So, you already know how to use FBA. You send the first 500 units. Sales are good. But, then, you realize you only have 50 more, and you’re about to go out of stock.
There is a danger out there that exists for all Amazon sellers--the product goes out of stock. You’re out of inventory. You lose sales and rank at the same time. You have to deal with upset customers. You’re done. Aside from putting a big “L” on your forehead and panicking, what else can you do?
What really happens when your product goes out of stock? And more, importantly what can you do about it? What do you do when it happens, and what do you do to prevent it from happening again?
WHAT REALLY HAPPENS IN REAL TIME
Amazon is pretty strict about your product going out of stock. In order to maintain their reputation as a reliable e-commerce site, they’re quick to act when products are not on hand. The following are things that you might anticipation happening when your brand runs out of stock:
1. Inactive Mark and Disappearance from Search Results
When the product goes out of stock, Amazon automatically removes your product listing, and marks it “inactive.” What this means is it disappears from search results. Potential consumers will not find your product. No one can preorder, no one can order, period.
2. Loss of Rank and Sales
When your product goes inactive and you disappear from search results, you will immediately lose sales. But you’ll also lose rank--instead of your product showing up on search results, it will be your competitor’s products that show up. So your potential consumers will buy similar products as yours from your competitors because yours have disappeared. As your competitors make new and more sales, they’ll increase in reviews and rankings, and it’ll be much harder to keep up once you get back on your feet.
3. Upset Customers
Sometimes, you may sell more products that you have in stock, and run out before realizing it’s too late. You’ll have to tell the customer that bought your product that you’re out of stock. As you can probably expect, they won’t take to the news quite well. Not only will they go to a competitor, but they might also give you a negative review.
WHAT YOU CAN DO ABOUT IT
Here are ways to prevent going out of stock ahead of time and when you’re low on stock:
1. Maintain a good relationship with suppliers.
Understand their product cycle, and make sure they understand your sales cycles. This way, you can preempt any and each of the problems in production. Delays on their end could very much waylay your own sales cycles.
2. Send units on a regular basis to FBA.
The Fulfillment by Amazon exists for your distribution ease--use it well! The FBA works best when you’re sending product continuously. As long as you’re “fulfilling” your end of the bargain, you can leave it up to them to pick, pack, and ship your items. Keep an inventory check and inventory forecasting of all your products. You need to understand - and pre-empt - events that can stock you out sooner than you expect. Make sure shipment and re-orders from the supplier are ready days if not weeks before your expected stock out. This way, you will have inbound shipment before you run out of stocks.
3. Reinvest profits in inventory.
Maybe you’re spending too much on other processes of your brand, and not enough on inventory. Keep track of your sales cycles, and preempt the best-selling seasons by reinvesting profits in inventory. By cushioning your cash flow, you can even possibly negotiate better terms with suppliers. Bulk up on inventory ahead of time. The larger the order for the supplier, the higher the profit margin for you.
4. A steady customer base with a good customer service team.
You’re out of products, but you still have your customer service team. Maintaining a good relationship with your customers ahead of time will guarantee that they won’t go off with your competitors when you most need them. We’ve outlined good customer service quality in a previous blog post.
5. Look into different types of shipment.
If you haven’t yet used it, Amazon’s international shipping service, Amazon Global, is ideal for shipping to more than 100 countries across the globe. With payment possible for 25 different currencies, Amazon’s global shipping method is easy and helps you avoid stock-outs. Slow shipping will delay your whole process, so take advantage of global shipping.
6. A little trick: Raise prices on the remaining products.
We’ll give you a little trick--when you’re low on stock, raise your prices on the remaining products. and even if it goes out of stock, you can sell at roughly the same starting price when it resells again. So, by raising your prices, you can resell at a fairly normal rate once stock is back. The impact on your sales won’t be too hard. Here’s some data for you on raising prices.
You don’t have to be an Economics major to understand the basic concepts of supply and demand--when sales go out of stock, demand drops. When products go out of stock, it certainly is a dire circumstance.
Managing or preventing a sales stockout will come in handy in those emergency moments. Anticipating a stockout might even lead to a higher profit margin. So, when the time comes that you’re low on stock, not only will you be prepared and not go into a total stockout, but you might even gain profit from it.
So, instead of panicking, make sure to keep these tips in mind next time you’re low on stock. The best method for something without a cure is prevention--you can do this by maintaining an eye on your sales cycles and trends. If all else fails, do last minute preventions by raising prices on the remaining stock.
We hope this helps to make your management department up and running and never run out of stock. If you have a question on preventing stock-outs, MarketplaceOps is here for you. We are a team of online marketplaces and e-Commerce experts who have been in the industry for many years. We’re willing to help you every step of the way. If you have more questions about our article or if you simply need help in starting or handling your Amazon business, just reach out to us by sending an email or clicking the link here: