‘It’s like a black box’: Amazon sellers plan inventory for a long holiday season

“Our fulfillment center teams will be focused on receiving inventory in September and October to ensure your products are placed in the right fulfillment centers ahead of peak,” Amazon said. “In November and December, we’ll shift our focus to processing customer orders as this is our busiest time of year.”

For Amazon, the shortened timeline is an apparent bid to keep up with its ultra-fast Prime delivery speeds during the biggest shopping season of the year. On July 30, Amazon announced that it had delivered more than 5 billion items worldwide the same or next day – more than 30% compared to last year, and a new record for the online retailer. At the same time, Amazon has turbocharged its logistics systems to expand its one- to two-day delivery speeds to rural areas of America, per The Wall Street Journal. 

Sellers are used to planning ahead for the holidays, but the ambitions of Amazon’s logistics empire has brands gearing up earlier than ever before. Sellers also have to factor in the possibility of another Prime Day sale in October. While the dates have been officially confirmed yet, last year’s sale took place on Oct. 10 and 11, a few weeks ahead of Amazon’s Black Friday sale. 

“Usually we start to plan our Black Friday about 10 to 12 weeks out,” according to Ronak Shah, CEO and co-founder of collagen brand Obvi. But with Amazon’s accelerated timetable, “It was like we had to start planning two weeks ago,” said Shah. 

That creates cash flow concerns, as well. “When I’m used to getting inventory just in time to start selling it with Amazon, whereas now I’m going to be sitting on inventory that’s not really going to start selling or make revenue for another few weeks, that creates a little bit of a cash flow consideration,” said Shah. 

All told, it could be a mad dash into the holiday season as the series of sales events stand to complicate inventory planning for sellers who are juggling consumer demand with the threat of hefty fees if their inventory runs too low or if their products go out of stock.

“It’s harder to adjust your supply chain when Amazon has already said, ‘Hey, if you’re going to send in your inventory in November or October, there’s a decent chance you’re going to miss Black Friday,” said Rob Hahn, COO of the e-commerce accelerator Pattern. “If you have an October sale, and it does really well, it’s like, ‘Well, all right, how do I make sure I can replenish that prior to the next large sale?'”

Complicating matters further for sellers are a slew of new fees that Amazon unveiled earlier this year. One fee that began in March imposes a surcharge on shipments sent to the company’s fulfillment centers if they don’t split up the inventory to be shipped around the country, known as an inbound placement fee, a service previously done by Amazon free of charge. Another fee, which went into effect in April, charges sellers when their inventory runs too low.

For sellers, the inbound placement fee adds yet more lead time on top of Amazon’s already accelerated Black Friday inventory deadline, as well as other costly knock-on effects. “Your transportation costs massively increase because you’re sending in five shipments instead of one, and they’re all smaller, so they’re more expensive, and they take longer to get into Amazon,” said Hahn. He added that smaller shipments are four and a half times more expensive on average compared to full truckloads that go to one destination. 

In a bright spot, Amazon said it eliminated its overage fee, which penalized sellers if their inventory exceeded capacity limits at the company’s warehouses. “The fee removal is in part due to Amazon’s more effective capacity management features, and we are glad to be able to eliminate these fees and allow sellers to not worry about them as we head into peak,” Dharmesh Mehta, vice president of worldwide selling partner services at Amazon, wrote in a LinkedIn post. “We hope this will help more sellers ensure they have enough inventory ready for peak demand this holiday shopping season.”

Still, the company said it would have limited spots to accept shipments during November and December. Amazon said sellers may encounter lower inventory capacity limits in October and November, as well. On average, the estimated capacity limits would have enough room for six months of inventory, the company said.  

Amazon gives sellers an update every month on how much inventory it is able to store, which varies by account. But Amazon’s reporting is not always reliable and “changes on the fly,” according to Gwen McShea, president of Lean Edge Marketing in Vermont, which works with about 30 Amazon sellers.

Last year, McShea said estimates she received in October about available storage space did not align with reality by the time shipments arrived at Amazon’s facilities. “Right as November clicks, Amazon is like, ‘No, you only have 60 square feet of storage space.’ Meanwhile, Amazon told me a couple weeks ago I had 80 for the month. So, you can’t send in anything more, and you owe Amazon for the space you exceeded.”

Sellers can use Amazon’s Capacity Manager tool to request an increase for a fee. “But why would you bid for space when they said you had plenty in the first place?” said McShea. 

For brands that also sell on other platforms like TikTok Shop, the prospect of going viral complicates inventory forecasting more so than in years past. “Do we go conservative? Do we go ultra-aggressive? Do we go somewhere in the middle?” said Obvi’s Shah. “It’s like a black box to be honest.”