A lot of Amazon sellers believe that a product’s ranking on important keywords would drop when it goes out of stock.
This is the reason why a number of Amazon sellers strategically raise their prices when the inventory is low. They do this to slow down sales and keep the product from going out of stock.
Sellers use this strategy to hold onto what’s left of their inventory until new stocks arrive--hoping that raising prices would help maintain their keyword ranking.
The Low Stock Price Strategy: What to Do When You Experience Stock Out
Almost every seller on Amazon has experienced inventory problems. So, what should you do if your product goes out of stock? Well, there are two options: (1) you can either raise the price to keep the product from going out of stock or (2) you can maintain the current price and just allow the product to go out of stock.
Raising the price of your remaining inventory is a great strategy to use if you do not want your product to completely go out of stock.
The best thing about this strategy is that your product doesn’t go offline and you can still make a few sales.
But, this strategy has a few disadvantages, too. When you raise your price, your product’s performance would drop significantly. Your conversion rate and click rate would go down as Amazon shoppers don’t usually go for expensive and overpriced products.
You’ll also get negative reviews because consumers would feel that they’re not getting value for their money.
If you don’t like this outcome, you can opt not to raise the price of your product and just allow your inventory to naturally run out.
This strategy would decrease your sales. Keep in mind that the Amazon algorithm puts a lot of weight on sales performance. When your product is out of stock, your competitors can outrank you in the Amazon search engine results.
The Low Inventory Problem: Does Going Out of Stock Negatively Affect Your Sales Rank on Amazon?
A case study was conducted to see what happens if a seller drastically raises the price to retain the remaining inventory. But, what’s interesting is that the products still run out of stock even after the price increase and the SERP ranking still went down eventually.
A real Amazon seller participated in the case study and take note of what happened:
The inventory started to go low.
The seller increased the price incrementally over thirty days. The original price was $20. The final price was $45 before going out of stock.
Despite the significant price increase, the product still went out of stock and its SERP ranking significantly decreased.
The product went out of stock for about 20 days. After restocking, the seller reduced the price from $45 to $22 to increase sales.
Amazon Stock Graph: What Happens When You Raise Your Price To Prevent Getting Out of Stock?
If you look at the graph above, you’ll see that the product’s performance has decreased when the price was increased. But, it increased after the new stocks arrived.
Take note that incremental price increase has significantly reduced the seller’s click rate, conversion rate, and sales.
The keyword rankings slightly decreased after the price was raised. But, it plummeted when the product goes out of stock. This goes to show that stockout negatively affects sales rank Amazon.
Let’s look at the data below to examine what happens to the keyword rankings after re-stocking:
Effects of Going Out of Stock On Keyword Rankings
You can see that the keyword rankings have decreased after the product was restocked, but has significantly improved a week after restocking.
Well, after the product was restocked, the seller ran a PPC campaign to boost the product sales and increase keyword rankings.
This shows that going out of stock won’t do a lot of damage to your keyword rankings. Why? Because once you restock your product, you’d only need a few more sales to get your rankings back to where you started.
Which Option Is Better: Increasing Prices to Hold On To The Remaining Inventory or Allow The Product to Go Out of Stock?
As previously mentioned, increasing your price to slow down sales would greatly affect your product performance. It would decrease your sales, click rate, and conversion rate. This could eventually decrease your ranking on Amazon SERP.
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If you’re having inventory problems, your best option is to just allow your product to go out of stock. But, you have to make sure that you restock as soon as you can. Your keyword ranking would drop significantly if your product is out of stock for too long.
You can also use a little bit of both strategies. You can slightly increase your prices to ensure that your product is available for a few more days. This could shorten your out-of-stock phases. This could help maintain your keyword ranking and minimize your losses.
What To Do After Restocking?
Stockout can significantly decrease your sales and keywords. So, if your product goes out of stock, you should do the following action items:
Call your supplier and reorder the product. Track your shipment daily to minimize delays.
Reduce your price a little bit. This can significantly boost your sales.
Launch a marketing campaign. This can improve your product’s performance – sales, click rate, and conversion rate. This can also increase your keyword ranking and bring it back to where it was before your product goes out of stock.
Focus on the right keywords. You don’t have to retarget old keywords. Do extensive keyword research to ensure that you are targeting the right keywords.
Focus on building customer satisfaction and retention. Getting more positive feedback and reviews not only increase your sales. It can also improve your rankings. Keep in mind that Amazon’s A9 algorithm puts a lot of weight on product ratings and customer reviews.
Answer customer questions. This habit increases your conversion rate and can eventually increase your keyword rankings.
Improve your order processing speed. Efficient order processing increases customer satisfaction.
Prevention Is Always Better Than Cure
PPC campaigns are not cheap. If you don’t want all your marketing efforts to go to waste, it’s best to stay on top of your inventory. You must have a tight and a foolproof inventory system to prevent stockout.
Here are a few inventory control tips that you can use to prevent stockout:
You must fine-tune your sales forecasts. At the end of each month, you must do your sales projection using historical sales figures, predicted growth, marketing efforts, the overall health of the economy, and market trends. This can help you decide how many products to produce.
Use the “first in, first out” or the FIFO approach, especially if you are selling perishable goods. This reduces spoilage and can help keep your inventory stable.
Track your inventory and stock levels daily. You must also track the regional demand for your products.
Set a minimum safety stock. This can help prevent stockout. But, don’t spend too much money on inventory.
Make sure that your team is in sync. Your warehouse attendants, purchasing, operations, and marketing people should be on the same page.
Invest in a modern inventory system. This can help you stay organized and vigilant. Automating your inventory process helps you manage your inventory easily and more efficiently.
Maintain a good relationship with your suppliers. This way, you can sometimes request rush production and deliveries.
You must anticipate product demand. For example, if you’re selling gift baskets, your sales numbers would possibly go up during Christmas and other holiday seasons.
Frequent stock-outs can seriously damage your business. It can cost you a lot of sales and can damage your reputation. It can also decrease brand loyalty. You could lose some of your customers to your competitors. This is why it’s important to have an optimized supply chain.
A lot of sellers think that raising prices to prevent stockout is a good strategy. But technically, it’s really not.. Raising prices can negatively affect your product’s performance – sales, conversion rate, and click rate. It can also decrease customer satisfaction and retention. This strategy can do more damage than good.
If you want to avoid stockout, allow MarketplaceOps to help you out. We have a wide array of business solutions that can help you avoid or cope with these situations. We also have a brilliant marketing team that can help you increase your ranking on the Amazon SERP (search engine results page), improve your sales, and earn more profits.