Managing your Amazon inventory is one of the basic activities of any seller. With more brands enrolling in the marketplace each day, it’s important to know how to manage your stock.
Inventory management is one of the most essential e-commerce tasks. From the moment you receive your stock, until when a customer buys a product, you should know where every item is and how many pieces you have in stock.
Yet, 42% of small-sized sellers don’t track their inventory.Does this sound like you?
If so, you’ll need to learn the ins and outs of Amazon inventory management. But, you’re in luck! Inventory management for Amazon sellers is easier than you think.
What Is Inventory Management?
Before defining Amazon inventory management, let’s gauge a better understanding of inventory.
Your product inventory consists of the items you own and plan on selling to customers. Therefore, inventory management is the process of storing and tracking your products.
Why Is Inventory Management Important?
Inventory management is necessary in many ways. First, the right management strategy will create an efficient and streamlined retail process. You’ll always know which products are in stock, are in low quantity, and if you sell out of any items.
Plus, you’ll always know which products are in demand. This can improve your product creation and sourcing process. You can discount any items that haven’t been big sellers to make more room for new products.
Risks of Not Managing Your Amazon Inventory
There are many downsides to poor inventory management. For instance:
- Dead stock
- Depleted items
- High storage costs
- Unfulfilled orders
Depending on your business type, you may risk selling spoiled products. All of these aspects can decrease your profitability.
Let’s cover some of these items in more detail.
All e-commerce businesses must have enough Amazon inventory on-hand to meet customer demand. Low stock levels can hurt your product sales since potential buyers may buy a similar product from a competitor if they see you’re running out of inventory.
However, note that even with exceptional inventory management, low stock levels still happen. For example, certain seasonal demands, such as Cyber Monday, can result in sudden low stock levels.
On the opposite end of the spectrum, excess Amazon inventory can also be a problem for your business. If you have too much inventory, it can lead to higher storage costs.
How do you know you have excess inventory? Amazon takes one of these factors into consideration:
- One unit stored over 90 days
- Selling the inventory at a lower cost results in better ROI
Fortunately, handling excess inventory is easier than you think. You can liquidate your Amazon inventory, selling your stock at a discounted price to save on storage fees. Your business can also take advantage of the Amazon Outlet.
If you sell food, vitamins, beauty products, or other perishables, poor Amazon inventory management can lead to spoilage. All of these products have an expiration date; if you hold this stock for too long, you’re not only spending storage fees, but all funds from those items have gone down the drain.
What if you realize some of your items are close to the expiration date? You can still sell them, but list them at a discounted price. Ensure the expiration date is clearly marked on the item and your Amazon listing.
Dead stock is inventory stored in a warehouse that isn’t listed on your website. Like excess inventory, dead stock is a waste of cash. You’re spending storage fees and missing out on an opportunity to earn sales. Plus, you lose the capacity to store more products.
Fortunately, Amazon offers tools to monitor dead stock. On Amazon’s inventory system, find the Stranded Inventory Tool. This way, you can find and fix dead stock.
How to Manage Your Amazon Inventory
Amazon makes the inventory management process very simple. You can access different tools on Seller Central, no matter which fulfillment you use. It’s still important to track product information on your end, however.
Here are some inventory management tips to know.
Monitor Your Sell-Through Rate
Your sell-through rate is an Amazon metric that shows how well you balance your inventory.
If you have a high sell-through rate, this shows your products sell quickly and are popular. At the same time, you shouldn’t aim for a high rate since you risk running into low-stocked products.
However, your sell-through rate shouldn’t be too low. In this case, you’re stocking more products than you can sell. The key is to have a balanced sell-through rate to ensure you have sales coming in, plus enough inventory to satisfy that demand.
Viewing your sell-through rate is easy. From your Seller Central dashboard, click “SKUs to restock today” and then “View Inventory in Stock.”
Regularly Run Promotions
Running regular promotions offers many benefits. First, you’ll experience regular sales and will satisfy your customers. But regular sales can also improve your bottom line and inventory management.
Selling more products, even at discounted prices, will save money on storage fees. If you sell food, supplements, cosmetics, or any products with an expiration date, regular sales can prevent spoilage and more wasted funds.
Should you place all items at sale prices? Stay updated on your inventory and prioritize items that would be the best fit for a promotion. This includes products that haven’t sold for 90 days and items at risk of expiring.
Amazon makes it easier to track these eligible items. On the Inventory Performance Index, you can view Amazon’s liquidation and promotion recommendations, knowing which items to include in any sale.
While regularly running promotions is key to preventing excess stock, some products will still be more popular than others–even if you offer them at full price. If this is the case with your inventory, restock as quickly as you can. This is especially true for some of the busiest seasons.
How do you know when to restock your items and how much to order? This will take some work on your end.
Every four weeks, identify how much inventory you sell for that time period. Look back on the previous year and identify the busiest sales period. Then, order enough items to meet past sales, with some extra units for backup.
This way, if you run into a sudden burst of sales, you have enough product to cover those orders. If you’re approaching a busy season, order even more units.
At the same time, you don’t want to order too much and waste money on storage costs. That’s why it’s best only to order enough units for backup orders and focus more on restocking when your inventory runs low.
Know Your Margins
Sales are a sign of business health, but it’s not the only indicator you should track. Knowing your margins is also part of the job and can be an effective inventory management tactic.
Which additional inventory costs should you track? These include:
- Cost of procuring goods
- Operating expenses
- Storage and warehousing
- Shipping your inventory
- Order fulfillment
- Amazon fees
This way, you know how much funds you have left over after you pay all these expenses.
Use Inventory Management Services
There are many inventory management services and software that make this tactic a piece of cake.
While you can use the Amazon inventory management software included in your Seller Central account, some sellers prefer using a third-party platform. Since there are many options on the market, you’ll want to ensure the service or software holds these qualities:
- Syncs with Amazon
- Demand forecasting
- Tracks product information, such as quantities, type, and dimensions
- Barcode scanning
- Offers alerts (such as when items are running low)
- Stocking recommendations
- Tracks the number of days an order has been in the warehouse
Do You Need Help Managing Your Amazon Inventory?
You may be tempted to purchase an Amazon inventory tracker to handle your stock. But there are more benefits to outsourcing this service to a full-service e-commerce company.
Our full-service solutions not only include inventory management, but we offer different promotional and advertising services to drive more sales to your business.
Click here to learn more about our services.
Stephanie Jensen has been writing e-commerce content for seven years, and her copy has helped numerous stores rank on Amazon. Follow her on LinkedIn for more insight into freelance writing and creating high-quality content.