Here’s the Deal on Amazon’s New Inventory Performance Index for FBA Sellers
FBA sellers, take note: Amazon launched an important update to Amazon Seller Central this past weekend (July 1), and it likely concerns your product inventory [R].
The company wants to free up some space within its fulfillment centers and eliminate constraints during major shopping seasons, so it’s introducing new storage fees for sellers, based on a newly assigned score [R].
The Inventory Performance Index
While these exact fees vary and can get a bit complex, Amazon has implemented a new tool for sellers, the Inventory Performance Index (IPI), to increase “efficiently managed inventory.” Make sure you study this new feature and start using it to your advantage.
The IPI measures sellers’ sales, inventory, and costs to evaluate the overall growth and efficiency of a given FBA business.
A higher grade means a better seller performance and general inventory health. If you’ve got a low score, the tool offers a few ways to move it in the right direction through [R]:
[+] Restock recommendations to increase your in-stock rate
[+] Excess inventory suggestions to reduce your storage fees + carrying costs
[+] Stranded inventory actions to make sure your inventory is available for purchase
Here’s an example that Amazon gives of the metric display in Seller Central [R]:
In addition to factors like excess inventory percentage, in-stock rate and stranded inventory percentage seen above, the fourth factor that plays a major role in determining the IPI score is sell-through rate [R]. Amazon Seller Central further explains these metrics in the Inventory Dashboard.
The Fee Breakdown
As of July 1, sellers with a score lower than 350 will face a storage limit throughout the following quarter, even if they improve their inventory management in that quarter. Additional overage fees will be charged at $10 per cubic foot, per month [R]. You’re safe if you have a score above 350: there’s no limit on storage (but the regular FBA storage and long-term inventory fees will still be charged).
If you’ve scored above 350 – a major kudos to you. If you’re below, while this new policy change may set you back a bit, there are a number of methods (inside and outside of Seller Central) to get your score where it needs to be.
We’ll be keeping an eye on this and other FBA policy changes, so be sure to keep checking our blog for more.
Resources and References
[+] 24/7 Wall Street
[+] Learn to sell on Amazon with our Infinity Code program.