As prices and inflation continue to rise, Amazon sellers are going to see an increase in storage and shipping charges as well. It’s probably not surprising that these changes can be attributed to the pandemic and the war going on in Ukraine. The question is, as an Amazon business, how can you survive?
I don’t claim to have all the answers, but I do know profitability and how to help you create it. I also know about managing inventory and controlling expenses. Let’s talk about how you can use these things to your advantage in the face of Amazon inflation.
There are six areas that we will address in this article. They may not all resonate with you, so focus on the ones that do. If you think they will all be beneficial, don’t get overwhelmed trying to do too much at once. Pick the one that will give you the biggest bang for your effort and start there. Then, pick the next one.
Amazon increased its FBA fees across the board earlier this year to offset higher operating costs. The first-ever Amazon inflation fee, a 5% fuel and inflation surcharge, was also introduced in April 2022.
The idea is simply to get started. These action steps are helpful for every business every day. But when costs are rising so steeply, they quickly move into the essential category. Let’s get started!
Take a deep dive into your inventory. Are there products that are largely outperforming others? Concentrate on these profitable products and ditch the rest. SKU variations are no exception; take a close look at these as well. Perhaps not all variations are profitable enough to save.
By simplifying your inventory and focusing on the “bread and butter” products, you’re freeing up cash to invest in the real money makers. Having access to cash is a critical aspect during this time when interest rates are rising rapidly. To get started, focus on the top 20% of your revenue producers and the bottom 20% of your revenue producers. You will see the biggest impact here. Then, dive into the next 20% and continue until you have reviewed all of your products.
It’s possible you need to increase your orders on those profitable items that tend to stock out. This will increase your inventory on hand and may require you to set your reorder timing to occur more frequently.
The cash you are saving by not reordering the less profitable products can be put towards increased orders for the ones that bring in more sales. Stockouts are incredibly costly to your business, so take steps to ensure your winning products are always available.
One of the ways you can do this is by optimizing your inventory management with trusted software for FBA sellers, such as RestockPro.
RestockPro by eComEngine tracks more than 70 different data points to give you accurate, timely data about your products. Sales data will show you high performers as well as items that need extra attention. You have price and cost data available to determine profitability for your items and identify poor performers. Tracking your shipments through Amazon status changes through RestockPro can also help you optimize your ordering schedule.Sean Shanahan
With RestockPro, you can instantly calculate estimated margins, create purchase orders, track shipments, organize your suppliers, and more. Harnessing the power of automation has never been so helpful or saved you so much time!
I’m not saying you have to be the cheapest on every item. What I’m suggesting is that you understand the impact that advertising, promotions, and discounts have on your demand.
Be mindful to cut off promotions for products where you are experiencing supply chain issues or that have low margins. Accelerating sales at reduced margins because of ad costs or discounts hasten your stockouts, which will do more harm than good.
Start by asking yourself, “What can I cut that I don’t use anymore?” Look for areas to reduce because you aren’t getting enough value back in return. Remember, cash in your pocket is important to have because the cost of loans and the costs of Amazon fees and advertising are all rising at the same time.
Having to take out loans will eat into your margins during a time when you should be working to help pad them. A good place to start is by reviewing your last three credit card statements. What can you cut? When we do this exercise with clients, on average we can cut $1,800 per month. That’s over $21,000 per year!
Recruiting, hiring, and retraining are all real costs to your business. Recruiting and training are especially costly when you are expanding. If you are experiencing these costs because you are losing people, then it’s costly and possibly avoidable.
Take the time to investigate and determine what is the root cause of turnover. Once you understand it, develop the steps to correct the issue. This is a longer-term fix, but it will pay off for years to come.
Taking these steps won’t magically fix Amazon inflation or make your business an overnight success, but they will help you keep the impacts of price increases at bay and prepare you for growth. This is a time to think smarter and work even harder to make your business work for you. Start diving into these areas and see what you can improve! Need more help? Contact bookskeep today!
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