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An absolute guide to Amazon Inventory Management for Beginners


May 17, 2021
6 MIN READ
Vinculum
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Striking a healthy balance between demand and supply is the key to successful business practices. Likely you might have heard this tens of times but what exactly a good inventory system is capable of doing? To refer to, inventory management is the process of determining the amount of stock you need to fulfill your orders timely and accurately. With the right inventory management strategies, you can build good customer relations and achieve more repeated buyers.

If you are a beginner and have just started with E-commerce retailing, this guide is all about steps you can take to help inventory management strategies run optimally.

Use an Inventory Management Software

All of the steps mentioned above are tedious to do at times. Manually tracking your inventory on documents or spreadsheets can be time-consuming and overwhelming.

Pro-tip: Use Inventory management software to automate your inventory management tasks and make sure that you carry enough, but not too much stock at any point of the time.

Amazon’s Seller Central dashboard has a suite of built-in tools that you can access for free. Within the dashboard, the Amazon Selling Coach helps you track inventory levels and when you should buy next.

By tracking your sales trends, you can check how much of each item you sell on Amazon on a daily, weekly, and monthly basis. This comprehensive look at your sales will help you make the best decision about your stock purchasing power.

Check if you are pricing the product right

The most important part of the selling process is determining the right pricing of the product you want to sell out. Unquestionably this begins with checking your potential customers and their buying habits. If you overprice it, obviously your potential buyers may turn out to your competitors and your business may collapse. Underpricing it, on the other hand, will run the risk of making marginal profits.

You need to, therefore, determine the pricing of your product based on your competitor’s listing. A quick review of the listings of similar products will help you figure out the right price for your product.

Learn your inventory turnover rate

How quickly you are able to sell through your Amazon inventory is your turnover rate. To figure this out, you need to measure, on average, how fast you are able to sell products on Amazon. If you have this estimate, you can certainly learn about the stock you need to fill the gap between demand and supply. It is a great way to avoid over-buying or under-buying under different circumstances.

For instance, Amazon sellers who buy stock target a 2-month inventory turnover rate, meaning they expect to sell through an order of stock in 2 months. A better way to learn your inventory turnover rate is to use Amazon’s another feature called a forecasting tool that tracks your product’s daily sales trends. This built-in feature, also called Amazon Selling Coach tracks sales against your available stock and suggests quantities needed to fill orders over a specified timeframe, all from your single Seller Central dashboard.

Understand your supply chain lead times

Supply chain refers to the movement of inventory from initial sourcing to arrival in your warehouse. Lead time is the amount of time when an order is received by a supplier and the time the order is shipped. Understanding these terms will help you get an idea of the time the entire process takes off in restoring your Amazon inventory.

To keep your supply chain run flawless, stay on top of your supplier’s delivery schedules. Just in case, always hold some inventory in reserve to cover unforeseen times

Plan ahead for seasonal sales 

Seasonal sales directly influence your inventory because of the ascent in customer demands and extended supplier chain lead times. The key is to know which products are in demand and which are slow movers during certain seasons of the year. Just to be assured, do this a couple of months before to surge the inventory of goods in demand at peak sale season and topple the supply of products that are out of season.

How about dropshipping?

Dropshipping is a retail fulfillment method where a retail seller does not keep the product in stock instead it makes a purchase from a third party and has it shipped directly to the customer. About maintaining inventory, dropshipping is less risky as you do not have to stock up products that are not in demand. And to sort it more, you do not have to buy storage space and invest in advance.

But remember to choose your dropshipping suppliers carefully so that you can earn profit too. Many suppliers add fees which ultimately increases the cost of your goods.

Also, be sure your dropshipping supplier is Amazon-compliant. Ask them to report inventory levels frequently so that you do not have to sell the products when they are out of stock.

Use promotions 

Promotions are a great way to boost sales quickly. But a sales spike due to promotional offers can leave you stock out before your next delivery and leads to a lower Amazon ranking due to losing customers.

One way to do this is to set a threshold number for promoted items in your inventory. Once that number is hit, you can remove the promotional offer and sell the rest stock at a price a little higher to avoid running out completely.

Or if you plan to sell the entire stock, be sure to set a threshold stock that covers four hours of promotional sales. This is because Amazon generally takes 4 hours to remove a promotional campaign after you’ve chosen to stop it.

The takeaway

It takes a great amount of time to earn a good reputation as an Amazon seller and you may not want to lose your Amazon ranking just because of poor inventory management. Once you learn how to do this with the help of tools, you would be able to stay competitive on Amazon.

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