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Tips For Amazon Sellers To Better Manage Your Inventory

Author Melissa YeoMelissa Yeo

8 min read
Better Business

Brand owners and sellers of all scales struggle to seek a well-balanced supply chain. Additionally, Amazon has its own inventory management rules, which makes everything even tougher.

Tips For Amazon Sellers To Better Manage Your Inventory

When it comes to selling successfully on Amazon, there are a lot of moving parts to look at. One of the most challenging issues to tackle would be Amazon inventory management. Successful inventory management can lead to sales increase, positive reviews, high ranking seller ratings and your business's overall success.

Brand owners and sellers of all scales struggle to seek a well-balanced supply chain. Additionally, Amazon has its own inventory management rules, which makes everything even tougher.

Thankfully, you don’t have to deal with everything on your own, especially when you’re trying to increase sales. Accounting tasks can be handed over to experienced accountants who understand how e-commerce selling works. Otherwise, read on for 10 tips on how you can improve your Amazon inventory management strategy.

What Is An Amazon Inventory Management Strategy?

An Amazon inventory management strategy refers to the way you increase brand awareness, yet maintaining and potentially increasing your business's profitability on Amazon. This means that your strategy has to incorporate ways to efficiently drive your costs down while delivering a seamless experience to your shoppers. To implement an excellent inventory management strategy, you have to grasp the following concepts:

  • Understand your inventory
  • Knowledge of chain components
  • Knowledge of supply lead times
  • Implement strong and repeatable fulfilment procedures
  • Create systems to automate issues found within components

Why Is Implementing Good Inventory Management Practices So Important?

Inventory management is important for any e-commerce business and involves two important stakeholders -- Amazon and your shoppers.

By implementing an Amazon inventory management, you will be able to:

  • Manage any errors, theft or losses in the inventory
  • Consistently generate sales and sustain customer interest with sufficient inventory to support customer orders
  • Be aware of product expiration dates, and reduce losses due to goods that are unsellable
  • Confidently work out your inventory needs to drive down costs of storing products or unsellable goods

If your store keeps running out of stock, you risk losing potential sales to your competitors. To counter this problem, keep tabs on your stocks to ensure you can meet consumer demand. Furthermore, if you constantly run out of stock, Amazon may lower your ranking on the list of retailers for a product.

However, having too much inventory on hand also has its disadvantages due to the expensive cost of Amazon's fees. In this situation, you could face cash flow problems by having too much stock. If you are a Fulfillment By Amazon (FBA) seller, you may even have to pay long-term storage fees.

How Do I Implement An Amazon Inventory Management That Works?

  1. Use Amazon Inventory Management Software

As your business grows on Amazon, so does your manufacturing and inventory. Handling your inventory manually can be time-consuming and tedious. It is also prone to human error.

Render these woes a thing of the past with advanced inventory management software to simplify your tasks while trading with Amazon. Automating your inventory management tasks helps you ensure that you carry sufficient inventory throughout the year without overbuying.

Amazon Seller Central dashboard offers a suite of built-in tools for you to access for free.

Within the Amazon Seller Central dashboard, the Amazon Selling Coach provides key inventory data to help sellers monitor inventory levels and purchasing needs. By monitoring your inventory trends and sales, Amazon inventory management tools allow you to see how many units of each item you sell on Amazon on a daily, weekly, and monthly basis. You can then make use of this data to identify trends and assess required inventory levels for different products over certain periods. You can then plan your strategies and make sound purchasing decisions.

  1. Set Inventory Minimums

Sometimes, it can be challenging to decide when the right time to restock your inventory is, especially during times of sales fluctuation. Thankfully, you can set inventory minimums to remind you to restock your inventory, instead of waiting for your goods to completely run out of stock. This method allows you to retain a safe level of inventory for your to restock and avoid running the risk of selling out while your supplier delivers your repurchase. Keeping your warehouse security on point also helps in terms of management and safety.

  1. Work Out Your Inventory Turnover Rate

Inventory turnover rate refers to the rate you sell your products through your Amazon inventory in a certain period. To figure out your inventory turnover rate, you will have to know how fast your products sell on Amazon on average. With an understanding of how many units of a product you need, you are less likely to overbuy and risk having additional goods that are unsellable or underbuy, which could potentially result in no inventory, poor customer reviews and loss of sales.

Once you have calculated your inventory turnover rate, you can better gauge the amount of stock you require to maintain stock levels between inventory shipments and avoid underbuying or overbuying when you repurchase stock.

As a general rule of thumb, Amazon sellers expect to sell their stock in three months. To better forecast, your inventory turnover rate, Amazon’s Selling Coach tracks sales against your available unit of stock and recommends required quantities to fill orders over a specified period.

  1. Understand Your Supply Chain Lead Times

Once you figure out the amount of inventory you need, it is crucial to compare it with what your supply chain can support.

Supply chain refers to the movement of inventory from initial sourcing to your warehouse. The lead time is the time required for your stock to get to the inventory stage once ordered.

Understanding this lead time allows you to efficiently schedule your orders to meet your shopper’s demands and avoid the low stock. With this knowledge, you can also create a backup plan in the event things go wrong. This is especially important if you source your products from overseas suppliers since shipping delays can take extended periods to resolve. Ensure you have some inventory in reserve just in case there are unexpected supply chain delays.

  1. Prepare For Seasonal Sales Fluctuations

Specific seasons or holidays are the time for sale and also a reminder for you to work extra hard as a trader. You will have to keep up with the pace and deal with your inventory to ensure that the seasonal demand and supply gap is not too big. Make sure you are sufficiently stocked, especially for your more popular products. The last thing you want is to disappoint your customer with out-of-stock signs when they are Christmas shopping for their loved ones.

However, this does not mean that you should overstock your goods, which could result in you paying for extra storage, packaging and packing charges. To avoid these problems, make sure to give yourself time to prepare for sufficient stock levels of popular goods in the upcoming sales period and forecast your inventory levels a few months in advance. Ideally, you should increase quantities of products that sell quickly during peak sales cycles and decrease quantities of products that move slowly.

  1. Consider Dropshipping For E-commerce

If you are just starting on the e-commerce path, the dropshipping model could be perfect for you. Additionally, you do not require a unique product idea or a large amount of capital. The dropshipping business model means that drop shippers will handle the entire process of shipping, delivery, and inventory management on your behalf. In other words, you do not have to hold and manage inventory. However, profit margins can be low.

Pros of dropship

  • Low costs to start: The best part of dropshipping is that you will not have to carry inventory, which means that you only require a little investment for your startup.
  • Streamline your selling process: Since your dropship partners will handle the duties of fulfilling the order from picking, packing to shipping your products, the entire process is streamlined for you. With this efficiency and convenience, you can flexibly run your business from anywhere in the world.
  • Reduce business risks: Since you are not buying products upfront, there is no risk of you having unsellable products in your inventory.

Cons of dropship

  • Heavy competition in the market: The low initial capital required for dropshipping will be a draw to many, which means that the competition can be intense. To distinguish your brand from the rest, you will need deep marketing expertise.
  • Inventory syncing: One of the drawbacks of not having your inventory would be the reliance on your dropshipper. If your dropshipper does not deliver products on time or ship low quality products, it will not reflect well on your brand.
  • Low profit margins: In a dropship business model, your profit is the difference between what your customer pays you and the price you are paying your dropshipper. Expect low profit margins of 10% or even lower. As such, this will make it extremely challenging for you to compete with your competitors in the paid advertising space.
  1. Establish Great Supplier Relationships

Many businesses concentrate on maintaining good relationships with consumers and unfortunately neglect their relationships with their suppliers. Think of your suppliers as partners instead of just vendors, and treating them with due respect can help optimise your relationships.

Always keep communication channels open with your suppliers, so you can avoid the risk of late shipment issues and unexpected delays especially when it comes to peak periods, which could affect your sales.

  1. Plan Your Sales and Promotions Carefully

Don't use promotions without proper planning, otherwise, this strategy may backfire.

Holding too many sales can clean out your inventory, leading to low Amazon ratings, backorders, and angry customers. Thankfully, there is a way to counter this issue is by allocating a limit for the number of stock in your inventory. Upon hitting this number, the promotion will be taken down from your listing, with the rest of your goods being sold at its regular price. Take note that the manual removal of promotion requires a minimum of four hours for the change to be implemented, so make sure that you have enough inventory to cover you for that four hours of sales.

Another tip for a successful promotion is to reserve the products on promotion from your supplier, but with a ship date that is in the future. If the promotion runs successfully, you can contact your supplier to receive the stock shipment fast. If the promotion does not do well, you can extend or cancel the ship date to avoid overstocking.

  1. Slow Down Inventory Demand When Necessary

Good sales and promotion strategies may result in your products moving quickly out of your warehouse, but you have to make sure you can meet this demand or risk losing shoppers to your competitors and potentially have your Amazon ranking lowered.

Steer clear of this issue by constantly keeping tabs on inventory levels and if you are running low on stock for a certain product, consider increasing the prices and pausing any advertising campaigns to slow sales down until you have restocked. This may result in a few days of slow sales, but it is better than completely running out of stock.

  1. Liquidate Excess Inventory

Liquidation is sometimes a natural part of inventory management and is a good way to keep your inventory flow within acceptable limits and get rid of any impending overstock or excess issues.

In short, inventory liquidation is required if you have predicted way too much demand for your goods and ended up with surplus inventory. Fret not, for liquidation can be the best option when it comes to your Amazon inventory, especially when it’s in an Amazon warehouse. It all boils down to not racking in too much storage cost that it slowly eats through your capital. You would want to avoid sitting on it since it leaves less room for fast-moving products. The storage cost for these slow-moving products can also eat through your capital. Some ways to liquidate your inventory include:

  • Lowering the price
  • Selling on other platforms
  • Giving them away as freebies
  • Have influencers review the product
  • Donating to charity

After you have liquidated the slow-moving products, make sure not to reorder them again.

Spare Yourself The Headache, Leave Your Accounting To Us

We know how intense the e-commerce competition can be, but you can do yourself a favour and outsource the accounting to us while you focus on growing your core business. We convert statements from e-commerce platforms into books, provide accounting services, tax filings, and profitability reports.

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