What is FBA inventory management?
A number of benefits come with being an FBA seller. In addition, there is Buy Box dominance, prime order eligibility, and streamlined order fulfillment. Although the Amazon FBA program has many advantages, merchants still face a number of challenges. One such challenge is FBA inventory management.
There are some tips and tricks in this article if you want to improve your inventory management, as well as everything you need to know about FBA inventory management. Let's get started.
How Does Amazon's Inventory Management Work?
A seller's inventory management is how they track and store products so that they can meet customer demand quickly and conveniently. In order to achieve optimal inventory management, you must know how much inventory you have available and how much inventory you expect to sell over time.
Your online business will suffer from poor Amazon inventory management. If you have to wait a long time for shipments, deadstock can result, in addition to increased storage fees and spoiled products. If you have to list product availability as "out of stock," your customers may turn to your competitors in the search for availability.
An interruption in your inventory management plan may cause orders to be delayed and sales to be lost, thereby limiting your profitability.
Amazon FBA enhancements and changes in recent months
Despite the constant changes that Fulfillment by Amazon undergoes, both its sellers and customers still benefit from the service. Staying on top of the latest changes to the Amazon FBA service enables brands to meet consumer expectations and stay ahead of their competition.
Explain how commingling works. It refers to the process by which Amazon stores each item of a product, regardless of the seller, together and ships any one of them to the customer. Stickerless inventory is another term for this process. It will be one of the major changes if Amazon's barcodes are used instead to track inventory in 2020.
Amazon's warehouses may end up shipping counterfeit products instead of the high-quality items you placed in them or other issues. It has happened that legitimate sellers using FBA services sold on Amazon have been banned. It happened due to negative reviews caused by defective or fake products. Keeping an eye on things can help you take advantage of this feature.
Costs associated with FBA
Spending money is inevitable, but it doesn't need to be a lot. Everyone always jumps to the cost part when it comes to budgeting. For example, if you take into consideration how Amazon charges for storage, items are charged based on weight and size rather than by cost. This means you could end up spending more than you are saving if you choose to sell low-dollar items through FBA. Consider your listing decisions carefully before submitting your products to the FBA platform.
In the Amazon FBA program, you are responsible for paying storage fees and fulfillment fees. You will incur a higher cost for storing larger quantities of inventory. In addition to this, Amazon charges you more for items kept over 6 months, motivating people to keep their products moving.
Additionally, Amazon tracks stranded inventory that is held in Amazon's warehouses but does not yet appear on the website. The cost of stranded inventory can be costly. However, Amazon provides stranded inventory reports to assist.
Pros and Cons of Amazon FBA Inventory Management
It's a good idea to make a list of pros and cons before deciding whether to move forward with Amazon FBA. You will be in a better position to make the best decision for your particular situation if you use this approach. In order to help you make an informed decision, here are a few pros and cons of FBA inventory management.
Pros of FBA.
Here are some of the biggest benefits of Amazon FBA, which we believe require more time and space to list exhaustively.
- A hassle-free shipping and logistics service. Amazon takes care of all the details for you. Keeping track of your listings, stocking them, and letting the fulfillment department handle the whole thing is all you need to do. You get an easy way to deal with a huge burden for a small fee.
- Shipping rates are discounted. Using the FBA platform also saves on shipping costs since Amazon is a global leader in fulfillment. Therefore, despite the fact that you are paying a fee, it may not be as high as you think. This is because with the shipping savings, and if you factor in the in-house fulfillment and shipping management, you can easily compare the two.
- Accounting for returns. Aside from sales, FBA takes care of returns and refunds since they are considered a part of the fulfillment process. This will significantly reduce your workload.
- Management of customer service. Sellers using FBA services have access to Amazon's customer support. Additionally, FBA gives you the option to handle all of your customer service needs through the same platform, allowing you to manage everything easily.
- Fast delivery. Prime badges are automatically applied to FBA products, and they qualify for Prime free shipping on customers' orders. Also, this is included with the service, so you won't have to charge extra for shipping.
Cons of FBA.
You should analyze the reasons why FBA may not be a good solution for you since nobody is exactly the same. The following factors are worth considering.
- Expenses. The costs of starting a business are considerable. While FBA is an extremely useful service, it does come at a cost. Many people can't afford to spend the money at the moment. Due to the way fees are calculated, you shouldn't enroll low-cost items in this service, so you should be careful. You can use Amazon's handy FBA calculator to determine whether FBA is a profitable decision for your business.
- There are more returns. The number of returns or the frequency of returns has increased for many sellers. Amazon's open return policy may play a role in this increase. In any case, Amazon handles transaction processing, so revenues are unlikely to be affected significantly by this change. Instead of returning items to Amazon, you will now be able to receive returns directly at your facility. Previously, Amazon shipped returns to them, and then you had to arrange for their return.
- Charges for long-term storage. In many cases, Amazon does not keep inventory for a long period of time. Consequently, stuff that sits for longer will cost more. To keep FBA a viable option for your business, you should get a long-term storage budget.
They will also charge you for storing items that are not actively for sale and will negatively adjust your metrics when you do so. The seller console allows you to view all of this information. Furthermore, you can also arrange to have the product returned to your own address if you wish.
- Taxation. State governments are responsible for managing sales taxes.
You might not be sure which tax rate to use if your business operates in one state but warehouses its items in another. Tax situations and rules can be automated by using special tools. Most of these issues can also be handled by Amazon.
- Payment of Amazon FBA fees. You can't delay your obligations to Amazon. The next sale cannot serve as repayment for previous sales. You will not receive any payment from Amazon until all fees are deducted. How will you cover your fees if you do not have enough funds to do so? You will be required to provide a credit card as payment in order to be able to pay off your balance.
Amazon FBA Inventory Management Tricks and Tips
These tips and tactics will help you to increase profits and accelerate growth when you utilize this service.
- Using analytics software, look at online data.
Do your research on profitable items and popular items on Amazon to determine what are the best product categories to sell on Amazon. Profitable products and popular products are top sellers for a reason.
- Think carefully about the products you choose.
Consider sales rank as well as what you receive in return. Product ranking affects product sales, but high-ranking products will sell quickly. Stock stagnation and long-term fees could result from low-ranked products.
- When possible, bundle your items.
It can be hard to distinguish your listing from others that appear similar but have just a few reviews or a few dollars difference in price on Amazon. Provide bundle listings that attract attention and provide more value to your customers.
- Promote your brand.
There's no point in hoping for the best when trying to sell items. Creating a brand, putting it in the right place, and reaching the right audience is the key to success. Getting in the buy box is only one part of the equation. A reputable manufacturer or distributor will be a reliable source of products of high quality. In order to qualify for the buy box and maximize your sales opportunities, you need good reviews for your product.
- Provide answers to users' questions.
As a general rule, how well a seller responds and engages when provoked is a major factor in choosing them as a seller. Please make sure to answer any questions users may have promptly and politely to reassure them that you are there for them.
- Implement FBA inventory management software
Despite Amazon's robust Seller platform, sellers often decide to integrate third-party tools for inventory management. Be sure you choose an Amazon FBA inventory management software that:
- All of your online sales channels are integrated
- Recommends replenishment of stocks
- Analyzes the types and quantities of products and provides reporting
- Counts the days an item has been stored in the warehouse in order to keep track of the inventory
If you use Amazon FBA properly and if you have profitable products for it, you can get so much more from your online sales.
Each person will reach a different conclusion based on their own individual circumstances. With the right Amazon FBA inventory management techniques, you can increase your revenue. As you can see, we have provided you with enough information for you to decide whether you should sell through FBA or SFP. Fulfillment by Amazon represents the best of both worlds for sellers, all wrapped up in a neat little package at a modest price.