Amazon inventory management helps Amazon sellers keep their products in stock and sales flowing. But it involves more than simply counting products and listing quantities in Seller Central. Order volume, cash flow, and sales forecasting all play a role, and sellers must master the entire process to stay on the top of Amazon’s search listings and drive sales.
In a way, Amazon itself makes it hard for sellers to maintain healthy stock levels. Amazon pays sellers just twice per month, which can delay ordering and paying for needed inventory. But Payability, the sponsor of this article, solves cash flow woes by making daily deposits into your bank account based on your Amazon sales. You even get a $100 account credit for signing up.
Now, let’s explore the 5 things you can do to effectively manage your Amazon inventory as your business grows.
1. Know the Hazards of Running Out of Amazon Inventory
In most selling situations outside of Amazon, say in-store or on your own website, being out of stock equates to lost sales for a particular item, but little else. On Amazon, being out-of-stock can have serious and long-lasting negative impact on your product listings and even your future sales.
Here are 3 major problems you face when you run out of stock for a well-ranked, fast-selling product on Amazon.
Lost Sales = Lost Income
It’s obvious that you can’t sell what you don’t have in stock. But running out of inventory for a product sold on Amazon is far more detrimental to your sales than being out of stock on your own website. On Amazon, you can’t accept orders for backordered items. So, if you’re at 0 stock, your listing goes down and sales simply stop coming in until you have the product back in stock.
“With our business model, we make candy orders “fresh to order” and it’s a challenge keeping enough ingredients on hand to fill Amazon orders. Being out of one ingredient can affect stock for many products, plus we have to balance stock orders and payments among many vendors. Switching from Amazon’s payment schedule to Payability’s daily payments helps us solve our out-of-stock problems, keep our listings live on Amazon, and keep orders coming in.”
— Damian Roberti, The Brittle Box Candy Company
Unlike Amazon, on your own website, you’re in control. You can note an item as out of stock, list its expected arrival date, accept backorders, and ship on arrival. You don’t have this flexibility on Amazon. However, you can cheat Amazon’s system by extending your order processing time for that item if your stock is arriving soon. Many do. But this can backfire in two ways:
- If your stock is delayed, you’ll have Amazon orders that you can’t fill, and that’s a direct hit to your important seller rating.
- Amazon shoppers are used to instant gratification. They come to Amazon expecting instant shipping and 2-3 day delivery, tops. If you list your product with a 6- to 10-day order processing time, it can negatively affect your brand image.
Zero Stock = Lower Product Ranking
Being out of stock for a long period of time, or very often, affects your shopping search results. Amazon relies on many factors when delivering search results to shoppers, and product availability plays a huge role in their search ranking algorithm. If you’re out of stock, your listings usually won’t show up at all in Amazon search. And if you’re out of stock often, you’ll find your listing knocked down in the rankings regularly, even when you do have stock.
If you sell a unique item with little competition, occasionally being out of stock may not affect your search results. But if you have a number of competitors in your category, you’ll have trouble fighting your way back to the top once you’re restocked.
No Sales = No New Product & Seller Reviews
All-important product and seller reviews also take a hit when your products are out of stock. No sales equals no new seller reviews from shoppers, it’s that simple. Plus, it’s impossible for shoppers or site visitors to add new product reviews to listings that don’t show up when searched.
This seems like a small thing, but continually acquiring reviews and ratings is important to Amazon sellers. Newer reviews bolster search results, plus listings with fresh reviews attract and convert more buyers. Simply put, if your Amazon inventory is 0, you’re missing out on new review and rating opportunities and losing traction.
Smart inventory management is important to any seller, online and offline, but Amazon sellers pay a heavier price than most when stock runs out. Next, we’ll explore ways to prevent these hazards by improving your overall approach to Amazon inventory management.
2. Use Amazon Inventory Management Tools to Track & Maintain Stock Levels
Every Amazon seller should be familiar with the inventory features that Amazon provides. After all, Amazon is the undisputed leader among the data-driven ecommerce platforms. The data that Amazon deems important enough to make available to sellers should matter to you.
Even if you manage inventory via a third-party system, it ties into the data on your Seller Central dashboard. So, you need to be familiar with the data that Amazon provides, and the controls that you have on Seller Central. Your first stop is the Manage Inventory screen, shown below.
Here, you can quickly scan many key data points for all of your Amazon listings and make all sorts of basic inventory adjustments manually. These include:
- View active, inactive, and suppressed listings
- Add a product to inventory
- Change quantity on hand
- Change pricing
- See seller fees for each product
- View FBA or merchant-fulfilled stock levels
- Track FBA shipments at every stage
Of course, if you manage large inventories, you can change and update inventory data via bulk upload or connections to third-party software. However you manage your Amazon inventory, your data is always tracked in Seller Central and always available for a quick overview.
Seller Central is more than a master list of your Amazon products. The Amazon Selling Coach has powerful, and often under-utilized, inventory management tools that assist sellers in many ways. In the Selling Coach, you can review sales trends for your products and see Amazon’s estimate for the number of days your current stock levels can cover. This helps you accurately forecast your inventory purchases based actual sales data, which we cover in detail below.
The Amazon Selling Coach also sends you Low Stock Alerts via email or your mobile Amazon Seller App. These let you know when it’s time to reorder based on the lead times that you set for each product. This helps you minimize 0-stock status and avoid lost sales and lower search rankings.
It’s true that many volume sellers turn to third-party Amazon seller tools to streamline their Amazon business, and we’ll explore those options below. But, plenty of successful sellers handle Amazon inventory management using the tools in Seller Central and the Amazon Selling Coach. So don’t be in a hurry to spend your money on an outside service until you see what Amazon’s inventory management tools offer.
3. Use Lead Times & Forecasting to Plan Inventory Orders
Business inventory management theory dictates you should have just enough inventory in stock to fill orders in between stock shipments. If only it were that easy in practice! Unlike theories, real-world inventory managers have to contend with challenges like unpredictable supplier schedules, raw material shortages, sales fluctuations, weather events, and more.
Smart inventory buyers factor these “what ifs” into their inventory order lead times and inventory forecasting when placing orders with suppliers. Here’s what these terms mean, and how Amazon can help you make smarter inventory order decisions:
Inventory Order Lead Time
Lead time is the time it takes for inventory to arrive once it’s ordered. The idea is simple. When ordering new stock, you allow enough time for it to arrive before you run out of your current stock. Understanding supplier lead times helps buyers manage 2 inventory challenges:
- Not Over-ordering – Ordering excessive stock ties up cash in more inventory than you need. Knowing lead times helps you judge how often you need to order stock to cover orders over a set period of time, and how much you need to order each time.
- Ordering Too Late – If you don’t allow enough lead time when reordering, you run the risk of hitting 0 inventory on Amazon before new stock arrives.
To avoid these pitfalls, you should constantly track your current inventory levels and sales volume, and balance this against your lead times for new inventory shipments. Here, the Amazon Selling Coach is a valuable tool. It generates low-inventory alerts so you know when it’s time to reorder. Inventory alerts are based on the lead times that you enter for each product and the sales volume that Amazon tracks for you. This way, your orders are based on sound data, not guesswork.
You also have to predict how much inventory you’ll need when you place an order. This is called inventory forecasting. Forecasting bases your reorder quantities on your sales trends. Again, the Amazon Selling Coach is a great tool for forecasting your inventory reorder needs based on your actual Amazon sales and inventory levels.
However, you need to apply your own intuition and experience when placing orders based on forecasted numbers. Seasonal demand, holidays, and trends can affect your stock needs up or down. You should consider all of this, along with lead times, in your decision-making process.
Example: Combine Lead Times, Forecasting
& Experience for Smart Buys
Let’s say you sell fashion swimsuits. In late July, Amazon Selling Coach sends you a low-inventory alert for a popular swimsuit. It has tracked increasing sales volumes in June and July. According to forecasted sales numbers and your current inventory, Amazon expects you to run out in mid-August. It tells you to buy 30 more suits to cover two more months of orders after you run out.
But, you know your reorder lead time on this swimsuit is 3 weeks, so your inventory order won’t arrive until mid-August. You also know from past experience that your fashion swimsuit sales drop in August and don’t pick up again until early March. In this case, you probably shouldn’t reorder a seasonal item in late-season, despite what Amazon says. When it comes to stock orders the data definitely matters, but so does your experience.
Know that Lead Times Differ Based on Your Amazon Sales Model
Sellers have vastly different ways of sourcing products to sell on Amazon. So, how you restock your Amazon inventory and how long it takes to arrive really depends on your particular sales model.
If you’re just starting out, here’s a look at 5 common Amazon business models and typical inventory order lead times for each. You can learn more about selling on Amazon using these different sales models in our Guide to Selling on Amazon.
|Type of Amazon Seller|
|FBA Retail Arbitrage|
|Private Label Importer|
|Multichannel Ecommerce Seller|
|Retail Store also Selling on Amazon|
4. Free Up Your Cash Flow for Inventory Purchases
For many sellers, the 0-stock inventory hazards discussed above are directly linked to Amazon’s payout policies. Amazon operates on a 14-day payout, so sellers get paid just 2 times per month. From a cash flow perspective, this drastically hampers a growing business’s ability to maintain Amazon inventory and manage it cost-effectively.
Without control over their daily cash flow, Amazon sellers:
- Can’t act on inventory sourcing opportunities in real-time
- Can’t take advantage of supplier prepayment and early-pay discounts
- Can’t make purchases quickly enough to keep products in stock
To combat being cash-strapped between payouts, sellers turn to alternative Amazon funding solutions like these 3 popular options.
Payability is the easiest way to turn your Amazon sales into daily income. It’s not a loan or a credit card, instead, it’s a service that tracks your Amazon sales and deposits daily revenues into your bank account. Payability effectively turns your twice-monthly Amazon payouts into daily deposits so you have total control over your cash flow.
“With Payability, I’m able to keep inventory either on my shelves or always have more on the way. Waiting the two weeks to get my money from Amazon was not effective in keeping inventory in stock at all, but daily payouts has helped me grow my business tenfold.”
— Elizabeth Whitcomb, Retail Arbitrage Seller
How Payability Works
Payability connects to your Seller Central account and deposits 80% of your daily payouts into your bank account or onto a prepaid MasterCard. The remaining 20% is held in a reserve to cover returns or chargebacks. That 20% is released to you on Amazon’s regular 14-day payment schedule.
The only cost associated with Payability is a 2% flat fee on your gross sales. Many users opt to take their payouts on Payability’s prepaid MasterCard because it offers 2% cash-back on purchases, partially offsetting Payability’s fee. Another plus is that Payability has no startup fees or cancellation fees. The only 2 requirements are that you’ve been selling on Amazon for over 90 days and that you average $2,000 in sales per month on Amazon.
The advantage of using Payability is that you have access to your cash as you earn it, just like a regular ecommerce seller. By controlling your cash flow, you can purchase and turn your inventory faster to make more money on Amazon. Plus you can jump on supplier prepayment and early-pay discounts to lower your inventory costs and increase your profits and buying power. Over 1500 sellers use Payability to help scale their Amazon businesses. Jump City Toys and Gifts Fulfilled are two of many seller success stories.
Credit cards are another simple way to fund your Amazon inventory purchases in between your sales payouts. But beware! Credit card charges have a pesky habit of stacking up quickly. If you’re not careful, the interest cost of carrying a balance for just a few months can take a huge bite out of your Amazon sales profits. So if you go the credit card route to fund your Amazon inventory purchases, watch your balance like a hawk.
Another issue with credit cards is that you can hit your limits at exactly the wrong moment. Credit card limits can hinder your ability to quickly reorder stock as needed. You either have to extend your limit, which card companies won’t always do, or pay down your credit card to make room for the new charge. Sellers who rely on credit cards to manage Amazon inventory often face both issues. But pairing credit cards with Payability can make it work since you can pay down balances faster with Payability’s daily payout.
If you’re careful, you can make credit cards work to your advantage by using 0-interest programs. Some businesses even manage to fund their startup inventories solely on credit cards and pay little to no interest. The trick is moving the balance between two credit cards that offer 0% interest on balance transfers for extended periods. Again, this must be very well-managed. If not, you can find yourself owing large balances and stacking up interest.
Loans or Lines of Credit
The third way that Amazon sellers fund inventory purchases is through business loans or lines of credit. Loans and lines of credit usually offer lower interest rates than credit cards, but they can be difficult to get, especially for a startup. You’ll need to provide tax documents, income statements, and balance sheets, and that only comes after you’ve been selling for some time.
Another drawback is that loans and lines of credit are easy to spend today, but can be hard to pay back tomorrow. They’re really best for an established business with a record of profits.
Amazon Lending is a small business loan option that helps Amazon sellers fund their inventory purchases. But you do have to be an established Amazon seller since the loan amounts are based on your running Amazon sales volume. Plus, you’re restricted to purchasing Amazon inventory only. Amazon Lending funds can’t be used for inventory sold elsewhere or other business expenses. In addition, Amazon Loans are offered to a small subset of sellers; you can’t apply for one without an invitation from Amazon.
Many Amazon sellers use a combination of Payability’s faster payouts, credit cards, and other types of credit to extend their buying power as they grow. For more on how Payability stacks up to traditional loans and credit cards, check out this short video.
5. Compare & Test-drive Third-party Amazon Inventory Tools
Amazon Seller Central, which we covered above, gives sellers a full suite of Amazon inventory management tools for free. You can even access them from your smartphone using the free Amazon Seller App. Many sellers find that Amazon’s suite provides all they need to efficiently manage Amazon inventory.
Others turn to third-party software solutions to find better ways to manage Amazon inventory for their particular selling needs. For example, retail arbitrage sellers need Amazon price scanner apps for smartphones that let them do detailed product research as they shop for clearance deals. Multichannel sellers often need to import sales from Amazon, eBay, Walmart, and their own website into one inventory and order management system.
If you find that Amazon’s inventory management tools don’t meet all of your needs, third-party Amazon inventory tools like these can fill in the gaps:
|Inventory Labs & Scoutify App|
This is just a glimpse of the many third-party tools designed to meet all types of Amazon inventory and sales management needs. Most offer free trials, so you can take them for a test drive to find the best solution for your Amazon business without spending a dime.
Learn more about what these and other Amazon seller tools can do for you in our Guide to Amazon Seller Tools.
The Bottom Line
Managing your Amazon inventory depends on many factors. How you sell on Amazon, how you fulfill orders, whether you sell elsewhere, and how you manage your Amazon cash flow, all play into your inventory management decisions.
Sellers moving a few products have vastly different inventory needs compared to multichannel sellers who stock and reorder products in volume. Whatever your sales model, it’s critical that you understand the problems you face when you let Amazon inventory run out, and how you can prevent this from happening.
Controlling cash flow, using Amazon’s free inventory management tools, and placing data-backed restock orders are key elements of an effective Amazon inventory management program. And as you grow, specialized third-party Amazon seller tools can help you better manage inventory and selling functions.
Do you sell on Amazon? If so, how do you manage your inventory and plan your restock orders? Do you stick with Seller Central and the Amazon Selling Coach or rely on third-party solutions?
Do you use Payability to turn Amazon sales into daily payments, or use other methods to fund your inventory buys? We’d love to hear your thoughts and insights in the comments below.