Are you running out of inventory on Amazon FBA?
If so, don’t panic. It’s a common problem faced by many sellers and there are solutions to help minimize the negative effects running out of stock can have on your business.
In this article, we’ll look at the steps you should take if you find yourself running low on inventory and how to avoid running into this situation in the future.
With these tips in mind, you’ll be able to keep your product moving and ensure that customers never miss an opportunity to purchase from your business again.
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What are the consequences of running out of inventory on Amazon FBA?
To understand the best steps to take, it’s first key to understand the negative effects running out of stock has on Amazon which are unique in comparison to other sales channels such as your own website.
There are three major consequences of a stock out to consider, with the third being particularly unique to selling on Amazon.
1. Lost revenue
Ok, let’s start with the obvious. You’ll be missing out on online and offline sales.
If you don’t have stock to sell, there’s no way people can buy from you.
These lost sales can slow down the momentum of your business which can be painful to watch.
If you’re trying to build a sustainable business, perhaps even a business you can sell one day, consistent and predictable cash flow is key.
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When you’re consistently running out of stock it makes managing cash flow – and therefore growing your business – very difficult.
2. Lost customers
Selling on Amazon is a great customer acquisition channel.
A customer searches for the product they are looking to buy and, hopefully, come across your brand.
If you’ve done a good job at optimizing your listing and getting reviews for your product, there’s every chance they convert from a browser to a buyer.
And, if you’re building a real brand – the hope is that these buyers would become long-time, repeat customers.
However, if you don’t have inventory on hand to make the first sale, not only do you lose that transaction, but you also lose the lifetime value of the customer.
Even worse – if you already have an existing brand presence and customers realize you’re out of stock when coming to purchase, they may buy another brand’s product and cause you to lose future sales too.
3. Lost ranking
Arguably the most significant impact of all when running out of inventory on Amazon FBA is the risk of losing organic sales rank.
Amazon’s algorithm ranks each product based on a number of factors, but one of the most significant ranking factors is sales velocity.
If your products have a good sales data record, Amazon will boost its visibility in organic search results.
And, as an Amazon seller, you’ll know – this is where the profit lies.
When you run out of stock for a significant period, you run the risk that the Amazon algorithm will see your product as declining in popularity and adjust its organic ranking accordingly.
I’m running out of inventory on Amazon FBA, what should I do?
Ok, so we’ve established that running out of inventory should be avoided wherever possible – particularly when selling on Amazon.
But some things are out of your control – extended supplier lead times, shipping delays, spikes in sales volume, plus a hundred other things you might not be prepared for.
So what should you do if you’re on track to stock out and there’s no way you can get inventory available before you do?
Maintain sales velocity
Contrary to popular belief, purposefully slowing down your sales is up there with the worst things you can do.
As we’ve covered, sales velocity is a primary ranking factor on Amazon.
If you deliberately slow sales too much – by increasing pricing or stopping ad campaigns – you run the risk of establishing poor sales history in Amazon’s eyes.
If you have a product that is selling 20 units per day and all of a sudden it’s selling 5 units per day over an extended period of time, that sales data will suggest to the ranking algorithm your product is declining in popularity.
Slowing down sales can have a greater negative impact on long-term organic visibility than stocking out.
When your product is stocked out – and your listing closed (more on that in a minute) – you preserve far more sales history than a slow-selling product that is in stock.
So, whilst the temptation will be great, try and avoid pushing your price up, tanking your conversion rate, and halting all marketing.
Avoid extra expansion
Whilst you don’t want to completely stop all marketing, you should certainly be mindful of any extra expansion.
The best course of action if you’re running low on inventory is to try and maintain a steady average daily sales for your product to maintain current ranking positions.
That may mean holding off on additional ranking campaigns, but there’s just no use in pumping new marketing dollars into a product that is short on supply.
Close your listing upon stocking out
If the day does come when you run out of inventory to sell, the best thing you can do is to close your Amazon listing to preserve your sales data.
This is different from deleting your Amazon listing which would be a permanent removal of the product from your Seller Central account.
By closing your listing you ensure that any returns or Amazon Warehouse Deals (units that Amazon has damaged, refurbished and placed on sale) don’t push your listing active whilst out of stock.
Then, once you have inventory back in stock, you can easily open the listing again and be back selling within minutes.
Related: Is it safe to close an Amazon listing?
How can I recover after I’m back in stock?
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Your stock is soon to be active, but what should you do to recover organic ranking?
Really it depends on how long you have been out of stock.
If it’s just a matter of days, you don’t really need to do too much different, and your product should slot back into the organic rankings almost as was.
However, if it has been a number of weeks or even months since your product has been in stock then you should definitely take proactive steps.
The best approach to take when coming back into stock after lengthy stockouts is to treat it as a product launch and push as much marketing as you can.
By approaching this re-launch as its own mini-launch you’ll give it the focus it needs to pick up momentum again.
Here are some strategies you can try to recover organic ranking on Amazon:
- Discounted pricing. Customers love a discount, so temporarily dropping your price below your standard selling price can help improve conversions and drive more sales.
- Promotional coupons. Amazon coupons are a great way to make your listing stand out and have been shown to improve click-through-rate.
- Amazon PPC advertising campaign. Re-engage your PPC campaigns with aggressive bids to ensure you are in the #1 sponsored spots for your most valuable keywords.
- External traffic campaign. Run some Google ads or work with a TikTok influencer to drive external traffic to your listing. Amazon loves external traffic and its algorithm rewards it. Just make sure you have Amazon Attribution set up and are claiming your Brand Referral Bonus.
- Email marketing campaign. Got an email list? Put it to use! Let your most loyal customers know you’re back in stock and ready to take sales.
- Social media campaigns. Whilst organic reach might not be what it used to be, it’s still worth letting your engaged audience know they can buy from you again.
- Vine reviews campaign. Is your product still relatively new in its lifecycle? If so, and you haven’t utilized the Vine review program, this is the perfect time to do so and generate some all-important extra reviews.
Essentially, any strategies you would deploy for an effective product launch, utilize when trying to re-rank a product coming back from being out of stock.
The best option is to pull as many of these levers as possible all at the same time to give your product a big boost out of the gate.
It may take a bit of time, but usually within a week or two you start to see shoots of recovery, and within a few weeks all being well you should have regained most of your organic ranking.
Now it’s essential to avoid finding yourself in the same position again…
How can I avoid stocking out in the future?
Once you’ve experienced a lengthy stock-out once, you’ll be determined to avoid letting it happen again.
But what steps can you take to ensure you avoid stockouts in the future? Plenty thankfully!
1. Carry out in-depth research
As the old saying goes, the horse may have already bolted here and we could well be dealing in hindsight.
However, learning from this mistake can save you thousands of dollars and a lot of momentum in the future.
When launching any product, your goal should be to hit page one of the most relevant keywords for your product which will result in a good amount of sales.
The days of dipping your toe in the water with launching a private label product on Amazon are gone, and you need to commit to the process.
So, use a tool like X-Ray by Helium 10 to get an accurate idea of how many sales your competition are achieving each month and place an initial inventory order with that in mind.
I always recommend our Brand Builder University students order 3 months’ worth of inventory so that they can sell for a month, re-order with some of the proceeds, and have new stock in place before the initial order runs out.
2. Monitor velocity
Speaking of which, to ensure you don’t stock out it’s essential you monitor unit volume versus inventory on hand.
I recommend tracking a 30-day average of units sold so that you can calculate how many days stock you have available at any one time by dividing units in stock by average daily sales.
Then you’ll need to know your average lead time (manufacturing plus shipping) and once your remaining days of inventory hits that, it’s time to reorder.
Or ideally, you’d add a little buffer in…
3. Utilize buffers
If a product has a manufacturing time of 30 days, and shipping generally takes 30 days, then you may be inclined to reorder stock when you have 60 days worth remaining.
However, it doesn’t take long as an Amazon seller to realize that what can get delayed, generally will get delayed at some point.
As such it’s advisable to keep safety stock on hand and build in buffers to your timelines.
In the above scenario, you might want to think about placing a new order with your supplier when you have 90 days stock remaining.
4. Work with your supplier on improved terms
Ordering further in advance isn’t always easy as it can add extra pressure to cash flow.
However, most suppliers will be open to negotiating on payment terms once trust between the two parties has been established.
We have a supplier with whom we’ve agreed 10/90 terms – 10% deposit with the 90% balance payable one month after arrival at destination port.
This really helps improve cash flow and helps us place orders in advance to increase safety stock and improve our overall supply chain efficiency.
If a manufacturer is reluctant to shift too much on payment terms, see if they will be flexible with other aspects such as storing some ready-made products for you so that you can ship them quickly in an emergency.
5. Inject capital
If cash flow is proving a problem, there is always the option to inject more capital into a proven product.
Whether that is personal capital, or eCommerce funding from a trusted provider, an extra boost of capital can really help break out of stock-out cycles.
6. Use inventory management tools
Many would suggest using an inventory management tool as the first step in overcoming poor inventory management.
However, I think it’s important to understand the dynamics of a good inventory management system before relying too much on tools.
If you don’t get to grips with velocity, lead times, and buffers then inventory management tools can keep you in the dark.
But when you fully understand these aspects, the right tool can be very effective in helping you with the inventory management of a growing eCommerce business.
My number one recommendation for an inventory management tool is SoStocked – it’s the tool I personally use to track inventory, place purchase orders, and track velocity for a 7-figure Amazon business.
The first fully customizable Amazon inventory management and forecasting software that helps you stay in stock and operate an efficient supply chain. Used and loved by us!
Running out of inventory (Amazon FBA) – The Bottom Line
Running out of inventory on Amazon FBA can be a stressful experience, but it doesn’t have to stay that way.
By understanding the dynamics of your business and taking proactive steps such as ordering buffer stock, monitoring velocity, working with suppliers for improved terms and injecting capital when necessary, you can take control over running out of stock again.
Additionally, using an effective inventory management tool like SoStocked will help make sure you’re always well-stocked without having to worry about running out.
With these tips in hand, running out of stock should no longer be something you fear!
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