Interviewing a new client this week we again heard how, after building good ranking over a couple of years, a surge of sales after being featured on a podcast, depleted stocks and a lot of the good work was undone. Amazon wants to make profit for you and themselves by delivering the best customer experience and the best price. When you’re out of stock you’re letting the team down.
Managing inventory levels effectively on Amazon is crucial for maintaining sales flow, controlling costs, and keeping your product ranking high. In complex landscape of e-commerce, especially on a platform as competitive as Amazon, staying in stock can be the difference between steady sales growth and missed opportunities. For sellers using Fulfilment by Amazon (FBA), the stakes are even higher, as inventory levels directly impact your ranking, fees, and customer satisfaction.
Breaking down the key aspects of inventory management on Amazon FBA, covering the pros, cons, and my take on how to keep stock levels optimised for long-term success.
1. Pros of Maintaining Optimal Inventory Levels on FBA
Improved Sales and Search Rankings
- Amazon rewards sellers who maintain consistent stock with better rankings in search results. This means more visibility for your products, leading to higher sales potential.
Positive Customer Experience
- When you’re consistently in stock, customers experience reliable service, which helps build brand trust and leads to repeat purchases. Stock-outs, on the other hand, can lead to negative customer experiences and hurt your brand image.
Cost Efficiency
- Efficient inventory management reduces the need for Amazon’s expensive long-term storage. By aligning stock levels with demand, you avoid extra fees while ensuring products remain fresh and relevant.
2. And the Cons?
Lost Sales and Revenue
- Running low or out of stock can literally mean missing sales, and affects your product ranking. When you’re out of stock, Amazon’s algorithm may lower your position in search results, making it harder to regain visibility once your inventory is replenished.
High Holding Costs and Excess Fees
- Holding excess stock can lead to substantial storage fees, especially during peak periods when Amazon raises its storage costs. Idle inventory not only ties up your cash but can erode profitability over time.
Risk of Inventory Ageing
- For any perishable or seasonal products, inventory that sits too long can become obsolete, forcing you to discount or dispose of unsold items. Amazon’s long-term storage fees also increase as inventory ages, making it essential to balance stock with demand.
Our Best Advice
Inventory management is all about balance:
- Too little stock can disrupt sales momentum and hurt rankings
- Too much stock can increase holding costs and tie up cash.
A data-driven approach, including historical sales and seasonality, can help align stock levels with demand and ensure that your products remain visible and accessible to customers without incurring unnecessary fees.
Check your Inventory Performance Index (IPI) to track your inventory performance. Your IPI score shows how efficient you are at managing your inventory. It ranges from 0 (very bad) to 1,000 (you’re the best!)
Need Help Optimising Your Amazon Inventory?
If managing your inventory feels like juggling chainsaws, don’t worry. Reach out to us for tailored advice — or, allow us to manage your inventory and keep your stock levels optimised and your profits healthy. Make sure your products are ready for the next sale!
