November 24, 2020
Peter Eickholt

More than Lost Sales: Managing Inventory on Amazon

Amazon is a machine that likes to be fed.  Consistent inventory + consistent sales = growth over time on the Amazon platform.

Have you looked at your inventory performance lately?

Amazon’s Inventory Performance Index (IPI) metric often gets overlooked by Amazon sellers, especially with Advertising Advertising Cost of Sale (ACoS) & Return on Advertising Spend (ROAS) keeping them busy, but it is important to manage your inventory performance in order to grow on Amazon.  Things like excess inventory and low sell-through can undermine profitability with high inventory storage fees.

While there are several components to the IPI scoring system in Seller Central, let’s focus on the most crucial: In-Stock Inventory.  Running out of stock on Amazon is never a good thing for an Amazon seller, but lost sales due to out of stock inventory is just the tip of the iceberg.

Inventory, Sales Ranking & Advertising

While lost sales are a big problem for any Amazon seller, a more concerning issue is the time and money needed to get products back up and running.  The product below went out of stock for over a week as the seller worked to get inventory into Amazon’s fulfillment center and through the receiving process.  As you can see, in that time the Sales Rank (green dotted line) for this product dipped severely.  Before it went out of stock, this product was at a sales rank of 1,850, while it was out of stock, it dropped to over 16,000.

Although the Sales Rank jumped back up when the product was restocked, it took nearly two weeks to return to its previous sales rank! 

The effect on advertising is even more telling. While products are out of stock, advertising stops running and the data stops coming in.  When a product does come back into stock, it takes time to ramp the campaign back to previous performance and continue data gathering.

Take a look at the campaign for this product in the 30 days leading up to the out of stock.  We can see the spend and sales scaling well over this time period.

The campaigns below show performance during and after the out of stock event.  Again, we see the time it takes to ramp back up to help get the product re-established and selling again.  ACoS is higher as campaigns ramp back up to previous efficiency.

Tips for Keeping Your Inventory Healthy in Q4

Inventory management has always been a key component for growth on Amazon. This aspect has become trickier in 2020 than previous years due to Covid-19 restrictions earlier in the year. The implementation of quantity limits in Q3 & Q4 left sellers struggling to keep inventory in stock at Amazon’s fulfillment centers. As the holiday period grows closer, keeping inventory in stock is vital for Amazon Sellers. Here are a few tips to keep your inventory healthy in Q4:

Check Amazon’s Restock Inventory report often – In seller Central, you can see this report by going to Inventory > Inventory Dashboard.  This report will suggest how many units to send to Amazon and when you should send it.  Please keep in mind that these numbers are based on sales volume, so if you have multiple out of stocks, you may want to send in a little more than suggested.

Try using a 3rd party app – If you’d like a more advanced method of keeping track of your inventory, you may consider a 3rd party app to help you keep track of inventory and even provide alerts for when to ship.  We recommend Restock Pro by eComEngine as a way to forecast and keep track of your inventory.

Be prepared to send in inventory more frequently – With Amazon’s limited restocks in effect, you may have to send smaller shipments more frequently to stay in stock.  While not ideal, it will help you keep inventory in stock and keep your sales, ranking and advertising on track.

Putting the above tips in practice gives you the data, tools, and processes needed to keep your Amazon listings healthy, stocked, and profitable in Q4.

Happy selling!

We understand that selling on Amazon can be a thrilling as well as a frustrating and time-consuming venture. We love to partner with emerging brands and help set them up for success with their digital marketing. If you’re interested, contact us at [email protected].

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