Managing your inventory better can save you a lot of money.
If you want to know how well you’re managing, first stop is to go look up your IPI score on Amazon. This will give you a broad view of how well you are managing. If it’s not too good, then there are a number of actions you can take to improve your inventory turnover and reduce your storage charges.
First off, identify any items in long term storage – that is, over 365 days. It’s a pretty simple calculation to compare this with your sales figures to see how long it will take to sell off all this stock. If it looks like it’s going to take a while, then you need to take action now.
You could, for instance, run a promotion or reduce the price. It’s pretty simple to calculate your break-even price for selling the stock against paying another month’s storage charges. (Of course, that assumes you do sell the stock.) If your product is just slow selling but ticking along, this is the right thing to do.
But if this particular product just isn’t selling any more, and the market has moved on, then it’s worth cutting your losses. Get the stock returned to you, or dispose of it. There will be a fee for that too, but again, it’s a one time loss instead of a continual expense. (It’s worth knowing you can set up automatic inventory removals.)
If you want to generate some positive karma you could always donate your excess inventory to charity.
It is also worth keeping an eye open for Amazon’s occasional removals promotions. They occasionally run these to clear the warehouse out.
If your inventory generally is a bit sloppy – more than 90 days of inventory on most products – then you need to think about negotiating lower minimum order quantities with suppliers, or finding a way of buffering what goes into Amazon by having some stored elsewhere.
It’s important that you keep checking whether your current order levels are still right for the amount of product that you’re shipping. If you’re shipping more product, making larger orders could get your prices down – if you’re shipping less, you might want to reduce your orders.
You could also switch some products to self-fulfillment. If you use Seller Fulfilled Prime, you keep the Prime label. This makes a huge difference for big, heavy products or for products that are close to or below the $15 level and where Amazon charges can destroy your margin pretty quickly.
Keep a good feel for what’s selling and what’s not. Sometimes, inventory levels give a much clearer signal than your sales comparatives. So take a good look and find out the reasons behind the change. If you product is no longer price competitive because one of your customers took their price down, you might want to price match rather than see the stock sit there. If new trends have made your product look old and tired, it’s time to liquidate. On the other hand, if you can’t see a clear reason, a dose of extra promotion might be all that’s needed to push your product back on track.
If you’re changing your price, you may want to tweak it a few times. In fact, you could try this on anything that’s got more than 90 days inventory – just try to find a price that has product turning over more quickly.
For those last few products that are stuck in stock and won’t shift? Use Amazon Outlet – check the Manage Excess Inventory tab on the dashboard. This is Amazon’s bargain bin. Or for stock that’s practically obsolescent, use the FBA Liquidations program, which sells off the inventory to merchants. You’ll probably only recover 5-15% of your selling price, but that’s better than nothing. You cut your storage charges, and got your cash back.
Above all, remember Q4. In October, November and December Amazon increases its storage fees more than threefold. If you have stock of Santa Claus hats and other holiday goods, or you know your product sells well as presents, fine. But if you have summer fashions or travel kit – shift them out.