Excess inventory is a problem many Amazon retailers face. It remains in storage, accumulating holding costs that waste money and affect a retailer’s Amazon IPI (Inventory Performance Index) score.
So what happens to excess inventory? Unfortunately, many choose to have Amazon destroy and dispose of their products, which go straight to landfills and are harmful to our planet. With a growing focus on sustainability in business practices, this is not sustainable and there are alternatives.
Let’s take a look at how Amazon defines products as excess inventory and the different ways that you as a retailer can manage your inventory.
What Does Amazon Consider As Excess Inventory?
Excess inventory is a store of items that have yet to be utilized or sold. When they continue to sit in storage over a period of time, they waste valuable space and money that would be best used in other aspects of your business.
It’s important to understand that Amazon has its own criteria for excess inventory, and that is when you will have several options as a retailer on how to manage it further.
Amazon’s criteria for excess inventory is:
- At least one unit of your inventory is over 90 days old
- There is over 90 days’ worth of inventory on hand
- The expenses of maintaining your inventory without taking any action are greater than the costs of taking action
Three Ways To Boost Sales And Get Rid of Your Excess Inventory
Before having Amazon take action in managing your inventory, you may want to consider the following:
Utilize Your Social Media Pages to Promote Your Products
Your social media pages are a free tool that should be utilized to promote your products. Be sure to not only post the products themselves but also discuss their features and why they are beneficial. Your social media pages give you an opportunity to engage with customers in real-time, which is invaluable when attempting to boost your sales.
I also suggest that you do an Amazon FBA Live Stream to demonstrate how your products are used.
Improve the Keywords on Your Product Listings
Your keywords and their placements are just as important as the product itself. When you are listing your items, be sure to choose the keywords carefully and strategically. Use a variety of relevant keywords that customers would likely search when looking for your products, and be mindful of ways to improve your product descriptions by providing more useful information. Take a look at how your competitors describe their own items to get ideas for how to improve your product listings.
Put Products in a Bundle or Multipack
If you’re still struggling to sell your products, consider putting them in a bundle or multipack. This helps customers see the value of purchasing multiple items at one time instead of purchasing everything individually. You can offer a discount on the total price to incentivize buying your products together and work on boosting your sales at the same time by freeing up space. Read about Amazon’s Product Bundling Policies to make sure your listings adhere to them because otherwise your listing can be removed and your account can be suspended.
How Amazon Can Help You Manage Your Excess Inventory
Amazon provides a number of tools to help businesses manage their overstock and minimize the chance of damaging their IPI score.
A section of the site that is lesser-known amongst customers, retailers can list their overstocks or excess inventory in one place. The difference between listing here and on your regular seller page is that Amazon needs to review the listings before they can appear on the Outlet. For example, the products need to be in new condition and have at least three-star ratings. Read about Amazon Outlet’s full guidelines here.
Amazon Removal or Disposal Order (and its costs)
When your product sales are no longer enough to cover the costs of having Amazon store them, putting in a removal or disposal order may be a necessary move for your business.
When you place a removal order, Amazon will remove the overstock from the warehouse and either sell them or destroy them. You can also request to have products removed from your inventory if there is a quality issue with it, such as if it’s been damaged in some way.
Note that Amazon has restrictions and fees associated with these kinds of requests, which we recommend that you read about in full here.
FBA Liquidations Program
When retailers don’t know what to do with their overstock or customer-returned inventory, there is now an option to sell them through Amazon-provided liquidators so they won’t go to waste.
They will determine an average selling price based on the following factors:
- Your sales history
- Average FBA selling price on Amazon
- Sales history of the ASIN (Amazon Standard Identification Number)
You can recover approximately 5%-10% of the ASP (Average Selling Price) value, net of fees. To understand more about this process, read Amazon’s article on the FBA Liquidations Program.
Surely you’ve seen Today’s Deals on Amazon, and that’s where you can find Lightning Deals. They are time-limited special offers that last for a few hours, and Amazon determines how long these deals will last. Take note that sellers pay to have their products featured as a Lightning Deal, however, this is an opportunity for you to spread brand awareness!
Close or Delete the Product Listing from Your Seller Page
To stop selling a product, you can choose to have the listing closed or deleted. Closing the listing does not affect the record in your inventory while Deleting it removes the SKU (stock keeping unit), sales history, and product information records from your seller page. Therefore, it is more practical to simply Close the listing so that you can reactivate it at any time.
How You Can Avoid Excess Inventory
As you can see, Amazon provides several options to retailers for how to help manage excess inventory. However, avoiding this problem altogether will help you run your business much more smoothly.
So what can you do as a retailer?
Keep Track of Your Cash Flow
Awareness of how much money you are investing in your storage and if the products are selling at a reasonable rate will help you better budget your expenses and know when to take action if your cash intake starts dropping.
Be aware of customer demand – if a product is not selling well, take it out of stock. If you are consistently out of stock on a popular product, customers may not even purchase your other products and cause your sales to drop.
Plan ahead – look at projections for how much product you can expect to sell and purchase more inventory accordingly, or even outsource the management of your inventory to a third party that can take care of it for you.
Pay Attention to Seasonal Demand
Be aware of common trends in your industry around a certain time of year. For example, if you know that during this time of year people are looking to purchase ski equipment, make sure to keep these products in high availability. Only make large stock purchases when the product you aim to sell is profitable at a certain time of the year. Otherwise, you will end up with a large stock of products with no demand for them.
Be Cautious in Managing Stocks of Products that Spoil
Certain products such as meats and dairy items will spoil over time. Be careful to not overstock these products, as you do not want to damage your IPI score by having excess inventory that needs to be disposed of, which will cost additional money.
Know when to re-order: if your perishable products aren’t selling at the rate you hoped for, manage the intervals in which you re-stock. If you find they are not selling well after 2 days, cut the stock interval down to one day so you do not have excess inventory that needs to be disposed of.
Create the Most Inventory Space for Your Best-Selling Products
As a retailer, it is a good idea to focus on offering more space for your best-selling products. If you’re going to purchase new inventory, prioritize your list of products and determine which ones will sell the most quickly, and then order that quantity.
Assess how often customers are buying your products daily or weekly to determine whether it’s worth it to buy excess inventory for these items to make sure they are always available.
Sell your Products on Other Marketplace Platforms
Consider also selling your products on other marketplace platforms where you may gain more visibility for your products. It’s worth the effort to create listings on other sites and generally involves little additional costs, because orders on other marketplace platforms can still be fulfilled through Amazon inventory. If there is demand for your products outside of Amazon, it can be beneficial to take advantage of this option.
One of the many benefits of selling on Amazon is that the platform provides internal possibilities to help you manage your inventory. This makes handling a business more manageable, especially for new sellers.
Amazon takes care of much of the work for you, and you may use these features to your advantage, but you should not rely too heavily on them without conducting a thorough analysis of your own handling of your inventory. Avoiding excess inventory altogether is still the best approach to reducing stress and unnecessary costs while managing your business.
Read the Sourcing Monster blog for more content to help you with your Amazon business!