A stock shortage on Amazon can have disastrous consequences for your business. Lost sales, a drop in BSR (Best Seller Rank), and reduced organic visibility are just some of the risks you face. In this article, we’re going to explore the impact of out-of-stock situations, strategies for avoiding them, and methods for relaunching your products effectively. Whether you’re an experienced seller or just starting out, these tips will help you optimise your stock management and maximise your performance on Amazon.
The Impact of a Stock Shortage on Amazon
Loss of Revenue and Competitive Advantage
When your product goes out of stock on Amazon, it disappears from search results. This leads to an immediate loss of revenue, but that’s not all. Your competitors will seize the opportunity to capture your potential customers, strengthening their organic ranking. In other words, a stockout doesn’t just mean lost sales—it benefits your competitors as well.
Negative Impact on Customer Loyalty
Repeated stockouts can damage customer loyalty. For instance, if a customer regularly purchases a subscription-based product (like cat food) and frequently finds it unavailable, they will turn to a more reliable brand. This not only affects your current sales but also your recurring revenue.
Decline in Best Seller Rank (BSR)
The Best Seller Rank (BSR) is a crucial metric on Amazon, reflecting your sales volume relative to competitors over the past 28 days. Even a short stockout can significantly lower your BSR. After 28 days without sales, you essentially start from scratch, making it much harder to regain your ranking.
How to Prevent Stock Shortage on Amazon
Optimize Supplier Management
Most stockouts occur due to supplier issues. Here are three key strategies to avoid them:
- Prioritize Small, Frequent Orders: Instead of placing large bulk orders, opt for smaller but more frequent orders. This reduces the risk of stockouts and helps you manage inventory more effectively.
- Maintain a Safety Stock Margin: If your supplier estimates a production and shipping time of two months, plan for a buffer by doubling this timeframe. It’s better to receive stock early than too late.
- Utilize 3PL Warehouses: Third-Party Logistics (3PL) warehouses act as a buffer stock, allowing you to store extra inventory and quickly ship it to Amazon fulfillment centers when needed. This minimizes stockout risks and helps maintain your BSR.
Monitor the Inventory Performance Index (IPI)
Amazon uses the Inventory Performance Index (IPI) to measure the efficiency of your stock management. A high score (ideally above 400) prevents storage limitations and extra fees. The four key factors influencing your IPI are:
- Excess Inventory: Having more than 90 days of stock is considered excessive. Keep a 30-60 day inventory aligned with demand forecasts.
- Inventory Turnover Rate: A turnover rate between 2.0 and 7.0 is ideal. Use advertising campaigns and promotions to boost sales and improve this rate.
- Blocked Inventory: Products without active listings are flagged as blocked. Use the “Fix stranded inventory” tool in Seller Central to resolve these issues.
- Product Availability: Stockouts of popular products lower your IPI. Ensure best-sellers always have enough stock for at least 30-60 days.
Strategies to Recover from a Stock Shortage on Amazon
Launch Aggressive PPC Campaigns
After a stockout, it’s crucial to relaunch sales quickly. Implement aggressive Pay-Per-Click (PPC) campaigns targeting your main keywords. Use Sponsored Products, Sponsored Brands, and Display Ads to maximize product visibility and regain ranking in organic search results.
Leverage Promotions and Coupons
Promotions are an excellent way to recover from a stockout. Offer coupons, flash sales, or temporary discounts to create urgency and encourage purchases. These strategies boost conversion rates and help reclaim market share quickly.
Combine FBA and FBM
If you rely on Amazon FBA (Fulfillment by Amazon), consider supplementing it with FBM (Fulfillment by Merchant). By storing part of your inventory in a 3PL warehouse, you can continue selling via FBM even if your FBA stock runs out. This helps maintain sales and protect your BSR.
Conclusion
A stockout on Amazon can have severe consequences, but with proactive inventory management and effective recovery strategies, you can minimize the impact and regain control of your business. By optimizing supplier relationships, monitoring your IPI, and leveraging PPC campaigns and promotions, you can prevent stockouts and maximize your Amazon performance.
Need Expert Help?
If you want personalized support, contact SkyVision, your specialized Amazon advertising agency. We offer a free audit to help you optimize your campaigns and reach your goals.
FAQ: Managing Stock Shortage on Amazon
Q1: Do Add-to-Cart Actions Impact Ranking After a Stockout?
A: Yes, Amazon’s algorithm considers add-to-cart actions. They indicate strong customer interest in your product, which can help improve your ranking even after a stockout.
Q2: How Can Promotions Help Relaunch a Product After a Stockout?
A: Promotions such as coupons and flash sales create urgency and drive sales. This increases your conversion rate and helps you regain market share faster after a stockout.
Q3: Why Is It Important to Monitor Inventory Turnover Rate?
A: A healthy inventory turnover rate (between 2.0 and 7.0) improves your IPI score and reduces excess stock risks. Use advertising campaigns and promotions to boost sales and maintain an optimal turnover rate.
Additional Resources
- Why is Amazon a Better Alternative to Your Website?
- Why Selling on Amazon? Our 5 Key Reasons
- How to Set Up Profitable Amazon Advertising Campaigns
- Discover the Essential Budget for Amazon Ads and How to Allocate It
- Amazon DSP : How to Integrate it into a Brand Strategy
- Amazon vs. Google Ads: A Comprehensive 2024 Comparison
- Amazon Attribution: The Ultimate Guide to Tracking and Optimizing Your Ads
- Secrets to Creating a High-Converting Amazon Store
- How to Optimize Your Amazon Ads: The 5 Mistakes to Avoid
- The 10 Most Frequently Asked Questions About Amazon Ads
- Master the Amazon Algorithm: How to Rank Your Keywords for Top Search Results
If this article was helpful, share it and follow us on social media for more insights on inventory management and Amazon advertising. For personalized support, contact SkyVision today!
