Substituted Li-layered transition-metal oxide (LTMO) electrodes such as LixNiy MnzCo1-y -zO2 (NMC) and LixNiy Co1-y -zAlzO2 (NCA) show reduced first cycle Coulombic efficiency (90-87% under standard cycling conditions) in comparison with the archetypal LixCoO2 (LCO; similar to 98% efficiency). Focusing on LixNi0.8Co0.15Al0.0.5O2 as a model compound, we use operando synchrotron X-ray diffraction (XRD) and nuclear magnetic resonance (NMR) spectroscopy to demonstrate that the apparent first-cycle capacity loss is a kinetic effect linked to limited Li mobility at x > 0.88, with near full capacity recovered during a potentiostatic hold following the galvanostatic charge- discharge cycle. This kinetic capacity loss, unlike many capacity losses in LTMOs, is independent of the cutoff voltage during delithiation and it is a reversible process. The kinetic limitation manifests not only as the kinetic capacity loss during discharge but as a subtle bimodal compositional distribution early in charge and, also, a dramatic increase of the charge-discharge voltage hysteresis at x > 0.88. Li-7 NMR measurements indicate that the kinetic limitation reflects limited Li transport at x > 0.86. Electrochemical measurements on a wider range of LTMOs including Li-x (Ni,Fe)(y) Co1-yO2 suggest that 5% substitution is sufficient to induce the kinetic limitation and that the effect is not limited to Ni substitution. We outline how, in addition to a reduction in the number of Li vacancies and shrinkage of the Li-layer size, the intrinsic charge storage mechanism (two-phase vs solid-solution) and localization of charge give rise to additional kinetic barriers in NCA and nonmetallic LTMOs in general.