Resources - Blog
Last-Minute Actions to Optimize Your Q4 Inventory
Stay on top of the latest e-commerce and marketplace trends.
Amazon is about to experience its best holiday shopping season yet, with sales projected to reach $38.8 billion. The anticipated Q4 sales generated through Vendor Central and Seller Central alone will account for 40% of all online holiday sales. The imminent rise in demand means one thing for Amazon sellers – inventory optimization.
Whether it is ordering from suppliers, preparing listings, refining operating logistics, or optimizing replenishment, as a seller you need to identify and focus on your key inventory drivers. Using prior-year Q4 data and applying the 80/20 rule is a good start. If you have historical data on your side, you will be better positioned for implementing an effective inventory strategy, as one of the most important directives in Q4 is never running out of stock.
By concentrating on the 20% of your catalog which generates 80% of your profits, you can cherry-pick the winning items and determine each SKU’s life-cycle. Feedvisor’s Q4 research into e-commerce sellers’ inventory management and behavioral trends reveals that 40% of revenue typically comes from your top ten selling items. These items can be categorized into the following groups: ongoing, seasonal, and long-tail. Each item category requires a different action and strategy to accelerate Q4 success.
Create a Solid Replenishment Plan for Ongoing Items
Develop a healthy range of pricing for your top-sellers and increase the ceiling price. This will help to boost your profit margin. Increase your replenishment times to keep up with the Q4 momentum. If you replenish every two weeks, consider replenishing each week or every couple of days.
Create an Estimated Days in Stock Template for Seasonal Items
There will be a bigger demand for seasonal items for a limited time, so you’ll need to establish a more accurate out-of-stock estimate template. To measure your stock coverage accurately, divide the quantity of items in stock by the last seven-day velocity. It might even be three- or four-day velocity.
To keep your inventory levels balanced, run weekly checks on estimated out of stock days and evaluate the next step. If it’s after the second week of December, and you’re calculating the estimated days of coverage, you’ll need to be more aggressive compared to how many units you’re selling. Alternatively, if your stock is about to run out, you’ll need to raise the price to slow down the velocity.
Create Competitive Floor Prices for Long-Tail Items
Now is the time to clean up your catalog of any items that don’t generate profit. Try to test and see if these items sell on other marketplaces, like Walmart or eBay. Consider the cost involved with disposing of stale items or paying long-term storage fees, even if it means reducing the item to a rock-bottom floor price.
Capitalize on Q4 Peaks
Feedvisor’s study of quarterly sales versus profit margin trends shows that Black Friday and Cyber Monday are peak sale days. Due to Lightning Deals and promotions Amazon runs, your profit margins can reduce by up to 20%. Prices and demand begin to rise right after November 26, which is the most profitable time for sellers. December 12 is typically the ultimate peak for inventory optimization as orders for the holidays flood in. By December 22, the demand starts to decrease with fewer orders coming in. This is a good time to sell any unwanted stock at a competitive price against other sellers trying to sell items at a profit.
Identify Opportunities for Items
Using ample data like Feedvisor’s sales and traffic report can help you drill through the inventory and profile your ongoing, seasonal, and long-tail items and identify the conversion rate for each one. Please note that sessions are represented by the average number of unique buyers that look at an item, showing demand. Here’s how to identify the opportunity by item:
- High sessions and high conversion rates: You’re hitting your goals without reducing prices.
- High sessions and low conversion rates: How can you turn around any missed potential? Are you at your floor price? Is there another ASIN selling at a cheaper price?
- Low sessions and high conversion rates: The pricing is accurate, but the discoverability is low. Run more promotions, use keywords, and optimize listings to increase traffic.
- Low sessions and low conversion rates: This tends to require a lot of work on the seller behalf. Check the quality of the product listing, reduce prices, and consider using Amazon Sponsored Ads to boost discoverability.
Review your inventory and evaluate your strategy at least twice, at the beginning of Q4 and then on December 1. By then, you’ll know which items need to be replenished when, how aggressive you need to be, and which price you need to sell at.