Amazon's new inventory index goes live this weekend
Amazon is instituting its Inventory Performance Index this weekend.
First announced last fall, Amazon calls the IPI a “first step in setting a bar” for inventory performance by tracking how well merchants shift products that aren’t selling and readjust listings.
Beginning Sunday, inventory that sits in Amazon warehouses for too long without shipping to customers or back to the merchant will hurt the seller IPI.
A score lower than 350 (on a 0 to 1,000 scale) means a merchant can’t send more products to the warehouses. Amazon will also charge a monthly “overage fee” on inventory exceeding storage limits.
Sellers could previously rent unlimited space regardless of inventory management practices.
Amazon has poured billions of dollars into warehouse expansion during the past decade to make room for the massive influx of inventory the company is storing for third-party sellers. Now, it's putting in place a program to force those sellers to use the space more efficiently, penalizing those who don't.
It's part of Amazon's effort to ease its growing warehouse congestion problem. The company can't open fulfillment centers quickly enough to meet the demand that comes with having millions of outside sellers on Amazon. Third-party merchants now account for more than half of products sold on the site.
In an attempt to reduce the clutter, Amazon is instituting a system called the Inventory Performance Index, which it describes as a “first step in setting a bar” on inventory performance. The IPI measures how well each merchant manages its inventory, removes products that aren't selling and fixes its listings as needed
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