This Issue's TLDR...

• The onset of Fall brings Pumpkin Spice, football woes, and that ever-pressing angst around Amazon's Q4 storage limits.
• I dive into Amazon's Capacity Manager, and show you how bidding for storage space is more about the timing than bid amounts.
• Finally, I open up my playbook on how I avoid bidding wars and instead game the storage system.

BEST from Me

For me, the start of Fall is marked by three things:

1. The onset of my seasonal depression linked directly to the underwhelming performance of my Chicago Bears
2. Pumpkin Spice Everything
3. Angst and anxiety around Amazon’s Q4 storage limits

You all aren’t here to listen to me drone on about football or food culture though, so let’s focus on that last one.

I remember when FBA storage limits were introduced in 2019 (Quick mea culpa: I was partially responsible for the launch of Amazon.ca, though, I didn’t really have a choice). Anyway, the storage limits that were launched with a whimsical innocence as a “temporary measure” (HA!) have now matured into the intricate system we grapple with today. If you, like me, nostalgically remember a simpler time before these limits, pour one out for the days gone by. But, if you're here to play the game in 2023, let's get into the nuts and bolts.

A Brief Origin Story

Amazon, in its infinite wisdom (or lack thereof, depending on whom you ask), decided to introduce storage limits in 2019. A temporary measure, they said. Fast forward to today, and here we are, dancing to the tune of the new norm, the Capacity Manager of 2023.

In case you’ve been living under a rock (some days, I envy you), Amazon’s approach to managing capacity has evolved from poorly-conceived and confusing temporary measures to…just confusing and potentially expensive permanent measures.

I won’t re-tread Amazon’s experiment with ASIN Limits, because my brain still hurts from trying to decipher those a couple years back.

All you need to know, now, is that Capacity Manager is the way that Amazon is requiring sellers to manage storage space going forward.

In a nutshell, the transition to Capacity Manager means:

• ASIN Limits have been replaced by a single storage volume limit (measured in cubic feet).
• Capacity is calculated per month, not per week. Capacity limits are announced on the third Monday of each month, and apply to the next two months.
• You can bid on more capacity for any individual month up to three months in advance.
• You can bid on more capacity for the next two months, on a rolling basis.

Those are the basic details. There’s more; but you all aren’t here for me to regurgitate 101-level information. You all want the clever, actionable solutions to dealing with your Amazon problems. So, let’s jump right into that.

(That said, if you do want some basic info, I’ve linked to a great article in the BEST from Everyone Else section, and also created an FBA Capacity Limit FAQ section, with the help of my friend ChatGPT).

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How to Play the Game

If you’re in the unfortunate position of needing storage, the most direct and proximate way to get more storage is to bid on it (duh).

You “bid” for more storage using Amazon’s reservation fee system in Capacity Manager. Put simply, you request additional capacity by specifying a reservation fee you’re willing to pay per cubic foot. Amazon evaluates capacity availability and grants requests, prioritizing those with the highest reservation fees.

“But what should I bid??”

Here’s my consultant answer: The ideal bid for you would depend on how crucial the additional capacity is for your business and how confident you are in offsetting the reservation fee with sales.

Here’s my savvy seller answer: It’s less about what you bid, than when you bid. You can bid for additional capacity up to three months out, and Amazon evaluates capacity requests every 3-4 days. When evaluating capacity requests, Amazon starts from the highest bid and works down the list, until all available capacity has been allocated. Then, you, and others sellers will pay the lowest bid of all sellers for which additional capacity was granted, regardless of your bid.

As an example, let’s say there are 10 sellers bidding for a total of 1000 cuft in available storage.

The 1000 cuft in allocable space gets awarded to the top 5 bidders, but all of those bidders only pay $3.35 per cuft, the bid of the lowest seller.

As you can imagine, certain times of year (cough NOW cough) will have more bidders than others. Meaning…you’ll need a higher bid to get above the line AND, on average, the “line” (i.e., lowest bid of all accepted sellers) will be higher (because everyone also has very pressing needs for storage, and will pay for it).

But…there’s another reason to bid early:

Amazon’s lowest reservation fee guarantee.

I’m going to excerpt it and add emphasis to the relevant verbiage:

I think of this as a “free option”.

Put differently, and continuing the example from above, if you get locked in at $3.35 per cuft for storage in October, based on an August auction, but, the storage auction in the following week yields a lowest accepted bid of $2.95 per cuft for October storage, you pay $2.95 for your October storage.

Again, the when matters more than the what, as it relates to bidding for storage in Capacity Manager.

How to Game the System

Let’s say that you don’t want to much around with the bidding system, and instead want to bend the FBA Capacity Limits in your favor. Here’s my playbook: (Oh, and because its football season, you’re going to get some football metaphors)

Time the Snap

There are two relevant details here:

AND

OK, so we know that Amazon is announcing your capacity limit on the third Monday of the month. This means, that if you want to influence it, you need to be taking aggressive actions in the 7-10 days leading up to Amazon’s calculation.

Pad the Stats

What kind of aggressive actions? Here’s a couple:

• Juice your historical sales with Multi-Channel Fulfillment (MCF) orders. There’s a white hat world in which you actually ship out these orders (maybe, to yourself), and then there’s a gray hat world where you create a 14-day MCF hold order, and then cancel it. I’ll leave it to you all to decide how to pad your stats.
• Create deals for the next two months. Amazon is going to take the projected demand spike into account, and provide extra capacity because of it. Note that you don’t actually have to run these deals, and can cancel up to 25 hours in advance without having to pay the deal fee. I’ll leave it to you all to decide what to do with that last sentence.

Steal the Other Team’s Plays

There’s one other highlight from above that is worth noting. Amazon’s is determining your capacity limits, in part, based on its own forecasts for your ASINs.

“That’s great, Jon, but I don’t know what Amazon’s forecast is”

Well….

You actually do. Partially.

In Seller Central, in the Restock Inventory dashboard, Amazon is now providing ASIN-level forecasts for certain ASINs.

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Take this together with something else Amazon says related to capacity limits:

So, if you know Amazon’s sales forecast for an ASIN — both Mean and Optimistic — you now know the “target” that you need to exceed if you’re padding your stats.

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BEST from Everyone Else

An Amazon Storage Limits Guide (updated September 2023) from my friends over at Ecom Crew.

FBA Capacity Manager FAQs (from my friend ChatGPT):

• What are FBA capacity limits?
  • FBA capacity limits help manage surges in demand and supply chain disruptions, ensuring efficient operation of Amazon’s fulfillment network. They provide clarity to sellers about their future storage capabilities, aiding in inventory planning and product launch decisions.
• How can I view my capacity limits?
  • Sellers can view their capacity limits and usage in the Capacity Monitor located at the bottom of the FBA dashboard.
• How are these capacity limits determined?
  • Individual selling accounts have a static limit of 15 cubic feet. New professional selling accounts (active in FBA for less than 39 weeks) don’t have FBA capacity limits. Professional accounts active for more than 39 weeks have limits based on their IPI score, sales performance, inventory on-hand, and open shipments.
• When are capacity limits announced?
  • Limits are announced monthly during the week starting the third Monday. They include the upcoming month’s limit and estimates for the next two months.
• What factors influence my capacity limit?
  • Factors include IPI score, historical sales volume, seasonal sales patterns, forecasts, product selection, scheduled deals, fulfillment center capacity, and shipment lead time.
• What is Capacity Manager and how do reservation fees and performance credits work?
  • Capacity Manager is a tool that allows sellers to request additional capacity by specifying a reservation fee they’re willing to pay. The reservation fee is charged per cubic foot of additional capacity requested. Sellers earn performance credits at a rate of $0.15 for every dollar of sales made using the extra capacity. These credits can offset up to 100% of the reservation fee.
• How does the reservation system work in Capacity Manager?
  • Sellers state how much additional capacity they want and the maximum fee they’re willing to pay. Amazon assesses fulfillment center capacity and grants requests based on available space, prioritizing those with the highest reservation fees.
• What happens if I exceed my capacity limit and what are overage fees?
  • Sellers will be prohibited from creating new shipments to Amazon. Overage fees are charged on inventory held above your limit in Amazon’s fulfillment centers, excluding open shipments. For the current rates, sellers should refer to the FBA inventory storage overage fees section.
• Can I exchange capacity between storage types?
  • No, capacity cannot be transferred between storage types.
• How do Multi-Channel Fulfillment (MCF) orders impact my capacity limits?
  • MCF orders are included in past and forecasted sales data, which influence capacity limits.
• What is the reservation fee in Capacity Manager?
  • It’s the amount per cubic foot that sellers would pay if no sales are made during the period. It can be offset using performance credits earned at $0.15 for every dollar of sales made using the extra capacity.
  • Reservation fees are charged after the end of the specified period. For instance, if you were granted additional capacity for October 1 through October 31, any reservation fees would be charged in early November.
• Can I cancel my capacity limit increase request and under what circumstances?
  • Pending limit increase requests can be canceled anytime until they are granted or expire. Once granted, requests can only be canceled if Amazon’s confirmed FBA capacity limit for the upcoming period is higher than the estimated limit provided earlier. Sellers have until the second-to-last day before the new limits go into effect to make these cancellations.

Updates to the Amazon Private Label Pathway

Since the topic of this newsletter issue was Capacity Manager, I thought I would double down on that topic. I've added Amazon's storage bidding calculator to the Amazon Private Label Pathway.

It's not exactly intuitive. Let me know if you need help navigating it.

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Back Story on the Amazon Private Label Pathway, ICYMI...

A few months back, I had a small group of coaching clients that were at the same point in their Amazon seller journeys.

I found myself answering the same questions, and pointing them to the same resources, so, in true Amazon fashion, I asked myself "What's the 1-to-Many solution here?" and built a Notion page of helpful resources, which I've called "Amazon Private Label Pathway."

You can get access to it here: https://auxo.gumroad.com/l/amazonpathway (it's free; but if you want to buy me a beer, I won't object)​

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Amazon Questions? Amazon isn't easy. Everyone needs a little help from a friend sometimes. If you ever have a tough Amazon question, I'm only a phone call away. Let's Chat

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