In order to differentiate between the two, Amazon looks to see what your sell through rate is. As Amazon described it:
Storage limits are reviewed monthly. If you have sold 8% or more of your inventory each week in the nine (9) previous weeks, your inventory storage limit is eligible to be raised. To request an increase to your storage limit, contact Seller Support.
What is the definition of a “sell through rate” and how does Amazon determine it?
Sell through rate is a percentage of units sold during a period (weekly for Amazon) and it is calculated by dividing the number of units sold by the beginning on-hand inventory (for that same time period).
So basically you need to be selling 8% of your total inventory every week, consistently, in order to be even considered for an increase in inventory storage limits. This is a mark you want to be shooting for every week anyways otherwise you’ll be hit with long-term storage fees every six months.
How do I monitor how much inventory I have or if I am approaching my inventory limit?
Amazon has a long way to go before I could happily say that they 100% support their sellers and their businesses, but in this case, they have given us a visual graphic to help remind us of our inventory status. They limit is set at 5000 for new sellers so you could always look at your inventory page and just count your items but they help us out with the graphic like below.
The color of the graph will change from green to yellow to red, based on your inventory health.
- Green Your inventory level is at less than 75% of your limit
- Yellow Your inventory level is between 75% and 90% of your limit
- Red Your inventory level is at more than 90% of your limit
I’m approaching inventory storage limits, how do I reduce my inventory to stay below the cap?
There are three ways to decrease the amount of inventory you have in an Amazon fulfillment center:
- Sell some of your current inventory
- Request to have some of your inventory returned to you by creating a removal order
- Request to have some of your inventory disposed of by creating a removal order
If your approaching your limit, like we said earlier, it could either mean your killing it and need to expand your business or your inventory is becoming stale and it’s time to “clean our your closet’. Either way, analyzing your inventory health is a great best practice and is not time wasted.