One of the most important things you can do as an Amazon seller is master inventory management — without a solid strategy in this area, your business simply won’t grow. Instead, you run the risk of an Amazon stockout, could lose the Buy Box and/or your Amazon SEO rank, or even get your account suspended.
The good news is, there are several ways to maximize your inventory management so you can buy more, sell faster, and see your business flourish. Here are four ways to get started:
1. Know Your Sales Cycle & Sales Velocity
Like most retailers, you see spikes in demand at certain times of year — such as the holiday season or, if you sell grilling tools, for example, the summer. Regardless of when your busiest times are, you need to be aware of them so you can plan accordingly and know how much inventory, at a minimum, to have on hand at a given time.
If you’re an experienced Amazon seller, take a look at your sales reports over the last year to get a sense for your high velocity sales days, weeks, or months. And if you’re new to Amazon, look at the selling history of your product to see when it’s typically in high demand.
2. Manage Supplier Relationships
A key component of your inventory management strategy is open communication with your suppliers. You need to know their lead times just as much as they need to know yours — the last thing you want is a delay in production because you weren’t on the same page.
So whether you’ve been working with a supplier for a long time or are looking for a new one, make sure to discuss these three topics:
- Lead Times: How long does it take for a supplier to fulfill your order, including production and shipping times? Do times vary depending on how many units you order?
- Pricing: Can you negotiate better terms with your suppliers if you can guarantee, for example, a minimum order each month?
Sales Cycles: When are your and their busiest times of the year, and how are lead times affected as a result?
3. Reinvest Profits in Inventory
As your business grows, use your profits to invest in buying more inventory first. Not only will you be preventing an Amazon stockout, you’ll be increasing your negotiating leverage with suppliers. After all, if you can guarantee more or larger orders, they may give you a better price.
Pro Tip: To maximize your profits, make sure you are optimizing product price — including the amount you pay to source an item as well as how much you list it for on Amazon. This way, your margins are high and you have more to reinvest.
4. Cushion Your Cash Flow
As you continue turning inventory, you’ll need a reliable source of cash to replenish it. While you should use your profits to reinvest in buying more, you may not have access to said profits right away — especially with Amazon’s two week payment terms.
With a service like Payability, you can have next-day access to your profits, allowing you to purchase more inventory at a faster rate, maximize inventory turn, and grow your business. Payability is a financing company that pays you 80% of your Amazon income within one business day at a 2% flat fee. The other 20% remains in a reserve to cover returns and chargebacks and released to you on Amazon’s traditional 14 day schedule.