Have you heard the news?
As the largest online retailer prepares for Q4, Amazon began rolling out inventory restrictions that make Amazon sellers around the world freak out!
And among these restrictions is putting a limit of 200 units for the maximum inventory required for new products.
Which means that for every NEW ASIN, you’re only allowed to store a maximum of 200 units in the Amazon warehouse.
And if you’re about to launch a new product, this might have put you in hot waters.
What will I do with the excess inventory?
Can I order an MOQ (minimum order quantity) of 200 units from my supplier?
With this new storage restriction in place, will it affect my Amazon sales, especially during Q4?
Before we answer these questions, let’s first try to understand where Amazon is coming from.
What is Amazon’s intention?
First things first, Amazon wants to boost capacity.
They want all FBA sellers to be accommodated and have enough space for their products, especially during the holiday season.
And they can only do this if they reduce wasted storage space.
Wasted space occupied by products which are NOT making enough sales.
Products which are NOT fast-moving…
Products which are mostly NEWLY LISTED.
Cause here’s the thing…
Whether we realize it or not, the first shipment for our new products is an EXPERIMENTAL batch.
One that will let you test the waters…
Will it connect with buyers?
Will it sell consistently?
Will it gain positive reviews?
You see, your first order isn’t meant to make you money upfront – but rather a trial run to determine if it will work in the long term.
So that being said…
Amazon restricting new product inventory to 200 units isn’t a terrible move after all!
Cause in the end, it’s for the Amazon seller’s benefit too!
Just imagine how much money you’ll waste for product and storage fees should it fail to sell and remain non-moving in the Amazon warehouse.
That would hurt you – A LOT.
So one of the challenges now is….
How will you negotiate with your supplier for an MOQ as low as 200 pieces?
Supplier Negotiation for Minimum Order Quantity
Meeting a Chinese supplier’s minimum order quantity requirement, also known as MOQ, is one of the biggest challenges an Amazon seller faces when placing a first purchase order.
MOQ is the least number of products a manufacturer is willing to produce for you per production run…
And this often strikes fear to newbie sellers or product sourcing personnel.
Cause more often than not, these MOQs are quoted in thousands while you as a seller only need 200 units!
So if that’s the case…
How do you think you and the supplier can meet halfway?
The key to lower MOQs always lies with NEGOTIATION.
For one, you first have to figure out if the MOQ figure is real or not.
Cause sometimes this is just completely made up – a number placed there just for the sake of having it.
However, there are also what we call “legit” MOQs – a number which needs to be strictly followed by buyers.
Because in order for the factory to produce a product (especially if it’s customized), it might need to:
- Acquire a minimum quantity of unique raw materials; and
- Allot resources for set up time which sometimes take a lot of time and money to get started.
Next, you have to clearly explain to your suppliers the need to buy a quantity less than their MOQ.
Cause aside from the 200-unit limit, the other reason why you’re buying a smaller batch is to VALIDATE their production quality.
From there, you can now start negotiating for your desired quantity.
Here are some terms you can put on the negotiation table.
- Share the setup fee with the supplier. If the set up cost is too high for the supplier, you can offer to share the expense with them.
- Buy less unique components. Ask them to buy smaller quantities of unique components, and if it costs them more, you can offer to give your share so you won’t have to buy the entire MOQ.
- Pay a slightly higher price for a lower quantity buy. If they still say no in lowering their MOQ because they will lose money in the process, try to offer a slightly higher price for the amount you’ll be buying.
Cause at the end of the day, what matters is the win-win relationship you build with your supplier which will be beneficial in the long term.
Now that we got that out of the way, another concern from Amazon FBA sellers is this:
“What if I’ve already ordered my 1st batch of more than 200 units? Where can my excess inventory go?”
What To Do With Excess Amazon Inventory
Have you heard of third party logistics (3PL) companies?
A 3PL company, like Amazon fulfillment centers, helps Amazon sellers with storage, order fulfillment, shipping, and customer service issues like exchanges and returns.
And usually their storage fees are much lower than Amazon’s which is why more and more FBA sellers are turning to 3PLs to help them save money.
So if you have just posted your orders to your suppliers exceeding 200 units…
Or your shipment may have already been in transit bound to the US…
Worse, they might have already arrived – waiting right outside Amazon’s doorsteps…
You can use a 3PL to receive your inbound shipments, store them, and then send inventory to Amazon when already needed.
When To Send Inventory to the Amazon Warehouse
You can easily track your inventory level through the Restock Inventory tool in your Amazon seller account dashboard.
This tool gives you the 2 most important data you need so you can still maximize sales even with the 200-limit inventory.
- Maximum shipment quantity which is the maximum units you can send to Amazon and is crucial in planning immediate shipping plans; and
- Maximum inventory level allowed which establishes when to reorder and how much you send to Amazon on your reorder.
And as you sell more, you can expect that both these limits increase.
Watch the YouTube Video – https://www.youtube.com/watch?v=UO_BmxqKjM4&t=1s
With its mission of providing the best online shopping experience to their customers, you can expect Amazon to further streamline its processes…
And this means Amazon sellers would need to adapt fast in order to stay relevant.
Cause if there’s any lesson we can learn from the recent 200-unit restriction, it is to always find ways to turn challenges into opportunities.
And the good news is…
You don’t have to figure everything out by yourself…
Cause the entire ZonBase team is here to assist you.