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Amazon tightens warehouse storage rules to get ahead of holiday shipping rush

The e-commerce giant wants to avoid clogging up warehouse space with products that won't move quickly during the peak selling season.

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- 03:19
Amazon Fulfillment Center

Prepping packages at an Amazon warehouse in Thornton, Colorado.

Helen H. Richardson/MediaNews Group/The Denver Post via Getty Images

Months into the coronavirus pandemic, Amazon continues to struggle with plenty of problems, such as out-of-stock sanitizing wipes, price gouging, shipping delays and disrupted supply chains. Expecting challenges to continue through this unprecedented year, the e-commerce giant revealed new plans Monday to prepare its huge logistics network for its first holiday-shopping season during a global health crisis.

The retailer will institute new limits on how much inventory that independent sellers can store in Amazon's US warehouses, according to a letter to sellers that Amazon sent Monday morning. The intention is to prevent large incoming shipments of products that aren't big draws during Christmas -- say, Easter bunnies or Fourth of July baby onesies -- that end up gobbling up a lot of storage space. That way, hopefully, there will be enough storage for every seller and Amazon will be able to provide more selection for customers.

Amazon said this change, which is effective immediately, shouldn't have any impact on customers being able to purchase top-selling products like the Nintendo Switch or Roku-powered TVs. Sellers will be able to store over three months of inventory for their items -- with limits set on a product by product basis -- and can replenish this inventory as items go out the door. Amazon says sellers tend to store only about six weeks' worth of products with the e-commerce giant. 

"Even though it's July, we're preparing early for the holiday season to meet sustained increased demand," according to the letter to sellers, which Amazon shared with CNET.

The new storage limits come after Amazon's logistics network was thrown into chaos as the coronavirus stormed across the US in March and April. Many essential products like toilet paper and hand sanitizer went out of stock, and shipments were delayed for weeks. To get a handle on a spike in orders as millions of customers avoided going to stores, the company temporarily restricted deliveries of non-essential items coming into its warehouses and slowed down shipments of those same items by up to a month.

Amazon has since inched its way back to normal operations but, like every other retailer, continues to face difficulties. So Amazon is planning ahead to try to avoid more issues during the critical holiday-shopping season and help get all its deliveries out, even during the pandemic. As part of this work, Amazon has hired 175,000 new US workers and instituted dozens of virus-related safety protocols in its warehouses.

"Our commitment to our selling partners has never been more steadfast and we are taking steps now to help ensure all sellers using Fulfillment by Amazon have space for their products," an Amazon spokeswoman said in a statement Monday.

In addition to the holiday season, Amazon will likely still need to prepare its warehouses for Prime Day, a massive sale that usually takes place in July but has been delayed likely until fall.

Aaron Rubin, CEO and founder of ShipHero, which provides warehouse space and warehouse software, said independent sellers already have plenty of options for long-term storage outside of Amazon warehouses. Because of this, he doesn't expect that Amazon's decision will cause a lot of disruption and said some sellers may even end up saving money by moving products out of Amazon's fulfillment centers.

Neil Saunders, a retail analyst for GlobalData, said it made sense for Amazon to avoid letting its sites serve as a "holding warehouse for a huge amount of stock that takes a long time to whittle down." Making the change is crucial going into the holiday season, when online sales will be driving a lot of retail sales and warehouse space will be limited.

"It's really important to make sure the right product makes it in the warehouse," he said.