASIN will be grouped together. After the price adjustment is made, the changes will be applied universally across that ASIN. However, with sellers now using both FBA and FBM, products of the same ASIN can be placed under different fulfilment methods. This raises a problem, that is, different fulfilment methods require different pricing strategies which are not covered by the current ASIN-based pricing strategy.

Since products under FBA will have the Prime advantage over FBM, they have a higher chance of winning the BuyBox. FBA products will be delivered faster, cheaper and with a more trusted customer support (Amazon itself). Hence, FBM products would normally need to be priced lower than FBA products to be more attractive to buyers. Consequently, even products that are under the same ASIN would need to be priced varyingly based on those different fulfilment methods.

With more sellers now using a multi-fulfilment model, repricing tools that reprice products based on ASIN should also be able to reprice based on fulfilment methods and this is where many of the previous generation are lacking.

A Solution from StreetPricer

StreetPricer is an advanced AI-based repricing tool for Amazon sellers. It offers an innovative feature called ‘multi-fulfilment’ logic that prices products based on fulfilment type. Their multi-fulfilment price logic is perfect for working within the Amazon restock limits or for sellers with a conscious strategy to have the same ASIN in both FBA and FBM, new or used. Sellers can easily set up a prioritized list of SKUs to win the BuyBox. For instance, users could prioritize a SKU that uses FBA to win the BuyBox over others, subject to stock. When that SKU is out of stock, the rule will switch dynamically to the next SKU on the priority list. If the SKU has won the BuyBox, other SKUs for the same ASIN could be assigned different pricing.

ABOUT THE AUTHOR

Cardy Chung is the founder of StreetPricer. Read more articles by Cardy Chung.

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