As a new Amazon seller, it’s crucial to understand the best practices for Amazon inventory management. The trouble is, this skill primarily comes with experience and requires mastering a lot of moving parts. And when compared to crafting a listing and showing off your product with stunning Amazon photography, inventory management isn’t the most exciting task on your to-do list. But if you don’t get it right, it’s going to impact your business from top to bottom.
We’re not going to sugarcoat it — sales forecasting and inventory management is tough, even for experienced sellers. The big thing to take away here is understanding why inventory management is so important and how you can avoid a detrimental stock out… never letting customers see this:
Let’s get to it!
Why Being Out of Stock is So Bad for Your Amazon Business
The implications of being out of stock run much deeper than you may think. Amazon inventory management is a crucial component of your business because, unlike brick and mortar stores, there are no backorders or clients who will wait patiently and just pop back in whenever a product isn’t available. Amazon shoppers will go straight to a competitor who has the item in stock, causing you to lose sales and all-important cash flow.
As if that weren’t enough, here are more ramifications for going out of stock:
- Dropped Rankings: If you’re out of stock for a long period of time or on a regular basis, you’ll likely experience a significant drop in keyword ranking, which can be difficult to overcome even when your product comes back in stock. Giveaways and sponsored ads can help you regain ground, but you’re now operating with poor sales history and you’ll be operating with less money due to lost revenue.
- No Organic Search Visibility: Amazon typically removes product listings without stock from its search result pages. While your listing may still live somewhere on Amazon, it’ll have a lot less visibility.
A huge part of Amazon’s appeal and what makes it arguably the world’s best business is its fast, easy access to millions of products. If you don’t manage your inventory properly, you’re going to be missing out on so many sales opportunities.
Having Too Much Inventory Isn’t Good Either
While you want to avoid having too few (or worse, zero) of inventory, you also want to avoid having too much. Inventory that’s sitting stale and stagnant isn’t making you any money — it’s actually costing you some.
On the 15th of each month, Fulfillment by Amazon (FBA) performs an inventory cleanup and any inventory that’s been in its warehouses for 181 to 365 days will incur a long-term storage fee (LTSF) of $3.45 per cubic foot. Items that have been in fulfillment centers for more than 365 days on the inventory cleanup date will incur a long-term storage fee of $6.90 per cubic foot.
Starting August 15, 2018, items that have been in Amazon fulfillment centers for more than 365 days will be subject to a minimum fee of $0.50 per unit per month. Either the long-term storage fee or the minimum fee will apply, whichever is greater.
If you’re not moving inventory, these storage fees can really add up!
Amazon Inventory Management: Knowing When and How Much to Order
So you don’t want too little and you don’t want too much. What does that mean? Take stock of your inventory and find a happy medium, or a healthy number that allows you to re-order stock while still continuing to fulfill orders.
When to Place a New Order
All new sellers struggle with how many units to buy because there are so many factors to consider. However, understanding your lead times and anticipated sales velocity can help you forecast sales and plan inventory orders.
If you’re unfamiliar with the term, lead time is the number of days that occur from when you place an order with your supplier to when the item is ready for purchase. Many Chinese suppliers typically operate on 30-day turnaround times, but if it takes another 20 days for the units to ship, clear customs and be delivered to a fulfillment center (or wherever else), that’s 50 total days you’ll need to take into account.
Like everything else in your Amazon selling journey, getting a good handle on your lead time comes with experience. As you continue to work with your manufacturer and forwarder, you’ll be able to compile data and better determine this. To help you do so, we recommend you keep detailed records of:
- The date you order from the manufacturer
- The date manufacturing is completed
- The date it ships from the manufacturing facility
- The date your shipment arrives at your home or an Amazon FBA center
- The date your product is checked into Amazon and ready for purchase
This information will also help you evaluate the performance of your manufacturer.
Using Historical Sales Data for Inventory Forecasting
When it comes to predicting your inventory needs, examining past sales is a great place to start. If you don’t have enough data to go by, check out your competitors’ sales trends to make these predictions.
Viral Launch’s Market Intelligence is currently the only tool available that offers Amazon specific market sales trends. We use a system of complex calculations based on hour-by-hour changes in BSR to create the most accurate sales estimates. We also show past sales estimates that we’ve calculated for each product to give you an understanding of how the product has performed in the past compared to how it’s performing now. This will help you better predict how the market will behave in the future.
With the proper sales forecasting techniques and Amazon inventory management, products will stay in stock, ideally resulting in more sales and more cash flow. A win-win!
Prepare for Peak Times
As you examine historical sales data, you’ll see how demand ebbs and flows. While this may be the nature of the market, there are other factors at play that will affect your sales history and therefore, your stock needs.
To meet fluctuations in demand, plan ahead and prepare for these peak times:
- Seasonal Demand: Consider seasonal weather and activities and how that might impact your sales. For example, anyone selling pool toys like squirt guns or floaties will naturally see an increase in sales during the warmer months. Other products may see a sales increase during the winter months or the wedding season.
- Holidays: We all know Christmas time is huge for retailers. On Amazon, it’s all about Cyber Monday. And aside from your own country’s holidays, it’s also important to know what holidays are coming up for your suppliers. The Chinese New Year is the most notable holiday in China, resulting in widespread work stoppages across the country.
- Trends/News Stories: Solar eclipse glasses and fidget spinners are great examples of products that capitalized on big news events and popular fads. Pay attention to what people are talking about on social media and news sites and see if you can take advantage, too.
- Q4: Since Q4 is right around the holiday season, most brands can typically expect to see increased demand from shoppers as well as more competition from other sellers.
Preparing for peak times means anticipating longer lead times on all inventory orders, shipment delays and longer check-in times at Amazon. For reorder quantities during the Q4 boom, it’s best to find your peak sales projections for the holidays and order to accommodate it.
The goal is to always keep your inventory moving and be able to meet any spike in demand without missing a beat. By anticipating (and meeting) demand properly, you’ll be maximizing profit potential and building a better overall brand.
Managing Your Inventory in Seller Central
There are several free tools available within Seller Central, some specifically for FBA sellers, that can help with your Amazon inventory management.
On the Manage Inventory page, you’re able to perform many routine inventory management tasks, including:
- Viewing and sorting inventory
- Creating, copying and editing listings
- Managing pricing
- Adding and removing images
- Closing and deleting listings
On the Inventory Reports page, you can find a wide range of information about your FBS inventory:
- Monthly storage fees report
- Stranded inventory report
- Reserved Inventory report
- Inventory Reconciliation Report
- Amazon-Fulfilled Inventory Report
- Daily Inventory
- Monthly Inventory
- Received Inventory report
- Inventory Event Detail
- Inventory adjustments
- Inventory Health Report
- Manage FBA Inventory Report
- Manage FBA Inventory Report – Archive
- Cross-Border Inventory Movement
- Inbound Performance
The Restock Inventory tool provides recommendations to FBA sellers on products to restock, suggested order quantities and reorder dates. Input your specific lead time and product volume to further customize these suggestions for your unique business.
Amazon also recommends that sellers keep a close eye on the shipping queue to monitor information about their shipments, including those that are in progress, in transit and at a fulfillment center.
For sellers with Professional selling plans, Amazon Selling Coach can provide you with personalized recommendations to help facilitate your success on Amazon. Discover new product opportunities, use the Match Low Price feature for pricing strategies or check out different Listing Enhancement tools to improve the quality of your content.
Selling Coach also offers in-depth inventory opportunities, including low stock alerts and Amazon’s suggested restock time using your recent sales data.
Source: Amazon Seller University YouTube Channel
Third-Party Inventory Management Tools
While Amazon has many helpful tools, you may find it’s just not feasible to manage inventory for hundreds or even thousands of SKUs all on your own. Multi-channel sellers in particular face this problem.
There are scores of automated inventory management software tools available from third-party companies to help you manage your inventory on Amazon and across other eCommerce platforms. However, many can cost you upwards of $40 a month, so take the time to weigh the pros and cons of these services before investing.
Final Thoughts: Amazon Inventory Management
A streamlined and organized Amazon inventory management strategy will help you stay in stock and plan ahead for peak times. While there are plenty of moving parts to inventory management, many problems that pop up are preventable. Continually monitor your current inventory levels, sales volume and lead times to make informed decisions about any new inventory shipments. Maximize your sales and profits by meeting inventory demands head on!