Your FBA inventory might be out of sight, but it should never be out of mind. Here's a guest blog from RefundsManager, FBA specialists.
Successful inventory management for Amazon FBA requires a focus on a variety of moving parts: price, sales rank, sales volume, fees…
The way that you manage your FBA inventory is critical to the success of your business. Here are six best practice tips.
1. Research sales ranks to choose the right products
It’s impossible to discuss managing inventory without addressing how your products made it to your inventory in the first place. One key factor during product research is sales rank.
When researching products to source, most sellers do consider sales rank, they just don’t take ranking seriously enough and end up with risky inventory investments. A product with a poor sales ranking—in multiple digits—won’t move quickly enough to be worth the FBA fees.
Any product that ranks worse than 10,000 in a top level category (not sub category) represents the inventory that never or rarely sells on Amazon. While there are almost a quarter of a million products listed on Amazon, only a percentage of them actually sell.
Also, rankings with high numbers tend to be more volatile, meaning they fluctuate much more often. A ranking in single or double digits doesn’t move nearly as much, giving you confidence that once you ship something to FBA, it will actually sell.
Going forward, make sure that sales rank plays a very large part in your decision making, so that stale inventory is an infrequent problem.
2. Reinvest in quick-selling products
When you source a new product, it’s best to start small. Many sellers choose to ship small quantities to FBA to mitigate risks. You can sell a test batch of say 500 units before going big and buying mass amounts of inventory.
There’s never a guarantee that a product will be profitable, or even break even, so it’s wise to only send products to FBA whose investment you can afford to lose. Why not take advantage of the fact that there are no FBA minimums?
When something is selling well, you need to be prepared.
First, you need to ensure that you’ll have the cash flow available to source the right products at the right time. Second, you need to make sure that you have enough time to ship a hot-selling item to FBA.
Here are factors to consider:
- Time to submit orders
- Time for supplier processing and fulfillment
- Time to deliver to Amazon
How many days will it take you to go from identifying that it’s time to restock to actually having the inventory in the FBA warehouse? Calculate this for each and every product so you know when to pull the trigger.
3. Remove stale inventory
It’s important to protect your cash flow. That way you can seize on the right opportunities, whether that’s sourcing a new product or restocking.
One way to keep more cash on hand is to not rack up FBA fees for stagnant inventory.
Removing inventory from FBA is a hard call to make, and one that’s painful every time. But experienced sellers have all had to accept defeat at some point. Again, it’s impossible to guarantee profitability every time.
Rather than continue to lose money by storing products that don’t sell, remove them and attempt to sell them in another channel.
Not only will this free up cash flow that you can divert into other SKUs but it will also make your business immediately more profitable. Seeing that effect in real time will encourage you to make routine removal orders part of your FBA inventory management strategy.
4. Audit for customer return errors
Inventory management requires that you audit as well as strategize. This doesn’t sound nearly as glamorous, but it can save you a huge amount of money in the long run. With FBA, here are some of the things you need to watch out for:
- A customer has received a refund but never returned the product
- An item was marked as returned but credited to another seller’s account
- A reimbursement was issued to your account by Amazon but was never received
- A customer paid for one item, but received a duplicate
Refunds Manager removes the grunt work from inventory management by systematically auditing your account and then manually filing claims for any valid issues. When you don’t have a healthy inventory at the item-by-item level, it’s impossible to protect your profit margins. But with so many different transactions, customer return issues are challenging to track. Refunds Manager makes this an easy, automatic process for sellers. Learn more here.
5. Get reimbursed for lost or destroyed inventory
You should pay FBA what you owe them for the service—but nothing more than that. The Refunds Manager FBA reimbursement solution doesn’t only cover issues with customer returns, but other types of FBA fee mistakes and inventory issues as well.
Here are some of the ways that inventory gets lost or damaged:
- En route to Amazon’s warehouses
- Inside the warehouses
- En route to the customer
It’s essential to be your own watchdog for lost and destroyed FBA inventory. While Amazon has (mostly) helpful policies in place, the astronomical amount of sales makes it impossible to get all the fees and reimbursements right 100% of the time. Refunds Manager identifies these errors and then handles the claims process.
6. Create and update your pricing strategies
Price is one of the few factors that FBA sellers can control. Your pricing strategy should based on your product acquisition cost, your FBA fees, your competitors, and key customer metrics.
To work, pricing strategies must operate on a SKU by SKU basis. Now is not the time to think of your business as a whole. Instead, the right pricing strategy will vary product by product.
While repricing software can take some of the headache out of this task (especially considering that Amazon reprices their own merchandise every 30 to 60 minutes), it’s only as effective as your data. So run your own calculations of indirect costs to establish a true baseline before enlisting any software.
Inventory management is a continuous task for FBA sellers, and is arguably the most important thing you do. When you send in your inventory to Amazon, the work has just begun.
Refunds Manager can help you audit your inventory for 19 different reimbursement cases so that you can protect your profits from Amazon errors. Learn more about Refunds Manager.