Inventory management is key if you're selling on Amazon. Get it wrong, and you could face big problems. Why? Because poor Amazon inventory management can lead to lost profits, unhappy customers, and skyrocketing storage costs… Your bottom line will suffer.
In this blog, we’ll dive into why nailing your inventory strategy is essential. Ever wondered how to keep your stock just right? Or how to avoid those costly storage fees? We've got you covered with top tips and best practices.
Let's break it down—how do you avoid the pitfalls that trip up so many sellers? How do you make sure you’re not the one sending customers to your rivals because you’re out of stock again?
Stay tuned: We're going to tackle these questions head-on, show you how to keep your inventory tight, and keep your customers coming back for more.
What is Inventory Management?
Amazon inventory management involves keeping track of your stock to make sure you have just enough to meet customer needs without overdoing it or running out.
Here’s how it works: Amazon sellers need to keep a close eye on what they currently have and predict how well their products will sell in the future. This sounds straightforward, but it can get tricky. Sellers often struggle with the following:
- Understanding Amazon's data to get clear insights about sales
- Using this data effectively to manage and track inventory
- Enhancing sales strategies based on past performance
Thankfully, since Amazon operates digitally, every customer interaction and sale is recorded. This means you can quickly notice even minor shifts in demand. With the right approach, you can use this data to make smart decisions fast, keeping your stock levels perfectly balanced.
Why is Amazon Inventory Management Important For Amazon Sellers?
Customers today expect fast delivery and little room for error in inventory management. A whopping 68% of U.S. consumers want their items within three days, and nearly half are willing to pay extra for quicker shipping. They don't like waiting for items to restock — 70% get upset if orders are late.
If you're out of stock, customers will likely turn to your competitors, boosting their rankings while yours drop. On the flip side, if you have too much inventory, you'll tie up funds and might face hefty storage fees, especially if you use Fulfillment by Amazon (FBA).
Several factors influence inventory management for Amazon sellers, like manufacturing and shipping times, customs delays, FBA storage limits and fees, and how quickly your products sell.
Launching a new product on Amazon can be challenging. Without customer reviews, it's tough to gauge how much stock to order, and your new listing might not initially perform as well as those of your competitors.
As time goes on, you'll get a better handle on how quickly your products sell, helping you order just the right amount of stock to avoid both excess and shortages.
Common Amazon Inventory Management Challenges And How They Impact Your Business
Managing inventory is a crucial responsibility for Amazon sellers that demands careful planning and organization.
While it may seem simple, poor inventory management can negatively impact your Amazon business.
These are some of the most common inventory management challenges faced by Amazon sellers.
Stockouts
When sellers run out of a product, they can no longer sell it to customers. It can result in lost sales and revenue, as well as a negative impact on customer satisfaction.
Many customers tend to expect their items to arrive within 0-3 days of purchase, so they are likely to be upset when their orders arrive late due to a lack of inventory. Unhappy customers mean negative reviews and, ultimately, decrease profitability.
You should also remember that if your products are consistently out of stock, it can negatively impact your Best Sellers Rank and organic keyword ranking on Amazon, which may take time to recover. Consider temporarily closing listings if you won't restock them within two weeks to prevent negative impacts on your Inventory Performance Index (IPI).
Overstocks
When sellers have too much inventory, they may struggle to sell them. It can lead to excess costs and tie up valuable capital.
Excess inventory can negatively impact your IPI score, an important metric used by Amazon to evaluate the efficiency of your inventory management.
If you have too much inventory stored in Amazon fulfillment centers, your inventory capacity limits may be reduced, and you may be charged monthly and long-term storage fees. These fees can quickly add up, leading to significant financial losses.
Hence, it's important to monitor and manage inventory levels regularly to avoid these costs and maintain a healthy IPI score.
Inaccurate Inventory Tracking
If a seller's inventory levels are not accurately tracked, they may fail to fulfill customer orders promptly or accidentally oversell a product.
It can occur due to human error, system glitches, or other issues. It can lead to canceled orders, negative reviews, and lost customers, which can affect the seller’s reputation and sales.
Additionally, inaccurate inventory tracking can make it difficult for sellers to assess their product’s sales performance, making it harder to make informed decisions about their inventory and pricing strategies.
Poor Forecasting
Poor forecasting can be caused by a lack of data analysis, outdated or incomplete information, or an inadequate understanding of market trends and customer behavior.
If sellers do not accurately forecast demand for their products, they won’t be able to order the correct amount of inventory, resulting in stockouts or overstocks.
As mentioned above, stockouts can lead to lost sales and dissatisfied customers, while overstocks can tie up valuable capital and result in excess costs.
Moreover, poor forecasting can make it difficult for sellers to anticipate trends and shifts in demand, making it harder to stay competitive in their market.
2024 Update: Amazon Introduced a Low-Level Inventory Fee
As of April 1, 2024, Amazon has implemented a new low-level inventory fee aimed at encouraging sellers to maintain a sufficient stock of standard-sized products.
This fee targets items where the inventory consistently falls short of customer demand, affecting Amazon’s ability to distribute products efficiently and maintain its renowned delivery speeds.
The fee is applicable only when both the long-term (last 90 days) and short-term (last 30 days) historical days of supply drop below 28 days. If inventory levels are above this threshold in either period, the fee is waived.
This metric is assessed at the parent-product level, and the fee is added to the FBA fulfillment fee for all shipped units of affected products.
Best Practices For Inventory Management on Amazon
With a robust inventory management system, sellers can avoid missed sales and costly storage fees.
Additionally, customers will be satisfied with their purchase experience and are more likely to return for future purchases.
To improve overall profitability and reputation on the Amazon marketplace, consider following these best practices for inventory management:
- Use Inventory Management Tools: Amazon sellers can use several inventory management tools to help automate the inventory tracking and replenishment process. Some popular options include Sellbrite, Veeqo, and Stitch Labs.
- Set up Automatic Replenishment: Many inventory management tools allow you to set up automatic replenishment, which can help ensure that sellers always have enough stock to meet customer demand.
- Analyze Sales Data and Trends: Review your sales data regularly and identify trends to forecast demand accurately and adjust your inventory levels accordingly.
This way, sellers can identify slow-moving products and adjust pricing or promotions to increase sales to avoid overstocking certain items.
- Monitor Inventory Levels Regularly: Sellers must consistently monitor their inventory levels to ensure they do not run out of stock or end up with too much inventory.
- Maintain Accurate Inventory Records: Sellers must maintain updated inventory records to ensure they can fulfill customer orders on time and avoid overselling products.
- Plan and Anticipate Inventory Needs for Peak Shopping Events: Sellers should plan ahead for major events such as Black Friday, Cyber Monday, or Prime Day to make sure they have enough inventory to meet the surge in demand.
- Consider Fulfillment by Merchant (FBM) as a Backup Plan: With FBM, sellers can still fulfill orders directly from their own inventory in case they run out of stock in Amazon's fulfillment centers. This allows them to keep their listings active and continue making sales even if their FBA inventory runs out.
Stay in Stock With Proper Inventory Management
Managing your inventory well is crucial for any Amazon seller's success. Not keeping up can cause lots of issues: missed sales, high storage costs, and unhappy customers. Want to keep your stock levels just right and keep your customers satisfied? Follow the best practices we've shared.
If Amazon inventory management feels overwhelming or takes too much of your time, don't worry. That's where experts like us come in. At Seller Candy, we offer tailored inventory management solutions that fit your business perfectly.
Struggling to keep up with inventory demands? Talk to us today. Let us help you streamline your inventory management and boost your Amazon sales. Isn't it time you took the stress out of stock management? Let’s make it happen together: Get your free quote today!
