The news: Amazon is lowering capacity limits in its fulfillment centers for some sellers, The Information reported, as it revives some of its pandemic tactics in light of tariff uncertainty.
Why? The last time Amazon cracked down on seller inventory was during the COVID-19 pandemic, when it sharply reduced capacity to make room for essential goods like groceries and household products. A similar strategy could be at play now as it looks for room to store the orders it pulled forward into Q1 to avoid tariffs.
At the same time, with sellers themselves ramping up orders to take advantage of the temporary tariff respite, the retailer may be trying to discourage merchants from using its fulfillment centers to stockpile goods. Excess unsold inventory in its warehouses could gum up Amazon’s ruthlessly efficient fulfillment network, undermining its push for ever-faster delivery—especially during the upcoming Prime Day sale.
- That, at least, is its stated rationale: The retailer’s adjusted capacity limits are meant to “maintain an efficient fulfillment network to ensure we can continue providing customers with fast delivery of a broad selection of products,” a spokesperson told The Information.
- But they also serve as a warning to sellers not to rely on Amazon’s fulfillment centers as long-term storage—which could complicate their tariff mitigation efforts.
Our take: Amazon’s capacity limits are yet another headache for third-party sellers on its marketplace to navigate—and one that will affect their ability to manage tariff costs, as well as their performance during crucial shopping periods like Prime Day.
- One option is to move more inventory into the retailer’s long-term bulk storage offering, known as Amazon Warehousing and Distribution (AWD). But even then, sellers can face difficulties moving goods from AWD into Amazon fulfillment centers.
- Another option is to take Amazon’s advice and discount, liquidate, or donate items to avoid inventory pile-ups—although such a strategy may not appeal to merchants trying to protect their bottom lines.
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