It’s no secret that Amazon warehouse space has become more and more scarce.
In response to this increased scarcity, Amazon has started restricting seller inventory capacity. As you prepare for the new year, it’s essential to have a solid plan in place for your new inventory and top-selling products.
The main cause behind this decreased warehouse capacity?
In this video & blog breakdown, Nick Bradley, Premium Services Manager at Teikametrics, joins Cameron Yoder to discuss IPI scores and the influence excess inventory has on IPI.
The video above gives an overview of his recommendations for working around the roadblock of excess inventory while Amazon is currently scarce on warehouse space. Continue reading for an in-depth analysis on inventory & IPI.
Note: This advice and strategy is a preface of what’s to come at AdMax 2022, the marketplace advertising summit we’re hosting to prepare sellers and brands for the year ahead. We’ll be covering in-depth supply chain and inventory topics with advanced advertising strategies for 2022. Click below to sign up for the on demand version (it’s FREE!)
What is the Inventory Performance Index?
IPI, which stands for inventory performance index, is a key metric that Amazon uses to gauge your performance and inventory sell-through as a third-party seller in FBA. The goal of this metric is to help Amazon measure how efficient you are at managing your FBA inventory.
There are a few factors that can impact your IPI score. According to Amazon, some of the most influential factors that influence positive IPI scores are:
- Maintaining a balanced inventory level between sold and on-hand in addition to avoiding excess and aged inventory.
- Avoiding long-term storage fees.
- Fixing listing problems.
- Keeping your most popular products in stock at the right levels to meet customer demand and maximize customer satisfaction.
As we kick off the new year, why is it essential to prioritize your Inventory Performance Index? Following the busy holiday shopping season, sellers tend to bring in a lot of new inventory. Considering Amazon’s recent warehouse restrictions, as sellers bring this new inventory in they’ll be facing major setbacks and roadblocks.
As you prepare to replenish your inventory in 2022, these roadblocks (and the solutions that coincide) are essential to set yourself up for success.
We can learn more about current inventory restrictions from this real-life example that Nick and his client are currently working to resolve:
“We had a great example this week that we were running into where one of our top sellers went out of stock, and our client went to replenish the inventory and actually received pushback from Amazon saying that they couldn’t because they had excess inventory on another product. So this other product, not a top seller, had been sitting in the warehouse for a while, and it was actually inhibiting our ability to add back in the top seller.”
How to combat this massive roadblock
There are four primary methods you can use to free up warehouse space and sell through inventory:
- Discounts and coupons
- Increase advertising
By adding discounts and coupons to your product and lowering the price there is a higher likelihood of seeing your conversion rates increase and your inventory move.
In addition to the discounts, another option is to increase advertising effort and push spend on that product. While it may not be the most efficient method, you may be willing to sacrifice efficiency levels in order to clear up the shelves.
Note: We recommend prioritizing the first two methods (Discounts, coupons, and increased advertising) over the last two methods (dumping and liquidation).
Nick goes into detail about what each method entails as well as his reasoning why he prefers and recommends the first two rather than the latter two options in the full video above.
Where are things moving in the future?
According to Nick, Amazon is going to continue cracking down on how they limit retailers in the amount of warehouse space they are able to take up at a time. Retailers are already feeling the crunch of Amazon’s scarce warehouse space so something has to be done about products sitting on their shelves for over 120 days.