Did you know that Amazon sold more than 3.4 billion products in 2020?
That's enough to wrap around the Earth's equator over 38 times! And that number is only getting higher!
If you're an Amazon seller, you're part of this vast marketplace, and one crucial aspect you can't afford to overlook is inventory management.
While its primary goal is keeping track of your products, it also ensures that your business runs smoothly, avoids costly mistakes, and maximizes profitability.
In this blog, we'll explore the significance of Amazon inventory management, why sellers should invest time in understanding it better, and how mastering it can significantly enhance your ecommerce success.
Inventory management on Amazon refers to sellers' processes and strategies to effectively monitor, control, and optimize their product stock within the Amazon marketplace.
It involves sourcing, storing, tracking, and replenishing inventory to meet customer demand while minimizing costs and avoiding overstock or stockouts.
Amazon offers two primary fulfillment methods:
Exploring the world of Amazon Seller statistics, it's impossible to ignore a significant revelation: 73% of Amazon sellers have embraced Fulfilled by Amazon (FBA) as their preferred strategy.
While it simplifies the storage process, you still need to maintain healthy inventory management strategies to run your business successfully.
Effective inventory management is important for ecommerce businesses, particularly for Amazon sellers, due to various compelling reasons:
1. Customer Satisfaction
Timely and accurate order fulfillment is vital in the ecommerce world.
When customers place orders, they expect prompt delivery.
A noteworthy statistic emerges: 41% of consumers are open to paying an additional fee for same-day delivery.
In comparison, 24% of shoppers express a willingness to pay extra for the convenience of receiving packages within a one- or two-hour window of their preference.
Effective inventory management ensures that products are available when needed, preventing stockouts and backorders, which can lead to customer dissatisfaction.
2. Cost Efficiency
Proper inventory management helps minimize holding costs, including storage, insurance, and depreciation expenses.
It also reduces the risk of overstocking, which ties up capital and can result in losses due to product obsolescence or spoilage.
3. Optimized Cash Flow
Maintaining proper inventory levels enables efficient capital allocation, freeing up resources for business growth.
4. Accurate Financial Reporting
Effective inventory management contributes to accurate financial statements and balance sheets. It ensures that inventory is valued correctly, which is vital for tax purposes and financial analysis.
5. Marketplace Performance
On Amazon's highly competitive platform, consistently having products in stock can positively impact a seller's performance metrics.
Sellers with a track record of reliable inventory management are likelier to win the Buy Box and earn customer trust.
Selling on Amazon offers significant potential for financial success. As of September 5, 2023, the average annual income for an Amazon Seller in the United States is an impressive $211,510.
However, it comes with its fair share of inventory-related challenges.
Here are the most prevalent issues Amazon sellers encounter:
Properly managing your Amazon inventory is essential for your business's success.
Here are some expert strategies and tips to help you stay ahead of your competitors and maintain control over your inventory:
Developing and maintaining strong relationships with your suppliers is essential for the success of your business.
When you establish a positive rapport with them, they are more likely to prioritize your orders. This, in turn, ensures that your products are produced and delivered on time, preventing any potential stockouts on your end.
Effective communication and mutual respect are the key components of building this relationship.
Regarding the right amount of readily available stock, you should keep an inventory sufficient for approximately 60 days of sales to avoid overstocking and stockouts.
To calculate your sales volume, refer to Amazon's inventory reports and keep a watch on your FBA sell-through rate.
It measures how effectively you balance inventory levels with sales.
To calculate your sell-through rate, use this formula:
Sell-through rate= Total units shipped in past 90 days/ Avg. units in inventory during the same period.
A good sell-through rate typically falls in the range of 50% to 80%.
It is not uncommon to overestimate sales volume, which can lead to excess inventory. There are several strategies you can use to manage it effectively.
Murphy's Law applies to ecommerce as well. Prepare for supplier delays, shipping issues, customs holdups, and other unforeseen challenges by ordering backup units.
You can store these extra units in your warehouse or leverage third-party storage and fulfillment centers.
This contingency plan ensures you can maintain FBA stock levels even during delays.
If your inventory is running low, control demand by temporarily raising prices and pausing advertising campaigns.
This tactic helps maintain your in-stock rate and improves your Inventory Performance Index (IPI) score.
A lower IPI score can result in severe consequences, including reduced visibility in search results, a diminished likelihood of winning the Amazon Buy Box, and the potential loss of Amazon Prime status.
Slowing down sales slightly, even if it affects rankings, is preferable to going out of stock entirely. Once you replenish your FBA inventory, you can return to your regular pricing and advertising strategies.
Equip your arsenal with robust inventory management software like SoStocked, Jungle Scout, Ordoro, etc.
These software tools enhance Amazon inventory management by providing advanced demand forecasting to accurately predict future sales, helping to determine the right inventory quantities to order, and preventing stockouts and overstocking.
Amazon's 14-day payout policy can hinder cash flow for sellers.
To overcome this, you can explore alternative funding solutions to ensure you can purchase inventory promptly and cost-effectively.
If you're running a high-end fashion store and gearing up for the holiday season, you need to stock over €150,000 worth of designer clothing to meet the surge in demand.
But this can tie up your capital for months. However, there is a solution that Myos offers. You can finance your inventory while freeing up your cash flow.
Here's how it works: You place your order, and Myos handles the down payment and/or balance payment.
Your inventory arrives in time for the holiday rush, with a bonus quantity included for immediate sales.
Suppose you need more merchandise due to high demand. In that case, you can repay part of the financing, and Myos will release additional stock.
With Myos, you can effectively fuel your business's growth and prepare for peak season!
With over 2.4 million sellers on Amazon, staying competitive and efficient is crucial.
One of the most effective ways to achieve this is through automation.
Automating inventory management tasks can significantly improve your business's efficiency, reduce human errors, and save you valuable time.
Benefits of Automating Inventory Management:
✔️ Automating inventory tasks means that you can save valuable time on many repetitive and time-consuming processes
✔️ With real-time data updates on your inventory levels, sales, and order processing, you can prepare for any arising circumstances.
✔️ It reduces the risk of human error in every aspect of inventory management and minimizes stockouts, overstocking, and shipping mistakes.
✔️ With the accurate forecast demand, you can determine when and how much product you need to order, reducing carrying costs and storage fees.
✔️ Multi-channel integrations allow your stock levels to be consistent and synchronized across different marketplaces, online stores, websites, etc.
✔️ Additionally, automation tools can help you identify slow-moving or obsolete inventory and take prompt actions.
In the world of business, effective budget management is crucial for growth regardless of company size.
Amazon sellers, in particular, often face unique challenges due to limited liquidity and flexibility.
These challenges can hinder their expansion efforts for several reasons:
Myos offers a solution that can help you overcome these challenges. We provide up to £2.5 million in funding without requiring ownership stakes or personal guarantees.
Here's why choosing Myos makes sense:
✔️ No Guarantees, No Personal Risk: We allow you to operate without the burden of personal guarantees, enabling you to focus entirely on business growth.
✔️ Flexible Repayment, No Extra Costs: Repay the funding at any time within 12 months, with no additional charges. You can conclude your Myos project without incurring extra expenses if the funds are no longer needed.
✔️ No Supplier or Customer Interaction: This preserves your competitive advantage by keeping you from direct contact with suppliers or customers.
✔️ Quick and Easy Processing: We eliminate the hassle of extensive financial analysis or lengthy business plans. Applying online is swift and straightforward.
Are you ready to elevate your business game?
Sign up today and receive a free, non-binding offer from Myos to unlock your business's full potential!