Low Inventory Fee versus Inventory Performance Index (IPI)
I just... feel like I must be missing something?
Amazon will start charging us for keeping less than 28 days of inventory - okay.
AT THE SAME TIME, Amazon's Inventory Performance Index (IPI) already has a component called "sell-through" where Amazon encourages us to keep inventory relative to sales as LOW as possible.
"Sell-through" is considered "Good" if it's above 2.0 and "Excellent" if it's above 7.0. If I understand it correctly, these ratios are based on 90 days sales.
But what about the math here? If you keep your turnover above 7, that means you're keeping an average of 90/7=13 days worth of inventory? Meaning that anyone with Excellent Sell-Through would be hit with the *highest* level of "low inventory fees". Surely this can't be right?!
Even just to qualify as "Good" you'd need to get in under 90/2 = 45 days. A much more reasonable number, but very tricky if you're trying to stay between 45 and the punishable 28. That's quite a tightrope to maintain at all times. But it's not as nonsensical as being punished for Excellent performance.
Low Inventory Fee versus Inventory Performance Index (IPI)
I just... feel like I must be missing something?
Amazon will start charging us for keeping less than 28 days of inventory - okay.
AT THE SAME TIME, Amazon's Inventory Performance Index (IPI) already has a component called "sell-through" where Amazon encourages us to keep inventory relative to sales as LOW as possible.
"Sell-through" is considered "Good" if it's above 2.0 and "Excellent" if it's above 7.0. If I understand it correctly, these ratios are based on 90 days sales.
But what about the math here? If you keep your turnover above 7, that means you're keeping an average of 90/7=13 days worth of inventory? Meaning that anyone with Excellent Sell-Through would be hit with the *highest* level of "low inventory fees". Surely this can't be right?!
Even just to qualify as "Good" you'd need to get in under 90/2 = 45 days. A much more reasonable number, but very tricky if you're trying to stay between 45 and the punishable 28. That's quite a tightrope to maintain at all times. But it's not as nonsensical as being punished for Excellent performance.
35 replies
Seller_z3XfkorVSmnEY
Saw the notice too. Going to have to reevaluate everything. Not happy.
Seller_8uc0P1EJEs5cJ
You are right - mathematically It doesn't make. Great research.
Also, if you send lots of inventory, you get stuck with storage fees.
Finally, how does this play for commodities that have supply chain issues, where we may be out for several months on good sellers due to issues in Europe or Asia that is out of our control and our "Days in Inventory" drops below 28 because of that? We would be penalized for things well out of our control.
Seller_6NYy0sAeVHZ80
Amazon - you need to review this new charge. I'm sure a lot of thought went into it initially and I understand the intent, but it simply is not going to work as intended. So many things are out of sellers control. Price drops, seasonality, competition, supply chain issues, I think a MUCH better approach would be to REWARD those sellers that are able to do this because they are saving amazon money, but not charge those sellers that cannot. Another approach would be to set minimums of how many of a unit you can send - you can base this on current stock level and sales. This will eliminate all those pesky sellers who don't send in enough stock to begin with (thinking used book sellers sending in single copies...)
Seller_tzb0Adb4whsRu
Great info! Thanks for sharing :)
Yes, the fees are getting out of control and these newer ones for 2024 is just absurd.
Amazon is always contradicting themselves and never make sense.
You can ship your FBA inventory and it still won't get "received" for almost 3 months.
Amazon doesn't even know their own policies or anything else for that matter.
Seller_0aryLLa4VXsmQ
Either a 7 or 8 sell-through rate means you turn over your inventory twice a month (once every two weeks).
My sell-through rate ranges from a 6.5 to 8.5 and my turnover has ranged from 13 to 18 days over the past few months.
If I used Amazon's recommended quantities to maintain a 30 day plus supply, I would have to triple my stock (assuming all of it is available from suppliers and to account for variability)
This would drop my sell-through rate down to a 2.
So yes, under this new system it would be impossible to maintain an excellent sell-through rate and avoid the low inventory fees.
To not pay any fees (besides extra inventory storage space) under this system and maintain an IPI score that will allow you sufficient space to actually send in your items, you would need to have a perfect balance between 30 and 45 days of inventory, which given supply chain issues and Amazon's own problems with receiving shipments in a timely manner, will prove impossible for all sellers. (with the exception of sellers who pay for Amazon Warehousing and Distribution)
I would say on average, a seller with good supply chain management can reduce these fees by 50%.
This will involve keeping your "A" level items fully stocked at all times, (the 20% of your SKUs that provide 80% of your sales), while most of your "B" and "C" level items will be sold FBM.
That a seller could avoid these fees completely is a straight up lie as you can see from the data.
Instead of just raising per product fulfillment fees by 50 cents, which they know would go straight onto retail prices, Amazon hopes they can con enough sellers to play their game and lose money in the process on low margin items.
I'm sure some will fall for it, but it won't work long-term.
Seller_4pOpgV39EK9Uv
Amazon is really crazy about making money. Excessive inventory incurs fees, while low inventory also incurs fees. I have nothing to say. Fees increase a lot recent year. Does Amazon just want to make some money and then and then exit the e-commerce business?
Seller_L4mc9uax2MoSW
"Tightrope" is the best way to describe it. They need to have a wider room for sellers to balance between over-stocked or under-stocked. make it a balance beam instead of a fishing line. So many things are out of our control during the shipping and manufacturing process and then even more-so when Amazon receives and stocks our inventory.
Seller_BE3xPpZWhTS9Z
This whole concept is absurd without a more predictable timeframe for inventory re-stocking once it's received by Amazon.
Seller_SUBrUFXJ9pHvQ
I promise you they didn't think about that lol. The 2 systems you are encouraged to excel in fundamentally contradict each other, as you said.
This thing is so disappointingly void of forethought and wholistic perspective.
Seller_Qef4rUzRRNtfq
Not so long ago, Amazon was encouraging sellers to increase the selection of products on their website through the FBA New Selection Program etc.
I'm a little confused how this new fee fits with this strategy?
Low Inventory Fee versus Inventory Performance Index (IPI)
I just... feel like I must be missing something?
Amazon will start charging us for keeping less than 28 days of inventory - okay.
AT THE SAME TIME, Amazon's Inventory Performance Index (IPI) already has a component called "sell-through" where Amazon encourages us to keep inventory relative to sales as LOW as possible.
"Sell-through" is considered "Good" if it's above 2.0 and "Excellent" if it's above 7.0. If I understand it correctly, these ratios are based on 90 days sales.
But what about the math here? If you keep your turnover above 7, that means you're keeping an average of 90/7=13 days worth of inventory? Meaning that anyone with Excellent Sell-Through would be hit with the *highest* level of "low inventory fees". Surely this can't be right?!
Even just to qualify as "Good" you'd need to get in under 90/2 = 45 days. A much more reasonable number, but very tricky if you're trying to stay between 45 and the punishable 28. That's quite a tightrope to maintain at all times. But it's not as nonsensical as being punished for Excellent performance.
Low Inventory Fee versus Inventory Performance Index (IPI)
I just... feel like I must be missing something?
Amazon will start charging us for keeping less than 28 days of inventory - okay.
AT THE SAME TIME, Amazon's Inventory Performance Index (IPI) already has a component called "sell-through" where Amazon encourages us to keep inventory relative to sales as LOW as possible.
"Sell-through" is considered "Good" if it's above 2.0 and "Excellent" if it's above 7.0. If I understand it correctly, these ratios are based on 90 days sales.
But what about the math here? If you keep your turnover above 7, that means you're keeping an average of 90/7=13 days worth of inventory? Meaning that anyone with Excellent Sell-Through would be hit with the *highest* level of "low inventory fees". Surely this can't be right?!
Even just to qualify as "Good" you'd need to get in under 90/2 = 45 days. A much more reasonable number, but very tricky if you're trying to stay between 45 and the punishable 28. That's quite a tightrope to maintain at all times. But it's not as nonsensical as being punished for Excellent performance.
Low Inventory Fee versus Inventory Performance Index (IPI)
I just... feel like I must be missing something?
Amazon will start charging us for keeping less than 28 days of inventory - okay.
AT THE SAME TIME, Amazon's Inventory Performance Index (IPI) already has a component called "sell-through" where Amazon encourages us to keep inventory relative to sales as LOW as possible.
"Sell-through" is considered "Good" if it's above 2.0 and "Excellent" if it's above 7.0. If I understand it correctly, these ratios are based on 90 days sales.
But what about the math here? If you keep your turnover above 7, that means you're keeping an average of 90/7=13 days worth of inventory? Meaning that anyone with Excellent Sell-Through would be hit with the *highest* level of "low inventory fees". Surely this can't be right?!
Even just to qualify as "Good" you'd need to get in under 90/2 = 45 days. A much more reasonable number, but very tricky if you're trying to stay between 45 and the punishable 28. That's quite a tightrope to maintain at all times. But it's not as nonsensical as being punished for Excellent performance.
35 replies
35 replies
Seller_z3XfkorVSmnEY
Saw the notice too. Going to have to reevaluate everything. Not happy.
Seller_8uc0P1EJEs5cJ
You are right - mathematically It doesn't make. Great research.
Also, if you send lots of inventory, you get stuck with storage fees.
Finally, how does this play for commodities that have supply chain issues, where we may be out for several months on good sellers due to issues in Europe or Asia that is out of our control and our "Days in Inventory" drops below 28 because of that? We would be penalized for things well out of our control.
Seller_6NYy0sAeVHZ80
Amazon - you need to review this new charge. I'm sure a lot of thought went into it initially and I understand the intent, but it simply is not going to work as intended. So many things are out of sellers control. Price drops, seasonality, competition, supply chain issues, I think a MUCH better approach would be to REWARD those sellers that are able to do this because they are saving amazon money, but not charge those sellers that cannot. Another approach would be to set minimums of how many of a unit you can send - you can base this on current stock level and sales. This will eliminate all those pesky sellers who don't send in enough stock to begin with (thinking used book sellers sending in single copies...)
Seller_tzb0Adb4whsRu
Great info! Thanks for sharing :)
Yes, the fees are getting out of control and these newer ones for 2024 is just absurd.
Amazon is always contradicting themselves and never make sense.
You can ship your FBA inventory and it still won't get "received" for almost 3 months.
Amazon doesn't even know their own policies or anything else for that matter.
Seller_0aryLLa4VXsmQ
Either a 7 or 8 sell-through rate means you turn over your inventory twice a month (once every two weeks).
My sell-through rate ranges from a 6.5 to 8.5 and my turnover has ranged from 13 to 18 days over the past few months.
If I used Amazon's recommended quantities to maintain a 30 day plus supply, I would have to triple my stock (assuming all of it is available from suppliers and to account for variability)
This would drop my sell-through rate down to a 2.
So yes, under this new system it would be impossible to maintain an excellent sell-through rate and avoid the low inventory fees.
To not pay any fees (besides extra inventory storage space) under this system and maintain an IPI score that will allow you sufficient space to actually send in your items, you would need to have a perfect balance between 30 and 45 days of inventory, which given supply chain issues and Amazon's own problems with receiving shipments in a timely manner, will prove impossible for all sellers. (with the exception of sellers who pay for Amazon Warehousing and Distribution)
I would say on average, a seller with good supply chain management can reduce these fees by 50%.
This will involve keeping your "A" level items fully stocked at all times, (the 20% of your SKUs that provide 80% of your sales), while most of your "B" and "C" level items will be sold FBM.
That a seller could avoid these fees completely is a straight up lie as you can see from the data.
Instead of just raising per product fulfillment fees by 50 cents, which they know would go straight onto retail prices, Amazon hopes they can con enough sellers to play their game and lose money in the process on low margin items.
I'm sure some will fall for it, but it won't work long-term.
Seller_4pOpgV39EK9Uv
Amazon is really crazy about making money. Excessive inventory incurs fees, while low inventory also incurs fees. I have nothing to say. Fees increase a lot recent year. Does Amazon just want to make some money and then and then exit the e-commerce business?
Seller_L4mc9uax2MoSW
"Tightrope" is the best way to describe it. They need to have a wider room for sellers to balance between over-stocked or under-stocked. make it a balance beam instead of a fishing line. So many things are out of our control during the shipping and manufacturing process and then even more-so when Amazon receives and stocks our inventory.
Seller_BE3xPpZWhTS9Z
This whole concept is absurd without a more predictable timeframe for inventory re-stocking once it's received by Amazon.
Seller_SUBrUFXJ9pHvQ
I promise you they didn't think about that lol. The 2 systems you are encouraged to excel in fundamentally contradict each other, as you said.
This thing is so disappointingly void of forethought and wholistic perspective.
Seller_Qef4rUzRRNtfq
Not so long ago, Amazon was encouraging sellers to increase the selection of products on their website through the FBA New Selection Program etc.
I'm a little confused how this new fee fits with this strategy?
Seller_z3XfkorVSmnEY
Saw the notice too. Going to have to reevaluate everything. Not happy.
Seller_z3XfkorVSmnEY
Saw the notice too. Going to have to reevaluate everything. Not happy.
Seller_8uc0P1EJEs5cJ
You are right - mathematically It doesn't make. Great research.
Also, if you send lots of inventory, you get stuck with storage fees.
Finally, how does this play for commodities that have supply chain issues, where we may be out for several months on good sellers due to issues in Europe or Asia that is out of our control and our "Days in Inventory" drops below 28 because of that? We would be penalized for things well out of our control.
Seller_8uc0P1EJEs5cJ
You are right - mathematically It doesn't make. Great research.
Also, if you send lots of inventory, you get stuck with storage fees.
Finally, how does this play for commodities that have supply chain issues, where we may be out for several months on good sellers due to issues in Europe or Asia that is out of our control and our "Days in Inventory" drops below 28 because of that? We would be penalized for things well out of our control.
Seller_6NYy0sAeVHZ80
Amazon - you need to review this new charge. I'm sure a lot of thought went into it initially and I understand the intent, but it simply is not going to work as intended. So many things are out of sellers control. Price drops, seasonality, competition, supply chain issues, I think a MUCH better approach would be to REWARD those sellers that are able to do this because they are saving amazon money, but not charge those sellers that cannot. Another approach would be to set minimums of how many of a unit you can send - you can base this on current stock level and sales. This will eliminate all those pesky sellers who don't send in enough stock to begin with (thinking used book sellers sending in single copies...)
Seller_6NYy0sAeVHZ80
Amazon - you need to review this new charge. I'm sure a lot of thought went into it initially and I understand the intent, but it simply is not going to work as intended. So many things are out of sellers control. Price drops, seasonality, competition, supply chain issues, I think a MUCH better approach would be to REWARD those sellers that are able to do this because they are saving amazon money, but not charge those sellers that cannot. Another approach would be to set minimums of how many of a unit you can send - you can base this on current stock level and sales. This will eliminate all those pesky sellers who don't send in enough stock to begin with (thinking used book sellers sending in single copies...)
Seller_tzb0Adb4whsRu
Great info! Thanks for sharing :)
Yes, the fees are getting out of control and these newer ones for 2024 is just absurd.
Amazon is always contradicting themselves and never make sense.
You can ship your FBA inventory and it still won't get "received" for almost 3 months.
Amazon doesn't even know their own policies or anything else for that matter.
Seller_tzb0Adb4whsRu
Great info! Thanks for sharing :)
Yes, the fees are getting out of control and these newer ones for 2024 is just absurd.
Amazon is always contradicting themselves and never make sense.
You can ship your FBA inventory and it still won't get "received" for almost 3 months.
Amazon doesn't even know their own policies or anything else for that matter.
Seller_0aryLLa4VXsmQ
Either a 7 or 8 sell-through rate means you turn over your inventory twice a month (once every two weeks).
My sell-through rate ranges from a 6.5 to 8.5 and my turnover has ranged from 13 to 18 days over the past few months.
If I used Amazon's recommended quantities to maintain a 30 day plus supply, I would have to triple my stock (assuming all of it is available from suppliers and to account for variability)
This would drop my sell-through rate down to a 2.
So yes, under this new system it would be impossible to maintain an excellent sell-through rate and avoid the low inventory fees.
To not pay any fees (besides extra inventory storage space) under this system and maintain an IPI score that will allow you sufficient space to actually send in your items, you would need to have a perfect balance between 30 and 45 days of inventory, which given supply chain issues and Amazon's own problems with receiving shipments in a timely manner, will prove impossible for all sellers. (with the exception of sellers who pay for Amazon Warehousing and Distribution)
I would say on average, a seller with good supply chain management can reduce these fees by 50%.
This will involve keeping your "A" level items fully stocked at all times, (the 20% of your SKUs that provide 80% of your sales), while most of your "B" and "C" level items will be sold FBM.
That a seller could avoid these fees completely is a straight up lie as you can see from the data.
Instead of just raising per product fulfillment fees by 50 cents, which they know would go straight onto retail prices, Amazon hopes they can con enough sellers to play their game and lose money in the process on low margin items.
I'm sure some will fall for it, but it won't work long-term.
Seller_0aryLLa4VXsmQ
Either a 7 or 8 sell-through rate means you turn over your inventory twice a month (once every two weeks).
My sell-through rate ranges from a 6.5 to 8.5 and my turnover has ranged from 13 to 18 days over the past few months.
If I used Amazon's recommended quantities to maintain a 30 day plus supply, I would have to triple my stock (assuming all of it is available from suppliers and to account for variability)
This would drop my sell-through rate down to a 2.
So yes, under this new system it would be impossible to maintain an excellent sell-through rate and avoid the low inventory fees.
To not pay any fees (besides extra inventory storage space) under this system and maintain an IPI score that will allow you sufficient space to actually send in your items, you would need to have a perfect balance between 30 and 45 days of inventory, which given supply chain issues and Amazon's own problems with receiving shipments in a timely manner, will prove impossible for all sellers. (with the exception of sellers who pay for Amazon Warehousing and Distribution)
I would say on average, a seller with good supply chain management can reduce these fees by 50%.
This will involve keeping your "A" level items fully stocked at all times, (the 20% of your SKUs that provide 80% of your sales), while most of your "B" and "C" level items will be sold FBM.
That a seller could avoid these fees completely is a straight up lie as you can see from the data.
Instead of just raising per product fulfillment fees by 50 cents, which they know would go straight onto retail prices, Amazon hopes they can con enough sellers to play their game and lose money in the process on low margin items.
I'm sure some will fall for it, but it won't work long-term.
Seller_4pOpgV39EK9Uv
Amazon is really crazy about making money. Excessive inventory incurs fees, while low inventory also incurs fees. I have nothing to say. Fees increase a lot recent year. Does Amazon just want to make some money and then and then exit the e-commerce business?
Seller_4pOpgV39EK9Uv
Amazon is really crazy about making money. Excessive inventory incurs fees, while low inventory also incurs fees. I have nothing to say. Fees increase a lot recent year. Does Amazon just want to make some money and then and then exit the e-commerce business?
Seller_L4mc9uax2MoSW
"Tightrope" is the best way to describe it. They need to have a wider room for sellers to balance between over-stocked or under-stocked. make it a balance beam instead of a fishing line. So many things are out of our control during the shipping and manufacturing process and then even more-so when Amazon receives and stocks our inventory.
Seller_L4mc9uax2MoSW
"Tightrope" is the best way to describe it. They need to have a wider room for sellers to balance between over-stocked or under-stocked. make it a balance beam instead of a fishing line. So many things are out of our control during the shipping and manufacturing process and then even more-so when Amazon receives and stocks our inventory.
Seller_BE3xPpZWhTS9Z
This whole concept is absurd without a more predictable timeframe for inventory re-stocking once it's received by Amazon.
Seller_BE3xPpZWhTS9Z
This whole concept is absurd without a more predictable timeframe for inventory re-stocking once it's received by Amazon.
Seller_SUBrUFXJ9pHvQ
I promise you they didn't think about that lol. The 2 systems you are encouraged to excel in fundamentally contradict each other, as you said.
This thing is so disappointingly void of forethought and wholistic perspective.
Seller_SUBrUFXJ9pHvQ
I promise you they didn't think about that lol. The 2 systems you are encouraged to excel in fundamentally contradict each other, as you said.
This thing is so disappointingly void of forethought and wholistic perspective.
Seller_Qef4rUzRRNtfq
Not so long ago, Amazon was encouraging sellers to increase the selection of products on their website through the FBA New Selection Program etc.
I'm a little confused how this new fee fits with this strategy?
Seller_Qef4rUzRRNtfq
Not so long ago, Amazon was encouraging sellers to increase the selection of products on their website through the FBA New Selection Program etc.
I'm a little confused how this new fee fits with this strategy?
