Profitable Inventory Management on Amazon

To achieve profitable inventory management on Amazon, consider FBA case packs, backup fulfillment, manage long-term storage fees, and optimize product dimensions for cost savings.

Tom Rohlf

October 4, 2023

As you mature in your career as an Amazon seller, you realize that selling on Amazon is more than just selling. It’s also about improving Amazon profits with inventory management.

Effective inventory management protects Amazon sellers against excessive operation costs and reduced profitability. Here are some tips for optimizing and achieving profitable inventory management on Amazon.

Case Packs for Amazon Inventory Management

High storage costs are one of the reasons Amazon sellers stress about lagging product sales. Following smarter business practices can reduce these costs and alleviate some of the stress associated with lagging product sales.

If you haven’t done so already, take advantage of case packs, inners, and master cartons. Rather than sending eaches to FBA, case packs hold a certain number of products making it easier for Amazon (and you) to optimize FBA costs.

I am very conservative about which SKUs I send into FBA. I only send a SKU to FBA when I am projected to sell more than two case packs per year. Other sellers find one case pack per year to be enough to justify the investment, and that’s completely reasonable.

For SKUs that don’t meet this threshold, I use fulfillment by merchant instead. This results in slower ship times, but that’s something I am willing to accept for financial reasons. See your history of product sales to decide which products in your catalog might not make sense for FBA.

Backup Fulfillment by Merchant Offers

Backup fulfillment by merchant offers gives you more control over your inventory. FBA requires you to send in your inventory to Amazon's warehouses, and when you sell a product, Amazon handles the fulfillment. This can be a convenient option, but it also means that you're at the mercy of Amazon's fulfillment system. If you run out of stock, you're out of luck—at least until you can restock and send your inventory back to Amazon's warehouses. With backup fulfillment by merchant offers, you can maintain your inventory closer to home and have more control over your stock levels.

Another benefit of backup fulfillment by merchant offers is cost savings. FBA charges fees for storage, picking, packing, and shipping your products. While these fees can be convenient for some sellers, they can also add up quickly. By using a third-party logistics (3PL) provider to fulfill your orders, you can save money on these fees and in some cases, provide a more economical way to ship your products.

A 3PL can be a better choice for sellers who want to maintain learner inventory and reduce overhead costs. It can also give you more control over the customer experience by letting you customize packaging and including promotion insights. FBA doesn’t allow custom packaging and custom inserts are difficult because you don’t control what inventory is shipped from FBA.

When you handle fulfillment in-house or through a 3PL, you can ensure that your products are packed and shipped correctly and that your customers receive their orders in a timely and efficient manner. This can help you build a stronger relationship with your customers and increase customer lifetime value.

Consider Amazon FBA’s Long-Term Storage Fees

Amazon FBA charges long-term storage fees, which can really add up if you aren’t careful. Apparel enjoys a 365-day long-term storage fee, while non-apparel is only six months. Recognizing this, it’s smart to remove off-season goods from FBA during the downtime. If customers are still interested in these goods, you can fulfill their orders through a 3PL instead. From a seller’s perspective, slower ship times are preferable to overpaying for storage on slow-moving inventory.

Keeping Enough Inventory in FBA

Fulfillment By Amazon offers sellers a competitive advantage in the form of fast shipping for all customers. Guaranteeing something like two-day shipping requires that products are on hand at any given moment and widely distributed throughout Amazon’s network of warehouses.

If your SKUs are consistently high in sales, you should absolutely lean into FBA. Customers love fast shipping and often organize their search results based on that fact.

Don't Be Afraid to Discount and Remove Inventory

Don’t hold onto past mistakes. Stubborn inventory is a drain on your investments. If you can take advantage of strategies to clear out your inventory, and make money while doing it—fantastic. But if you need to cut your losses, that’s better than throwing good money after bad.

Here are some strategies to move sluggish inventory:

Cut prices and retarget a new audience: If you need to clear out inventory, consider changing the price point and targeting a new audience. For example, discounting mid-tier cookware and targeting parents of college-bound students.
Offer deep discounts and time your clearance sales: Need to get rid of inventory quickly? Sell your products at a little more than cost and sell them on Prime Days.
Bundle low-performing products with top-sellers: Have a product that just doesn’t convert? Figure out ways to bundle this with a hot seller. For instance, your lipstick might be a runaway success, but your mascara just won’t move. Try offering these products as a bundle deal to alleviate your backlog and offer additional value to shoppers.

Discreet Sizing Makes a Big Difference

Amazon is a tech-forward company, even using lasers to measure the size of the products you share with FBA. This helps the ecommerce company to delegate space in their warehouses for your merchandise. The process is pretty straightforward for boxes or items with fixed sizing.

But what about clothing or more malleable dimensions? Imagine you’re selling big, floppy teddy bears packaged in loose plastic bags through Amazon FBA. As the items are scanned for inventory, they are going to register differently each time due to the nature of the product. This results in wildly overpaying for FBA warehousing.

Another strategy to consider for those floppy teddy bears is to vacuum seal or box them to minimize the product's dimensions. This keeps things consistent and helps Amazon sellers save money. The same can be said for clothing, pillows, products with lots of individual pieces—really anything that is not already precise in its dimensions.

An example of FBA fulfillment fees by dimension and weight.

Another helpful tip is to size your product containers right at the edge of breakpoints in the FBA fee scale. Fitting your merchandise in a 15”x12” box rather than an 18”x14” container offers a cost advantage that scales with the number of units sold. The same goes for weight. The better you strategize around the FBA fee structure, the better for your business overall.

Profitable Inventory Management on Amazon

All in all, effective inventory management is a crucial aspect of maximizing your profits as an Amazon seller. It might not be as glamorous as selling, but optimizing inventory management as an Amazon FBA is just as important.

By implementing smart Amazon seller inventory management strategies like these, you can streamline your operations and reduce unnecessary expenses.

‍Want even more stellar content for Amazon sellers? Check out our resource center. Or follow me on LinkedIn.

ABOUT THE AUTHOR

Tom Rohlf

Tom has been selling on Amazon since 2014 - He exited his first business (Playerten.com) in 2019 and is the CEO and Co-founder of Cuddle Club an Amazon native children's clothing brand.

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