Whether you are a new seller or an established one, inventory management is a crucial factor for effective holiday season planning on Amazon. This year during Prime Day, several sellers faced challenges by missing deadlines for inbounding inventory. They encountered difficulties in various aspects ranging from loss in sales to incurring additional costs. To ensure that such problems do not arise during the BFCM period, sellers need to critically focus on inventory management. They need to strategize their entire inventory plan to not just win big during Q4 but also control the damage caused by missing timelines. Efficient management not only saves costs but also benefits your products by improving the chances of achieving success in the holiday season and beyond. A sound inventory management system helps Amazon sellers keep their product in-stock rate high, thus avoiding any potential loss of sales.
In this article, we are going to deep-dive into some of the best strategies that you can employ to fix your inventory issues:
- Understanding and improving your IPI score
As Amazon restricts inbound ASINs with lower IPI (<500), many sellers reported that they were unable to inbound the material and therefore could not leverage sales from high traffic, despite having the final product in hand on Prime Day. This directly impacts sales/ranking on Amazon which leads to considerable loss on high traffic days, such as Prime Day, Black Friday and Cyber Monday.
To avoid this and improve your IPI score, you should periodically examine excess inventory and slow-moving products. Identify ASINs that have been in the warehouse for 90 days or more. Then, determine how you can get those ASINs to sell at a faster rate. You can offer discounts or promotions on these ASINs, ahead of the peak selling season. You should also focus on resolving any issues related to stranded/unfulfillable inventory to avoid paying excess storage fees.
Prioritize the timelines given by Amazon for getting inventory inward for big holiday events and actively strive to meet it. While the thumb rule is that the products must be inbound a month before the event day, it differs for peak traffic days. For instance, the date for Prime Day was 11-Sep-2020 and the date for Black Friday and Cyber Monday is around 05-Nov-2020. By doing so, you will have all of your inventory inbounded and your sales potential will not take a hit.
- Forecasting your inventory requirements
You must have your goals and strategy in place first and then plan for inventory in order to achieve that goal. Inventory requirements vary according to the different strategies and goals. For instance, if you have planned to offer higher discounts on a particular ASIN/program to drive more traffic, then, this strategy would require planning additional inventory for these ASIN/s. You will need to extensively analyze the sales trends and inventory levels. Based on the observations, you should forecast your inventory requirements keeping the lead time and supply chain factors in mind. If the inventory planning is not done effectively, you can land up with excess or short inventory, both of which can affect your sales potential. The holiday season along with any seasonal peaks and new trends can affect inventory requirements. Consider these factors to make an educated decision while forecasting inventory.
- Determining lead time and safety stock norms
By critically examining your supply chain and lead times, you can figure out the entire process of sourcing, receiving, and storing the Amazon inventory. Additionally, complete knowledge of the lead times helps you determine the required quantity and frequency of ordering the inventory to cover demand over a given period. By doing so, you can avoid over-ordering or running the risk of hitting a shortage before the arrival of new stocks.
Based on the supply lead time, finalize safety stock norms to ensure that the products will be available to customers, even if there are unanticipated delays in the supply chain. Typically, it is recommended to have a buffer stock of about 4-6 weeks depending on the sales rate, lead time and supply chain factors.
Cost considerations are also important while deciding the safety stock norms. Understand the restriction on inventory inbound by Amazon on each ASIN and based on economical considerations, third party warehouses can be used to store additional inventory. Further, several sellers have reported Amazon restricting booking of inventory, depending upon factors such as recent sales rate, utilization rate, etc. By having third party warehouses as a backup, sellers are able to sell the ASINs through FBM if they are unable to sell through FBA due to restriction on inventory inbounds.
Hence, in order to handle the unbooked inventory, it will be useful to review the actual utilization rate given by Amazon and assess if it is correct. If not, sellers can raise a case with Amazon to seek a higher booking of inventory.
- Factor in your promotions and sales
A well-timed lucrative promotion can lead to a spike in sales, which can drain the inventory before the arrival of the new stock. This can result in loss of customers and lower Amazon ranking until the product is back in stock. To avoid this, promotions must be planned ahead and factored in during the inventory planning process. Keep in mind the deadline for the submission of promotions as well, for instance, the last date for the submission of BF/CM promotions was 10-Oct-2020.
By chalking out a detailed promotion and ad spends calendar and formulating an extensive inventory plan, you can seamlessly operate promotions and ad sales, especially through busy shopping seasons. Holiday Gift Guide, Deal Guide, Launchpad Gift Guide, etc are avenues that can be explored for this purpose Your Amazon relationship manager or the support team of Amazon can further help you with promotions planning.
All in all, planning and managing your Amazon inventory can seem daunting, however, sellers must rigorously focus on it to have a successful Q4 on Amazon. From maximizing sales to winning the buy box, it plays a crucial role in new product launches as well as the scale-up of the existing products. With the strategies mentioned above, sellers can maintain a healthy inventory position and stay competitive in the coming months.
Want to know how you can effectively manage Amazon inventory for higher sales during Q4? Hit reply and let’s talk.