Top 3 Amazon Inventory Management Tips
Arguably one of the most important strategies you can master as an Amazon seller is inventory management. After all, if you don’t manage your inventory well, you risk setting your business up for a host of problems, from stockouts, to tied-up cash flow — all of which prevent you from winning the Buy Box and growing your business.
The good news is that with a few simple inventory management tricks, you can prevent all this and set your business up for long-term growth. Keep reading to get started.
1. Optimize Price
There are two prices to optimize here: your sourcing price and your selling price.
How you get the best sourcing price depends on how you actually source your products. For example, if you run a retail or online arbitrage business, you want to make sure you’re shopping in the clearance aisles at stores that already offer the best discounts. If you work with suppliers or wholesalers, you’ll want to negotiate with them to get their price down (more on that in #2 below). In either case, make sure to shop around for the best offer.
When it comes to selling your product, you’ll want to set a price that allows you to win the Buy Box and maximize your margins. Pricing too low could lead to high volume sales, but you will most likely run out of inventory faster than you’re able to replenish it. On the flip side, if you price too high, your inventory simply won’t sell. To find the sweet spot in between, look up the pricing and sales histories using an Amazon scanner app or a repricer tool.
2. Know Your Sales Cycles & Sales Velocity
One of the best ways to get negotiating leverage with your suppliers is to understand your sales velocity over a given time period. When are your busiest times? Your slowest? How much inventory, at a minimum, should you have on hand during each?
Understanding this information will let you know when and how much to reorder so that your inventory levels never reach 0. This way, you can guarantee regular orders from your suppliers, determine when the best time is to order from them (i.e. working around their production and shipping times as well as your lead times), and never run out of stock.
For help understanding these data points, look at your inventory reports in Seller Central or consider investing in inventory management software that will calculate your minimum viable stock levels, reorder points, and more.
3. Maximize Cash Flow
At the end of the day, you won’t have inventory if you don’t have the cash to purchase it. Not only that, you won’t be able to make unexpected resupply orders if you have a surprise surge in sales, or you’ll lose out on a great last-minute limited-time offer from a supplier.
Having consistent access to cash will allow you to buy (and turn) more inventory more quickly so you can grow your business faster. Unfortunately, there’s nothing consistent about cash flow as an Amazon seller. Unless, of course, you use Payability.
Payability will advance you 80% of your Amazon income every business day for a 2% flat fee on gross sales. So, if you make a sale on Monday, you’ll get 80% of that income as soon as Tuesday. That means you can reinvest in more inventory more quickly, sell it faster and increase your profitability.
The Payability Team