Excess inventory is a problem. It ties up your capital, which might be better used elsewhere. It means your product isn’t selling as well as it should. And Amazon doesn’t like it either.
In fact Amazon scores your inventory levels, giving you an IPI score, and if it thinks you have too much, it could limit your storage. In addition, it charges you to keep stock in the warehouse, particularly in the season coming up to the Q4 holidays when storage space is at a premium.
Amazon’s algorithm for calculating what is ‘excess’ inventory is a mystery – like most of Amazon’s algorithms. You can’t game it if you don’t know what it is. But you can try to keep your inventory moving, and if you do have an overstock there are a number of things you can do to reduce it.
It’s worth noting that even though Amazon might say you have 15 excess units, the algorithm looks at how often you’re selling, as well as the units in stock. If you use advertising and a promotional offer to shift ten of those units pretty fast, Amazon will recalculate your IPI, and you may find you’ve no longer got excess stock. So do keep checking the page, as you don’t want to do more than is necessary.
First of all you’ll want to look at Manage Inventory in Seller Central. If Amazon thinks you have excess units you can see that there, and you can also see whether you have inventory that has overstayed its welcome (aged inventory), on which you’ll pay extra storage charges.
First off, you might be able to use some PPC spend to give your sales a boost. If competitors have been advertising and you haven’t, they may have been taking your sales away from you. A quick blast of advertising should get your inventory moving again. This might also be a good time to check your keywords and make sure you’re hitting the right spots.
Or you might consider discounting. You could use a special one-time coupon offer, for instance, which might just get inventory under the ‘excess’ level. That works well if you have social media or an e-mail newsletter where you can give customers your coupon code, and it has the advertising that once your inventory is where you want it, you can just discontinue the offer.
Sometimes, though, you might need to reprice on a more permanent basis. If your price is a notch above your rivals’, you’ll want to take it down to the right level. You might want to use automatic repricing, which can stop you getting left high and dry when competitors reduce this prices.
If you’ve repriced and nothing happened, then either you need to reprice again even lower, or your problem is lack of advertising so you want to combine some ads with your new price. Sometimes you’ll want to use both ads and discounts or repricing together.
How do you choose? Amazon may give you an indication of the best course of action on the excess inventory page. Its software will be comparing your search rankings and prices with other sellers, so it’s worth taking this suggestion seriously.
Another way to get your sales moving is to use multi-channel marketing, selling on Shopify and/or eBay (or even your own website) and using Amazon to fulfill the order. Amazon will charge you fulfillment fees, but this may cost in none the less. You’ll still need to look after returns and customer service, as Amazon will only do the basic fulfillment job, but it’s not hugely more labor-intensive than FBA alone.
Finally, your product may have been overtaken by new products. Perhaps it’s fallen out of fashion, it’s in last year’s color, or new products are more powerful or use new materials. If that’s the case, then it’s time to issue a removal order or ask Amazon to liquidate the stock.
There are different ways of dealing with stock removal, but if you want to, you can donate excess product to a thrift shop. That will do someone good, at least!