Introduction:
Every brand wants to have roaring sales each day. They wish to expand their business across the globe. Fortunately, there are several ways a brand can sell the products online through eCommerce channels like Amazon, Walmart, or eBay.
Amazon Inventory Management
These eCommerce channels have plenty of unique features to make your listing look just flawless. These cool features include unlimited media storage, same-day or two-day shipping, inventory management, early access to special elements, and many more.
When we talk about Amazon, it has one special functionality related to its inventory known as Inventory Performance Index (IPI). Well, this is quite a foreign term to many. But in simple terms, the Inventory Performance Index (IPI) is a vital score bar to compute how well brands can manage their inventory on Amazon.
The inventory health score allotment is between 0 to 1000. The IPI has rolled out as an effective measure for brands as well as Amazon.
IPI factor assists in optimizing inventory, reducing inventory operating costs, and recovering lost sales. Brands can know the right quantity, right products, and right information about the same. Any brand on Amazon that scores 500 or above indicates that they are excelling well on Amazon whereas brands with a score below 500 indicate they need to focus on their inventory well. How to calculate IPI on Amazon is still unknown due to confidential protocols.
Factors that affect the Inventory Performance Index are as follows:
- Excess inventory and sell-through
- In-stock inventory
- Stranded inventor
IPI Score Scale
- Excess inventory and sell-through: It simply means reducing excess inventory in order to accelerate profitability. Amazon gives a lower IPI score to the listing that has more stock which can, later on, disturb the sales of a particular product and also reduce the rating of the same.
- In-stock inventory: Amazon frequently sends recommendations to the brands about what and when to restock. Amazon loves the product list that is never out-of-stock, it loves the product list that has the correct ASIN (Amazon Standard Identification Number). Product listings with complete information and stock help a brand to gradually increase the Inventory Performance Index. One can improve the score of IPI by hiding frequent recommendations by Amazon. You can do this by disabling “Restock Inventory.”
- Stranded Inventory: When any brand’s products are available in the warehouse or fulfillment centers by Amazon but invisible in the product listings or yet to be listed. A brand must regularly check stranded inventory to gain a higher IPI score and higher sales.
Top Influencing Factor
Now it is a bit natural to think your Amazon product listing is your capital asset as it can make or break a brand. If a brand has a lower IPI score, it is a bit uncomfortable. However, it can take proper action on the basis of the following points:
- Grow your sell-through rate: In layman’s words, sell-through rate simply means a brand selling actual products on Amazon and the stock it actually has. A brand can compute the Sell-through rate using the following formula:
| Sell-through rate = Actual units sold till date / Actual Stock-in-Hand (Note it) |
Amazon likes when a brand gains a higher sell-through rate because that means goods are leaving their fulfillment centers really quickly.
Moreover, a brand can increase its sell-through rate by selling products in a bundle, offering attractive discounts and promo codes (if available), removing extra stock from fulfilment centres if not necessary at present, promoting all the products frequently to increase their sales.
Inventory Control
- Avoid overstocking: One of the improper ways to manage your inventory is overstocking products. Well, Amazon doesn’t consider a brand with “overstocking issues” and thus gives a lower IPI score that can also impact your sales and revenue.
It’s pretty easy to compute annual overstock wastage cost with its formula:
| Cost of inventory in hand x (multiply by) excess inventory stored = Annual overstock wastage expenses/cost |
However, this can also be avoided by making a robust pricing strategy, automating reorders for all the products, forecasting demands, constant market research, and adopting the latest trends.
- Always keep an eye: No matter how successful a brand is on Amazon. All one has to do is always keep an eye on popular goods as well as “not-so-popular” ones. In order to gain a higher amount of sales, it is much important to keep a stock of higher selling products always. On the contrary, remove lesser selling products from the stock as they may use the “extra” space in the stock section. A brand can use an inventory management system to extract sales reports that show which goods are popular. Likewise, the reports show them which products need to be stocked daily. One can also make use of ABC Inventory analysis and categorize their respective products.
- Fix stranded products: As discussed earlier, stranded products are those stored in fulfillment centers but invisible in the Amazon product listing. These products are generally known as stranded; they are yet to be listed, listing yet to be created, or anything that cannot be sold at the moment. Amazon charges a penalty for such inventory or stocks. So, it’s necessary to fix those unavailable stocks as soon as possible.
Conclusion:
In order to tactfully manage your inventory on Amazon for a fruitful return, connect with 99 YRS, 360 degrees performance-based global eCommerce marketing agency today on enquiry@99yrs.com.
We help you in forecasting the demand of your products, bundling products to increase sales, manage your entire inventory on Amazon and other eCommerce channels, create a custom pricing strategy, easily transfer stock to FBA centers, automate shipping orders, and marketing the same efficiently.