Sellers on Amazon say the company's new cap on products they can send to its warehouses is cutting into their holiday sales: 'It's killing us'

• Third-party sellers are saying Amazon's inventory restrictions are making it difficult for them to replenish supply and keep up with demand during a busy holiday-shopping season.
• Amazon capped the number of items that the sellers can ship to its warehouses in an effort to reserve space for all sellers, but sellers told CNBC that the new rules are cutting into their holiday sales.
• This year's holiday-shopping season has been forecast to be the busiest ever, bolstered by online sales already driven up during the pandemic, with customers forced inside.
• The report also comes as Amazon remains under scrutiny over its treatment of third-party sellers on its online marketplace.
• Amazon has since emphasized the success that sellers have seen on its site — the company said third-party sales surpassed $3.5 billion during its Prime Day event this year.

Amazon's third-party sellers are saying the company's cap on the number of products they can ship to warehouses is hurting their holiday sales and making it difficult to replenish supply, according to a new report from CNBC.

Amazon rolled out the new policy in August in an effort to ensure there was enough space for all sellers to store their shipments, despite the creation of more warehouses across the country, during a pandemic-driven online sales surge.

Amazon sets the quantity limits by factoring in the last 90 days of sales for any given item, per CNBC, and the company said it also factors in forecasted demand, including seasonal. But sellers told CNBC that they didn't think the company was considering the high demand of the holiday season when setting those restrictions. The company also says it caps the number of shipments for a new product at 200 units until those sellers build up their business.

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According to one third-party seller that spoke to the outlet, Amazon capped the number of units per shipment at 230. He said that number has been in the thousands in the past few years.

As CNBC notes, Amazon said back in August that third-party sellers can send in more stock as they sell products. But sellers told the outlet that their shipments are delayed when they send them to the company's warehouses. Sellers also said that they're worried about their listings being bumped down by Amazon's algorithms if they run out of supply, according to the report.

Another seller, Jerry Kavesh, told CNBC that there's a delay in about 30 of his units in entering one of Amazon's warehouses.

"It's been that way for five days," Kavesh told CNBC. "It's killing us."

Amazon said it checks in shipments from sellers within 3-5 days of them arriving at the warehouses. The company said that processing time could be delayed depending on which warehouse the items are shipped to.

Amazon said its cap on shipments also applies to its own brands, per CNBC. Some sellers told the outlet that they expect this year's sales to exceed those from last year, but the shipment limitations are still cutting into potentially higher sales.

In response to Business Insider's request for comment, Amazon said it will be providing further details regarding the claims made in the CNBC report soon.

This year's holiday shopping season has been forecast to be one of the busiest ever - online shopping is expected to rise 35% this year. The expected influx of online sales has led experts to warn of a "shipageddon" in which retailers and shipping companies are forced to scramble to keep up with the surge in business.

The report comes as Amazon's treatment of its third-party sellers remains under scrutiny. The e-commerce company faced questioning from Congress this past summer over allegations that the firm released new products through its private label that appear almost identical to those sold by third-party sellers. The House determined that Amazon indeed used third-party seller data to inform its own copies of the most popular items listed on its online marketplace.

Read more: Amazon's biggest strength isn't its size or delivery network - it's the data. Now the EU wants to rein it in.

Employees also spoke out in 2019 about how easily Amazon can scrape third-party seller data and share it with its own retail team.

Amazon has since stressed that small businesses are thriving on its online marketplace. Amazon said third-party sales surpassed $3.5 billion during its Prime Day event this year, a growth the company said its own retail business hasn't seen.

You can read the full report on CNBC here.