Amazon restricts warehouse storage as Covid-19 crisis continues and holidays loom

Key Points
  • Amazon is instituting quantity limits for product shipments from third-party sellers that use its U.S. warehouses, the company announced Monday.
  • All product categories will have quantity restrictions in order to ensure sellers have enough space to store their goods.
  • Between March and May, Amazon encountered a flurry of online orders tied to the pandemic, resulting in supply chain issues and delivery delays. 
An employee looks for items in one of the corridors at an Amazon warehouse.
Carlos Jasso | Reuters

Amazon is putting in place new inventory restrictions at its warehouses to prepare for the upcoming holiday shopping rush.

In a note to sellers on Monday, the company said it's instituting stricter quantity limits for all third-party merchants that store goods in its U.S. warehouses. 

All product categories are affected by the change, with quantities differing on a product-by-product basis. The new policy, which was first reported by CNET, takes effect today. 

"Given the unprecedented challenges the Covid-19 pandemic has placed on all of us, we are preparing early to deliver a great holiday season for our customers and selling partners — building out capacity as quickly as we can so we can deliver products customers need and want directly to their doorsteps and help you continue to grow your business," the note said. 

An Amazon spokesperson told CNBC that the quantity limits will "help ensure all sellers using Fulfillment by Amazon have space for their products." FBA is Amazon's program that lets individual sellers ship their products to an Amazon warehouse and then Amazon ships the product to customers for a cut of each sale.

Even with the new limits, most products will have enough space available for over three months of sales. If merchants sell all of their stock, they can send in new inventory any time, Amazon said.

Amazon is also waiving inventory removal fees at its warehouses starting July 14, the note said. Amazon typically charges sellers a storage fee for products that aren't selling in its warehouses. By waiving the fee, it will allow sellers to more easily remove stagnant inventory and free up space at FBA facilities. 

The changes show how Amazon is preparing for this year's holiday shopping season, which is likely to be more challenging than before given the Covid-19 pandemic. 

Between March and May, Amazon weathered a series of supply chain constraints and delivery delays at its warehouses as a result of a surge in online shopping orders. The company prioritized shipments of essential goods to make sure shoppers could access in-demand items such as hand sanitizer and toilet paper. 

Since then, delivery speeds have largely returned to normal, but as Covid-19 outbreaks continue to pop up in some parts of the U.S., Amazon has taken steps to prepare for the possibility of new demand constraints, including pushing back its annual Prime Day shopping event. Prime Day is now expected to take place in the fall, with a target of the first week of October

WalMart's Amazon Prime competitor set to launch in July, Recode reports
WalMart's Amazon Prime competitor set to launch in July, Recode reports