Top 3 Inventory Management Strategies

 

Whether you’re a veteran Amazon seller or are just starting out, it’s critical to have a solid inventory management strategy in place. That way, you can effectively grow your business without risking an Amazon stockout, losing the Buy Box, or putting your account in jeopardy.

So where do you begin? Keep reading for the top three inventory management strategies that will ultimately help you increase your profits and spur your storefront’s growth.

 

  1. Find the Right Inventory

Before you can really dive into your inventory management strategy, you have to think about what you’re going to sell — and unfortunately, it’s not always as simple as buying something on clearance just because it’s discounted. Sure, you want to maximize your profits, but you first want to make sure you’re investing in a product that’s in demand. After all, you won’t have any margins at all if your inventory doesn’t sell.

So where to begin? You have two things to think about here — what to sell and how you’re going to source it. Will you do wholesale, private label, or retail arbitrage? Your sourcing strategy may depend on the actual product, so it’s important to think about these two in tandem.

For help narrowing down your inventory choices, do some research. Algopix helps simplify and speed up this process. But, be sure to check out Amazon’s category and product restrictions, as you may need prior approval to sell a certain item — or not be allowed to sell it at all.

 

  1. Source Smarter

Once you determine what you’re going to sell, you need to come up with a plan to maximize your ROI. That means finding the best sourcing price and cutting deals with suppliers.

If you source through a supplier, you’re going to need to negotiate your terms. It might be tough to do when you’re just starting out, but as your business grows and you gain more negotiating leverage (i.e. if you can guarantee a certain number of orders a month), it will be easier for you to get a better price.

If you do retail arbitrage, make sure you’re shopping from discount/liquidation stores, the clearance aisles from retail stores, or even auctions and thrift stores. Keep track of store closings and major sales. If you’re not one to clip coupons, consider buying inventory from someone who does. Lastly, many successful retail arbitrage sellers find out about sales before anyone else because they’ve built friendships with store associates and managers. So it’s always a good idea to build relationships with the people who work at the stores you frequent.

 

  1. Prevent an Amazon Stockout

Now that you have a product and optimized pricing strategy, you need to put steps in place to prevent an Amazon stockout. There are four simple ways to do this:

  • Manage your supply chain: Make sure you know your suppliers’ lead times and processes inside and out, and that they know yours. That way there won’t be any surprises when it comes to order processing, shipping times, etc.

 

  • Know your sales velocity: This will give you a sense for how much inventory (at a minimum) to order/have on hand at a given time. You can evaluate your sales velocity by looking at your sales patterns over the course of a year — just don’t forget to factor in Amazon’s spikes in demand for sales days like Prime Day or Cyber Monday.

 

  • Invest in safety stock: Order an extra amount of inventory that essentially functions as a buffer should you have an unexpected surge in sales.

 

  • Maximize your cash flow: Surprises happen in any business — surprises that are often expensive and require you to have extra cash to manage. But cash can be hard to come by when you sell on Amazon and have to wait two weeks for your income. One solution to this is Payability, a service that pays you in real-time by advancing 80% of your Amazon earnings every business day for a 2% flat fee. The remaining 20% is left in a reserve to cover returns and released to you on Amazon’s regular two week payment schedule. These daily payouts allow you to cover surprises, buy (then sell) more inventory, and increase profitability as a result. Added bonus? You won’t be assuming any risk of debt, depleting your savings, or hitting credit limits.


If you’re ready to take your business to the next level, check out these tips on Smart Inventory Management, hear from this Amazon seller on how daily cash flow helps her avoid the Amazon stockout, or visit www.payability.com.

 

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