Amazon Seller, Amazon Inventory Management / 7 MIN READ

Grow as an Amazon FBA Seller: Inventory Management Tips and Tricks

It’s always the question that haunts Amazon FBA sellers everywhere. “Am I truly optimizing my FBA inventory?” With everything you have to consider when you run your store, it’s easy to slip into complacency when it comes to deciding how to manage your FBA inventory. After all, there’s a fine line between just getting by with your Amazon store and setting it up for incremental future success.

The difference often depends on how you approach Amazon inventory management. Even seemingly small details can make a sizeable impact on your bottom line. So you need to know what to address your energies toward in order to maximize your return on investment and set the stage for your Amazon seller account to soar.

To that end, we’re going to delve into some tips and tricks that you can use to manage your inventory on Amazon. Of course, you should incorporate Amazon inventory management software into your methodology. This may prove to be one of the cornerstones of your approach, since it can take into account how Amazon itself manages inventory.

Beyond that, the responsibility falls to you to steer your inventory toward an upward trajectory. Here are some ways you can ensure that you handle your inventory to foster growth in your Amazon store.

Pay Attention to the Key Performance Metrics

In order to truly gauge how your store is faring, you need to mind key performance metrics. These can guide you toward how to adjust your inventory management and course-correct as necessary. Here are a few figures to watch:

  • Sales: The most obvious figure you should watch is your sales. If a sudden dip occurs, then you know you need to take action quickly to get your inventory back on track. Perhaps an inventory update is needed, but whatever the case, you’ll need to scrutinize your numbers to see what changed to trigger such a drop.
  • Amazon sales rank: This number might be ever-changing, but if you ever see it change, take note at recent activity in your stock to try and identify a root cause. Striking the right balance between supply and demand can be tricky. So check your rank regularly and react accordingly to restock items that need a boost to their sales rank.
  • Page views: Your page views say a lot about the level of interest your inventory is garnering among your prospective customer base. You might be low on a particularly popular item if page views drop or, at the very least, need to make a concerted effort to boost your visibility. And if your page views skyrocket, be ready to leverage that too.
  • Feedback: Ultimately, your customers are the lifeblood of your Amazon store. If you aren’t leaving them satisfied, then you are in for heaps of trouble. Perhaps your positive feedback has fallen off, or you may have seen an influx in complaints. Either way, you must react and resolve these issues quickly to save your rating and your business.

Exercise Caution and Strategy for Promotions

Promotions might seem like an easy way to boost sales, but truth be told, they are something of a double-edged sword. On the one hand, promotions are absolutely a strong way to boost sales (and, hopefully, your Amazon sales rank), earn positive feedback from customers and move inventory like never before.

However, today’s consumers are savvier than you might realize. They know how to find deals and exactly when to strike to take full advantage of them. In this regard, a promotion that really takes off can actually do more harm than good, eating into your inventory without serving your business well long-term.

Think about it. When you launch a promotion, you are sacrificing a bit of your profit margin, but a promotion that gets out of hand and leads to you running out of stock on items undermines all your hoped-for success.

Your sales will falter, your ranking will still fall and you’ll suffer the often-lasting consequences of a low inventory. Of course, promotions have their place, but don’t get too starry-eyed about the rewards that you put your Amazon store in serious jeopardy as a result.

Plan Ahead for your Inventory’s Busy Season

You’re always going to be able to maintain a more consistent, successful Amazon business when you take a step back and consider the big picture. When it comes to managing your inventory, that means knowing when the busiest times of year are and preparing your inventory to meet them.

Start by studying your backlog of sales data so that you can spot those times when your business tends to spike. Often, these fluctuations coincide with a specific season — say, if you specialize in sports equipment or winter clothes, etc. — but may also depend on what holidays are around the corner or what trends are sweeping the nation.

After you know when your business is expected to pick up, you can order enough inventory to meet anticipated demand and ensure that you are able to more effectively serve your customers.

There is, of course, more calculation involved in knowing how to time all the details just right (which we’ll discuss in a bit), but until you recognize when your products appear to be at their hottest, you’re playing a guessing game without any clue how to market your inventory properly. As a result, you’re really missing out on the opportunity to tap into your profitability.

Leverage Both Amazon and Third-Party Tools

In order to make the most of your inventory, you need to embrace a larger view of the tools you have available to you. Of course, Amazon’s built-in FBA inventory tools can take you a long way, providing an easy option to track inventory, customers and product performance.

It can even help you forecast your inventory turnover (more on that shortly), but you also shouldn’t be so beholden to the resources Amazon provides to you that you fail to investigate other tools that might be able to help you more effectively manage your inventory.

Once you explore the possibilities, you might even find that some third-party inventory tools better fit your business, since they are able to consolidate management for multiple sales channels into a single source. Many of them even allow you to employ automation for your Amazon seller account or run reports to uncover invaluable data.

Best of all, because these third-party inventory management software systems are endeavoring to stay competitive with Amazon’s native tools, you’ll find a wide range of services and functionalities that Amazon itself hasn’t made readily available to sellers.

Calculate and Monitor your Turnover Rate

One of the most fundamental parts of your inventory — the true secret to success for any top-ranking Amazon seller, really — is your inventory turnover rate. As its name implies, this figure represents the speed with which your inventory is sold through, that a particular shipment is depleted and due for restocking.

While this might be difficult to ascertain for Amazon sellers who are earlier in their store’s history (the more data you have, the easier it is to estimate), you should be able to determine at least an approximate range for the average inventory turnover rate of your products.

Once you have arrived at this figure, it’s time to put it into action. Factoring your turnover rate into your store’s plans, you will be able to decide how much inventory you need to have on hand to maintain your stock at a certain level. With a little bit of focused effort, you’ll be able to find a happy medium and minimize the chances that you would buy too much or too little of your product.

A forecasting tool, such as Amazon’s own Selling Coach, can help you track your daily sales and land on a solid prediction for your turnover rate. Moreover, such a resource can help you decide when the time has come to reorder, an especially vital bit of guidance for your hottest-selling items.

Breakdown your Supply Chain Lead Times

Fostering a larger understanding of your inventory and the cycle involved can play an integral role in how well you’re able to manage your store. In particular, your supply chain lead time — that is, how long it takes your products to arrive at your warehouse upon ordering — is absolutely essential.

Without this critical bit of knowledge, it’s impossible to accurately set benchmarks for when you need to reorder popular items and to forecast your budgets going forward.

Part of this understanding comes from developing relationships with your vendors and familiarizing yourself with their ways of working. If necessary, you may even need to make adjustments to your supply chain if you just aren’t able to find an effective way to minimize issues that may delay or otherwise disrupt the flow of your inventory.

After all, your suppliers all run on their own schedules, and in order to provide the quality customer service you no doubt strive for, you’ll need to sync everything up just right.

You might also choose to have a contingency plan — such as perhaps backup suppliers or inventory reserves — in place in the event that your supply chain lead time falters. Naturally, your priority needs to remain the overall satisfaction of your customers.

You cannot afford for that dynamic to be compromised, as it would cause repercussions that would wreak havoc on your business. Getting a firm grasp on your supply chain lead time curbs the possibility that a delay in shipping or other complication might negatively reflect on your customer service.

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Originally published Dec 17, 2019 12:06:48 PM / Updated April 3, 2020