What you need to know about Amazon's inventory performance indicators
Inventory management capability is the core competitive power of Amazon sellers, which can differentiate sellers from each other, especially FBA sellers. In order to enable sellers to better manage inventories, eliminate those products that cannot be sold, and improve overall revenue, Amazon has introduced a new inventory performance indicator ( IPI ), which will be implemented starting July 1. The IPI score of each seller will be reevaluated once every quarter, and the inventory of seller's account numbers with scores lower than 350 will be limited until the next quarter's reevaluation is higher than 350 points. Excess inventory charges will be charged at a rate of us $ 10 per cubic foot per month. There is no limit to the inventory of sellers with scores equal to or higher than 350, but the short-term and long-term storage fees of FBA will still be paid normally. So what are the factors affecting IPI? It is understood that IPI scores mainly depend on the following four factors: Sell – through rate ( sales rate, currently the most important influencing factor ) In – stock rate Excess inventory percentage ( unsalable stock ratio is too high ) Strayed inventory percentage ( stock ratio retained in the warehouse due to problems with listing ) If the seller is not familiar with any of these factors, you can check the detailed explanation in the Amazon seller center and check the clear breakdown of each indicator in inventory dashboard. What do you need to know about Amazon's inventory performance indicators? What impact will IPI have on sellers? Obviously, an IPI score higher than 350 is of great benefit to sellers, and inventory can be unlimited. Sellers with scores above 350 can relax a little, but still, have to have strategies to help maintain a good reputation and improve IPI scores. Sellers need to know that there is a time lag between taking actions and recalculating to update scores. The seller said that stock sold out and restocking were usually updated on the same day, while the sale rate was only updated once a week. Especially if you are close to the IPI threshold, you must plan and adjust replenishment inventory and carefully add new products. Please remember that the IPI score at the final evaluation date is the most critical and will affect the storage space for the entire quarter. How should sellers deal with the new policy? For those sellers with low IPI scores, they should not only think about how to survive but also how to achieve growth with limited inventory. So, what should the seller do? 1. Determine the new inventory limit. Amazon will allocate separate storage space for clothing, standard sizes, and oversized products. If the seller's catalog spans multiple categories, putting products in separate warehouses of these categories can at least relieve some of the seller's storage pressure. 2. According to Amazon's announcement, the seller's storage limit is not less than 25 cubic feet per product. Especially for sellers with good sales history, the storage space provided by the platform may exceed the limit. Although it is not yet clear how Amazon will limit its inventory, its move is aimed at ensuring that inventory is effective and meaningful for both Amazon and sellers. 3. Give priority to minimizing inventory. If the seller's stock exceeds the limit, the seller still has time to sell some stock before Amazon calculates the excess charge. The specific approach is to increase the sale rate or remove products from FBA warehouses. Using marketing services such as Amazon sports ads or lightning deals will also help to increase orders and reduce inventories, thus minimizing excess costs. In addition, the creation of removal orders can also help clear excess inventory and increase the sale rate. Creating an inventory removal order is a relatively painless ( and cost-effective ) process. Amazon allows sellers to choose which products to process or return them free of charge. 4. Clean up the category catalog. For all sellers on Amazon, this policy aims to clean up some products that do not perform well or sell at a low speed and help improve the experience offered by the sellers. Sellers can use some tools to clean up categories that may expire. The update of Amazon's policies may change the traditional practices of sellers, including third-party sellers. The only thing to be sure of is that Amazon's policy updates definitely go beyond this, but sellers need not worry too much, and then they will be safe.