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November 24, 2020
Peter Eickholt

More than Lost Sales: Managing Inventory on Amazon

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

Have you looked at your inventory performance lately?

Managing Inventory on Amazon and How it Affects your Sales

What is Amazon's IPI Metric?

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. 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. Lost sales due to out of stock inventory is just the tip of the iceberg. Again, it's crucial to you are managing your inventory on Amazon weekly.

Managing Your Amazon 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. 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.

Out of stock products on Amazon cause a big impact on lost sales.

When the product was restocked, Sales Rank jumped back up. However, 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 effect of not managing your inventory on Amazon

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

Managing your Inventory on Amazon well will reward you with good sales.

Want Help Managing Your Inventory on Amazon and Your Amazon Account?

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Tips for Keeping Your Amazon 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. 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.

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.

Use the above tips to keep your Amazon listings healthy, stocked, and profitable in Q4 and throughout the year.

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. Want help? Contact us at [email protected].

Note: some links in this post are affiliate links where we receive a nominal commission. We would not recommend anything that we don’t think will help your business.