The landscape is changing for Amazon sellers. There’s more competition than ever, along with complex FBA fees, reimbursement changes, tariffs, and other financial challenges. Identifying your under-performing SKUs is critical as staying profitable gets more challenging.
Under-performing SKUs tie up capital, impact your Buy Box performance, and increase FBA storage fees. After accounting for all of the costs associated with selling on Amazon you may even find that some of your underperformers are losing money or barely breaking even.
Regularly analyzing SKU performance is necessary for scaling your Amazon business. In this article, we’ll cover how to identify slow movers to reduce waste and improve FBA profitability.
Low sales velocity, declining profit margins, and high return rates are all signs of SKUs that aren’t performing optimally. Here are key metrics to track to identify underlying issues:
You can find these metrics in various Seller Central reports to do your own analysis or save time by using analytics tools such as SellerPulse. The FBA analytics software can help you spot trends and find problem SKUs faster. See weekly changes at a glance and drill down to the SKU level for additional insights into FBA sales, fees, returns, Buy Box status, and inventory history.
Once you’ve discovered which SKUs are under-performing, it’s time to decide what to do about them. Dive into understanding what’s going on at the SKU level by looking at your SKU’s recent trends and exploring competitive ASINs to see how your listing compares. Pricing issues, losing the Buy Box, poor listing content, seasonal demand shifts, and high FBA fees are all common culprits for underperformance.
Here are a few strategies to try to improve SKU performance:
Listing optimization: Improve your listing images, titles, and bullet points. Be sure all descriptions are accurate and provide the details customers need, such as sizing information.
Repricing: Consider increasing or decreasing prices based on your competitive research and costs. In some cases, you might want to decrease your price to sell through inventory if you aren’t planning to restock the SKU. If high return rates and FBA fees are eating into your margin, it might be time to increase your price.
PPC campaigns: Running ads on and off Amazon can help you boost visibility and sales for your products.
Drive external traffic: Consider working with influencers and/or driving traffic from social media to increase visibility.
Get more reviews: Amazon reviews have a big impact on search visibility. Send automated review requests to increase reviews and improve search performance.
If you’ve tried these tactics and don’t see improvement, or if your margin is just too slim, it might be time to cut your losses and focus on SKUs that are performing well.
Look at sales velocity and historical sales data to identify dead stock that won’t recover. Prolonged storage durations and minimal recent sales can be a sign that an SKU is under-performing. Amazon FBA’s aged inventory surcharge applies to inventory that has been in fulfillment centers for more than 180 days.
Of course, this trend might be expected if you sell a seasonal product. Use market trends and seasonality data to determine if demand is likely to rebound. If not, it’s likely time to remove or dispose of the inventory to avoid incurring additional fees. Consider your carrying costs alongside the potential liquidation value to determine your next step. You have a few options when it comes to removing FBA SKUs:
You can sell the inventory on another platform like eBay, Walmart, or your website if you have the inventory returned to you. Calculate the cost of getting the inventory back along with the original costs associated with manufacturing, shipping, and storing the inventory to determine whether this makes sense for your product.
If you’d like to remove an SKU by selling it on Amazon, consider running Amazon Coupons or Lightning Deals to stimulate demand.
Market trends can be unpredictable, but proactive inventory management can help prevent under-performing SKUs. Use demand forecasting to stay in stock without overstocking. Software specifically designed for FBA sellers can streamline this process for you. Use a balance of FBA (Fulfillment by Amazon) and fulfilling orders yourself for better control.
Audit your SKUs regularly to analyze performance. If you manage your inventory effectively, the FBA returns processing fee, low-inventory-level fee, aged inventory surcharge, and inbound placement fee are relatively preventable.
Analyze returns regularly to determine the most common return reasons and do what you can to reduce returns. Some categories tend to have higher return rates than others, but issues with your listing, packaging, or manufacturing may be preventable. Identifying these trends gives you action items such as improving your packaging to reduce your return rate. Changing your packaging or enrolling in the Ships in Product Packaging (SIPP) program may also reduce your overall FBA fees if your product dimensions decrease.
Maintaining FBA profitability isn’t always easy, but it’s worth the effort. Use automated FBA analytics software like SellerPulse to stay on top of key insights and trends that impact your business. Having an ongoing SKU performance tracking process helps you make smart decisions faster instead of losing money for months due to underperforming SKUs. Try it free today!
About the Author
Becky Trowbridge is the Senior Marketing Manager at eComEngine. Her mission is to empower Amazon sellers with the information they need to be successful in a competitive market.