Amazon Inventory Management: Mistakes you should look out for and avoid
Effective Amazon inventory management is all about sales forecasting, logistics, and looking at numbers….lots of numbers. Something most sellers find irrelevant, or even boring.
Yes, this is the less glamorous part of selling on Amazon. For outsiders, being an Amazon seller conjure visions of internet savvy retailers selling hundreds of items per day. And hough selling hundreds of items per day is indeed plausible, what’s not mentioned is the backend work that sellers go through to ensure the continuity of said sales.
This my friend is the nitty gritty of things. The side that is rarely seen, or talked about, when it comes to selling on Amazon. Nevertheless, it is a key component in the success, or failure, of an Amazon seller.
In this article, I will provide you with three Amazon inventory management mistakes that you should steer clear of.
Let’s start with…
Amazon Inventory Management: The problem of not having one
Let’s start with the most obvious…
No Inventory, No Sales
If you think that it’s ok to have a seller account without anything to sell, then you are wrong. Doing so will get you “Ghosted” by Amazon.
Being ghosted means that you won’t be searchable on the platform, nor can anyone see your listings. Also, by staying in this status, Amazon might just cancel your Seller Account if it stays that way for too long.
You’re Allowing The Competition To Overtake You
Having nothing to sell means that potential customers will look for other sellers that can provide them with what they need.
Let’s say you have listing that used to sell well, but since you didn’t manage your inventory correctly, you now can’t sell more of it. If you did your Amazon SEO right, then you probably will be appearing on the first page of that listing. By not being able to continue selling your product, competitors will slowly eat away on your search result rank, and eventually overtake you.
As with anything related to SEO, it takes time to reap ranking results. But at the same time, said results can easily vanish much faster depending on your competition.
So a week of being Out Of Stock, might cause you a month’s work of SEO. You see where this is going yeah?
Basically, you’re not just doing the competition a favor, you’re also making it difficult for yourself.
Top Amazon Inventory Management Mistakes
Not Using Sales Velocity Data To Monitor Inventory
Sales velocity is a metric that tells you how fast an item is being sold. Usually used as a metric to gather long term data, sales velocity can be a huge indicator as to how fast, and most probably when your current inventory (for a specific item) will run out.
Though not entirely accurate to the dot, using this metric will give you a pretty close estimate as to when you might need to restock a specific product.
The problem with sellers that don’t have an Amazon inventory management plan in place is that they tend to eyeball things. Though I admit that there is nothing with using said process, you’re somewhat making decisions based on guesstimates rather than actual hard data.
So what happens is that, sometimes you restock a few days late, or get overstocked.
Now don’t get me wrong, I’m not saying that being overstocked is bad. It’s just that being in that state means that you’re not maximizing your investment, or ROI, properly.
Forgetting To Stop PPC Campaigns
Running out of stocks, and waiting for your supplier to send you more might feel like a break from the hectic backend work you do on Amazon. But if you are running PPC campaigns, then those click throughs are eating up on your ROI.
Though this seldom happens, I have seen this a few times in the past.
So if you are running a PPC campaign for your Amazon listing, make sure to stop it once you have run out of stocks…. Or better yet, just avoid running out of stocks will ya?
Failure To Adjust Pricing
Let’s say you just realized that you’re about to run out of stocks. You contacted your supplier to send more, but got the reply that the stocks will arrive after the timeframe that you think you would have sold all your inventory for the said product. The best thing for you to do is adjust the price a bit higher.
Yes, I know, it might drive some potential buyers away. And yes, having a higher price might not win you the buy box. But what it will do is act as a buffer before you’re able to restock.
If you have enough positive reviews, and if you adjusted the price enough to not make it feel overpriced, people will still buy your product.
Remember, online retail is about establishing trust. So if your reputation as a seller is good, buyers will patronize you.
The idea of adjust prices is to slow down purchases a bit, and keep the listing active until the new stocks arrives. Again, yes…it may cost you a few customers. But at least that is better than having your seller reputation with Amazon dip because you ran out of stocks.
Amazon Inventory Management Solutions
Always Be Stocked: Use Customer Demand Metrics
This is not as simple as buying 2000 units of one item. First, you need to have data to base your inventory on.
For this, you need to do a test run for a specific item.
- Check to see how much of the said item gets sold per day, week, month.
- Check to see how sales fluctuate depending on special occasions like Christmas, Valentine’s Day, 4th of July, etc.
Yes, this looks like something that could take a while. But I assure you, once you have the data, you will be able to pinpoint the exact number of units you need to stock for a specific listing.
This is about establishing consumer demand towards your listing.
Seasonality: Take It Into Consideration
Like what I mentioned above, you need to factor in data during specific seasons when planning your inventory.
If your listing gets more sales during the Summer months, then increase your inventory, and lower it during Winter. Yes, it may seem like common sense, but you would be surprised how difficult it is to keep a straight head when you’re in the thick of things.
Remember, being well stocked is great. But if you’re overstocked, your money is just sleeping.
Using Forecasting Software
In the modern world we live in today, sale metrics/forecasts are just a click of the button away. And for Amazon sellers, having a software that tells you “you need to restock now” is a godsend.
There are a lot of inventory forecasting software out there. Some can be used in the retail industry as a whole, while some are Amazon specific.
As of now, Sellerlift is still in the drawing board as to coming up with our own forecasting software. But once it reaches its alpha testing phase, we might get a few of you to try it out.
I hope that I shed a bit of light into this less talked about topic. And I do hope that some who have previously brushed it aside as nothing more than extra work sees the process in a new light.
The intention for talking about Amazon inventory management is not to make things more complicated as they already are. No, we’re not trying to scare people off, nor make selling on Amazon feel like a massive headache.
What we only want to achieve is to provide you, the sellers of Amazon, with as much information about the ins and outs of the platform, in the hope of your business reaching its full potential.
If you want to know more about Amazon inventory management, or have other topics you wish us to discuss, get typing and leave us a comment below.
As always, have a great day, and see you next time.
Johann is a Psychology major turned online writer and branding/marketing consultant since 2008. He now happily calls SellerLift home, and is the person behind their blog content.
In his spare time, and to remind himself that there is more to life than his computer monitor, he throws himself down steep country roads on his longboard, takes black and white photos, and produces lounge music for an independent music label.