Many in the marketplace world will know Gareth Lloyd-Jones, now Head of Business Development at Activ8. Having worked with marketplaces from Amazon to Newegg and a host of start up marketplaces in the past, it’s likely you may have worked with him in the past even if you weren’t aware of it.
Today Gareth looks at Amazon and managing Amazon inventory in a post (or quite possibly still present) Coronavirus world. With Amazon already announcing quantity limits for managing Amazon inventory in US FBA warehouses, retailers need to be more savvy and on top of their game than ever to ensure a successful Q4:
Managing Amazon Inventory for Q4 Restrictions and a possible second winter spike in COVID-19
As Amazon has released a note to sellers about upcoming FBA Quantity Limits which will be imposed in the US from August until the end of the year, appropriate steps should be taken to ensure preparedness during this period. As reported, this move by Amazon is viewed as a measure to prevent further shutdowns to FBA due to the rising cases of COVID-19 in the U.S. Although the changes don’t yet concern other variants of the channel this may change and they will affect any EU sellers trading on Amazon US and utilising FBA warehouses.
Learning from previous shutdowns
The shutdowns earlier this year provide an opportunity for sellers to use that information and take advantage. Firstly, it is recommended that sellers investigate which restrictions will apply to their products to prepare for the changes. Amazon has stated that the changes will only affect sellers with an Inventory Performance Index (IPI) score below 500. Quantity limits can be found in Seller Central within the Restock report sections. Sellers should track this page, as it will be continuously updated to accommodate for more products if additional capacity becomes available.
Seller-Fulfilled-Prime (SFP) is also an alternative solution for sellers interested in obtaining the Amazon Prime badge without dealing with any restrictions applying to items. Businesses shipping a variety of products with a greater volume can also utilise a hybrid of FBA and SFP to supplement stock levels once they deplete from Amazon warehouses.
Hold some stock back from FBA in warehousing that can either quickly replenish depleted FBA stock or if restriction come into play offer an FBM solution. You will also avoid paying Amazon’s peak storage rates and can keep stock more fluid.
This could also be a good opportunity to diversify your global marketplace presence and investigate the possibility of selling across the Amazon network or other marketplaces. By distributing products to warehouses that will hopefully not have Q4 restrictions sellers will be able to de-risk future FBA non-essential shutdowns and reach a large consumer base via other channels.
Insight for managing inventory strategy for Q4
Instead of seeking alternative solutions, sellers can also improve their IPI score to ensure that there are no limitations on their products. Firstly, removing unsold inventory using the waivered storage fee period will prevent any low-performance products impacting the score going forward. Sellers should also continually undergo this process to remove inactive listings and outdated SKUs.
Basing inventory levels on quantity demand is a good strategy, as focusing on best-sellers which generate more sales will have a higher positive impact on IPI scores. Monitoring sales and reports more frequently will provide insight for tweaking any pricing and offers to boost sales with Lightning Deals or Amazon advertising. IPI scores will be affected immediately if a product runs out of stock, so try not to let this happen. Sellers should look into integrating inventory management software to automate and support day-to-day operations. Solutions like Mint Soft, Cin7 and Linnworks are all great, user-friendly solutions and are integral for businesses shipping globally or looking to scale operations on Amazon or across other marketplaces, as they help to speed up processes and easily monitor stock levels so you can supplement products when new items are required.
Although Q4 is fast-approaching, sellers still have an opportunity to prepare product inventory, set up a strategy, and boost their IPI score to ensure preparedness. For more information about how the upcoming changes may affect sellers and the possible solutions to help your business get properly prepared, the team at Activ8 are more than willing to assist. More than anything though, our advice is to be prepared and de-risk your business.