Originally published on March 31, 2021, updated October 20, 2022
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eComEngine hosted a panel of experts from First Choice Shipping (now known as Frisbi), Kickfurther, and WELL Insurance for a strategic discussion on Amazon inventory management strategy. Watch the webinar to get tips on how to fund, ship, protect, and manage your FBA inventory.
The presenters discussed recent updates that impact sellers including the newly enforced Amazon insurance requirements and what sellers are doing now to keep their inventory in check in the EU, post-Brexit. Other discussion topics include:
The team also shared exclusive offers at the end of their discussion. Want to learn more? You can watch the webinar above or check out the show notes below for the recap.
This incredibly informative webinar covers all aspects of the FBA inventory cycle. The topics include how to fund, manage, and forecast your inventory, protecting your investment, successful strategies and shipping tips, insurance, and so much more.
As we all know, there are many circumstances where your Amazon business might experience cash flow problems. Having a funding plan ahead of time gives you leverage and allows you to get a better deal when you need it most.
Kickfurther’s CEO Sean De Clercq explained that it’s common to experience a crunch when demand outpaces your inventory. While identifying a growth channel that works well is great for your business, running out of stock is not. On top of the risk of losing customers, stockouts are expensive for product businesses.
Big distribution opportunities are another time you might need an inventory funding option. “There are a lot of direct-to-consumer brands that are selling well and get noticed,” De Clercq said. “All of a sudden you get a purchase order from Target asking you to deliver three months worth of your inventory all at once.” Having established funding in place will allow you to seize those moments when they come along.
Today’s Amazon sellers have more funding solutions available to them than ever. Equity finance, personal credit, and revenue-based finance (merchant cash advance/daily debit) are common options. Even most payment processors like Shopify, Amazon, and Paypal now offer their own funding options. Meanwhile, Kickfurther is inventory crowdfunding that is distribution agnostic. “All of these different funding solutions have various positives and negatives,” explained De Clercq. It’s just a matter of connecting with the one that’s right for your business.
The COVID pandemic and Brexit have made international shipping a lot more complicated. “When it comes to shipping into Amazon’s international marketplaces, they actually do not provide a solution for that,” explained Pearl Ausch, COO of First Choice Shipping, a company that helps sellers ship inventory to international marketplaces.
Ausch points out that the pandemic has made a lot of sellers realize that they can’t have all their eggs in one basket. To keep their businesses afloat, many have turned to selling on multiple marketplaces. When starting out, though, it’s best to start small. “You don’t want a large shipment getting stuck,” she said. Instead, shipping small parcels is the faster, more reliable approach to your Amazon inventory management strategy right now.
Considering all of the changes and challenges, expanding might feel intimidating, but don’t shy away from the EU market. When choosing where to begin, keep in mind that Germany is typically a bigger marketplace for most sellers than the UK. While it may take some extra effort, your hard work could pay off in a big way!
Planning to ship overseas? It’s important to find ways to protect your investment. Matt Lovell, Founder of Well Insurance, explained that there is a type of insurance policy for ocean marine cargo that will protect your “products as soon as they enter the shipping container.” This insurance also safeguards inventory while it’s being imported to the U.S. or exported abroad by sea or air.
“We can cover it from the time it leaves the manufacturer…until it’s in the customer's hands and everywhere in between,” said Lovell. Never heard of this? Lovell says that a lot of sellers don’t even know that this option is available, but it’s incredibly useful.
“In Amazon’s Terms of Service, there’s always been an insurance requirement. Amazon has not enforced it until about two months ago (in Q1 2021),” shared Lovell. You are required to have insurance if you're a Professional seller who has been selling $10k or more for 3 consecutive months.
What is your Inventory Performance Index (IPI) score and how can you improve it? eComEngine’s Joe Hyatt explained that your “IPI is probably your single most important Amazon FBA inventory metric. It’s really a combination of several metrics that make up one score.” Essentially, it gauges the health and performance of your FBA operation, and it's an important part of your Amazon inventory management strategy.
The score can range from 0 to 1000, but sellers should aim to stay above 450. Being above this threshold gives you access to unlimited storage while being below means you can be subjected to storage limits and fees. This goal has changed without warning in the past, however, and may again in the future. For this reason, it’s important to keep your FBA account in good shape at all times.
There are several steps you can take to improve your IPI score. One thing Hyatt suggested is doing everything you can to stay in stock. It’s important to understand and factor in lead times and processing times to ensure you have the inventory that you need to keep your customers (and Amazon) happy. Using inventory management tools such as RestockPro can automate the process and keep your account in good standing.
While this recap touches on some of the highlights, the full webinar provides detailed guidance on shipping to the EU and UK markets successfully, choosing the right shipping methods, inventory funding options, improving IPI scores, and making accurate forecasting and restocking decisions. It’s well worth the listen and offers great tips for both protecting and growing your Amazon business!
Editor’s note: Starting in March 2022, fulfillment between the UK and the EU will reopen via the European Fulfillment Network following a two-year closure due to Brexit.
Colleen: Okay. Welcome, everybody. Thanks so much for joining us today for our panel on Amazon inventory management strategy. We have a full team of experts here, and I'm excited to share each of them with you. They have a lot of expertise in many different areas of the inventory management cycle. So just to introduce each of us, my name is Colleen Quattlebaum, and I am the marketing manager at eComEngine, and I live in Richmond, Virginia. With me from my company today is Joe Hyatt. He's a product manager here at eComEngine, and he is based in Charleston, South Carolina. Joining us from Boulder, Colorado, we have the CEO of Kickfurther, Sean De Clerq. And on the opposite side of the state, just north of me, Pearl Ausch is here from First Choice Shipping from Brooklyn, New York. And last but not least, Matt Lovell from Morganfield, Kentucky. He is the founder of Well Insurance.
Colleen: So we have a lot of great topics to share with you today. We're going to touch on everything about the FBA inventory cycle. We're going to talk about how to fund your inventory, give you some tips on how to ship that inventory, and the different ways to make sure that you can do that successfully, how to make sure that you protect that investment. So Matt's going to talk about insurance and protection there. We're going to talk about how to manage and forecast your inventory. So best practices and tips from all of these experts. And so we look forward to talking with you over the next hour. Please feel free to share any questions that you have in the question and answer section here in Zoom. And if you do miss any of this, we will be happy to send the recording out to everybody who registered later today, so feel free to share it with anybody else on your team as well if they missed it.
Colleen: But without further ado, I'm going to go ahead and close out my slides here, because we want you to talk with our team and not just look at our slides the whole time. So we're going to kick it off with Sean from Kickfurther, because obviously to sell on Amazon, you need to have a good quality product, but in order to get that product, you have to have the capital to invest in the product. So, Sean, can you tell us a little bit about some challenges that brands face with cash flow issues and what of their options are that are available to finance their products?
Sean: Yeah, absolutely, Colleen. Thank you. So I think a relevant first question is, when do you kind of anticipate that you hit these cash flow issues as a product business? So what we typically see at Kickfurther is, there's kind of a couple events predict that you're going to encounter this cashflow crunch. One is if you identify a growth channel that works better than you expect, or works just as well as you expect, and it turns out to be a producing channel. Once you start chewing through your inventory, what we know is that for e-commerce brands, it's very expensive and painful to hit stockouts.
Sean: What we know about consumers is that it's pretty typical if your favorite soap or whatever else is unavailable for purchase at the time when you want to buy, what consumers typically do is they go to purchase a competing product. And that can be pretty annoying for, I think, obvious reasons for an e-commerce business. So that's one of the things we see, is when sales start picking up and you understand, all right, I'm forecasting that I need 50% more inventory for Q3 than I needed last year, because this or that or the other.
Colleen: Oops. Sean, I think you're on mute there. Sean, it just muted.
Sean: Oh, I just muted myself by accident. Okay. Sorry.
Colleen: No problem.
Sean: So yeah, when any of those things kind of hits, it's great to get ahead of that. Inventory stockouts are expensive for product businesses, and you just want to be able to serve your customers when they want to buy. So that's the number one trend we see particularly focused on e-commerce. The other that we typically see is a lot of wholesale businesses, think like Target, CVS, Whole Foods, whoever, they like brands that have already established product and market fit and have a brand.
Sean: So what we've seen is that there are a lot of direct to consumer brands that are doing well, they're selling primarily direct to consumer through Amazon or through their own webpage, and then somebody takes notice, and all of a sudden you get this purchase order from Target asking you to deliver three months worth of your inventory all at once to their central fulfillment warehouse in 60 days or something like that. So when those big distribution opportunities come in, it's really beneficial for product businesses to have already established a funding option that they know can provide the capital they need to capture those opportunities as they come through the door.
Sean: In terms of where you can find those funding options, I mean, probably the one that is best known would be equity finance. So there's groups like republic.co that have these interesting blended equity/rewards crowdfunding options. You can go to AngelList, there's Crowdfunder. So there's a bunch of different equity options. If you know rich angels in your local network, that can be a great option. We also see that younger brands are leveraging their personal credit through mechanisms like credit cards.
Sean: They buy on Alibaba, and they put the inventory purchase on a credit card. And obviously, that has some certain limitations to how far that's going to take your business. Whoever's processing payments for your e-commerce company, most payment processors now have some kind of funding arm. So that goes for Shopify, Amazon, PayPal. They all have working capital arms, so does Amex. Then there's revenue-based finance. So revenue-based finance, also known as merchant cash advance or daily debit, those are groups like ClearBank, previously OnDeck, Kabbage, and all of these different funding solutions all have various positives and negatives. The other I would encourage people to look at if you're primarily wholesale is accounts receivables factoring, another big player in the space. And there's just a lot of AR factoring groups. There's some new digital solutions that have fully digital onboarding.
Sean: And what we typically see with any of these different solutions, is that they're typically specific to one distribution channel or another. So what we've developed at Kickfurther is inventory crowdfunding that's distribution agnostic. So on the Kickfurther platform, you can fund a purchase order with your manufacturer, 100,000 units, and if you ship 50,000 of those units to Target, and 25,000 goes to Amazon, and 25,000 goes direct to consumer, that works really well with Kickfurther and the underlying consignment model that we have, but would not be as good of a fit for something like AR factoring that would primarily be interested in the 50,000 units that are going to Target.
Sean: And so those are a few of the different options that we see on the marketplace. And of course, it's worth mentioning that there's some of our entrepreneurs we work with have great private networks, kind of what we call rich uncle Joe that's willing to take a bet. But for those entrepreneurs that don't have access to those other funding options or find that a distribution agnostic channel is best, that's what we created Kickfurther for.
Colleen: Okay. And you mentioned a purchase order, is that required, and are there any restrictions in terms of where the products are manufactured that can prohibit somebody from using certain types of financing?
Sean: So I can't speak for everybody on the second part of that question. So for Kickfurther, we have no restrictions on where the inventory is manufactured. We've funded productions in Haiti, India, China, Europe, America. Domestic manufacturing is great. And with Kickfurther, there's no requirement for a purchase order. With something like AR factoring, they will have a requirement for a purchase order. With revenue finance, you have to show and demonstrate a track record of having earned revenue with your business.
Colleen: Okay, great. Any other tips in terms of financing that you want to share with sellers or brand owners that might be on the webinar here today?
Sean: Yeah. So, I mean, I think it goes well to the point of this webinar that the entire industry, the funding industry is moving towards a data-driven approach. And so as a product entrepreneur, if you can get kind of what I call, get your ducks in a row, like start plugging into these digital solutions, manage your data in a way that you can paint a clear picture for a potential partner in the future, and engage with them earlier. You have less leverage as a product entrepreneur if you desperately need the cash tomorrow, versus talking to those same potential partners and saying, Hey, I see that there's growth coming in the future, and I want to make sure that I take the time to evaluate the best partner for me to continue to fund this growth. And if you can get ahead of that, which means kind of dealing with it and having those conversations a little bit ahead of when you desperately need the funding, I think that absolutely behooves the entrepreneur to do so, because they have a lot more leverage, and I think they'll get a better deal.
Colleen: Okay, good. Great advice on financing there. So now we've talked about how to finance the products. Once you've actually purchased those products, then you obviously have to ship them, so I want to turn to Pearl from First Choice Shipping to talk a little bit about how you can make sure everything is in place to ensure a successful shipping experience. But let's start with the biggest issue of this past year with the pandemic. There's been a lot of supply chain issues this past year, what advice do you have to give to sellers to make sure that they can keep inventory in stock, and what shipping methods are best? Because so many items are getting held up at sea.
Pearl: Yeah. Yeah. So first off, thanks for having me. Actually, you guys were the first webinar that I ever did ever, so for me, that's pretty cool, a few years back, so brings back great memories. So yeah, basically I do want to talk about the pandemic, and then Brexit of course was a huge aspect that people had an issue with when it came to Amazon global expansion, which is our specialty. So when it comes to shipping into Amazon's international marketplaces, they actually do not provide a solution for that, and that's where we come in, and we're actually working very closely with Amazon to make it happen. So just to take a step back and answer what you were trying to get to, what COVID did to a lot of sellers is make them reflect and realize, we cannot have our eggs in one basket.
Pearl: When the US was hard hit, Australia was okay or Canada was fine. Right now, Canada is doing terribly. And what people realized was when they were expanded and they were in various marketplaces with Amazon, they were much safer. They were able to start leveraging the different marketplaces that Amazon has and say, okay, right now France shut down their fulfillment centers, I cannot send inventory into Amazon, where else could I send inventory? Let's try to diversify our portfolio. And it has been a huge help for a lot of sellers, and we found with COVID, hopefully we're getting to a much better place and people are getting back onto their feet on a much higher scale, it's become this mad rush where people are like, get me expanded. They want to know how to make this happen.
Pearl: So what we recommend from a shipping aspect is to start small, and even when you are doing really well, not necessarily to start shipping the large shipments in by sea. And the reason being, especially in today's climate, these shipments are getting stuck or they're delayed because of the tremendous amount of product that's trying to get out, especially from China right now, with obviously the PPE backing up everything. All of a sudden when COVID hit, every single factory in China became a PPE factory, and everybody that was creating a product was like, what happened to me?
Pearl: But that's what happened, they weren't able to create product for people, and people were stuck. So people are still very backed up. So what we suggest is taking that small parcel approach and shipping in smaller amounts. And yeah, you could do the sea option, obviously it's cheaper, but have that as your retainer of, let's send in our bigger shipment, but in the meantime, to keep things afloat and not having our rankings go down because our inventory is out, shipping those smaller shipments by small parcel, which is way more reliable right now with speed, and the price is not even as bad as people think it is.
Pearl: So that's something that we definitely recommend. Now, switching into Brexit. I just want to touch upon that, but because there's so many questions around that, and there's so much uncertainty that people have. People gave up on Europe. They're like, this is not possible, I'm finished, or they continued selling in the UK, because that was... Basically what Brexit did, just to give everybody a little understanding. Some people might not be aware. Brexit basically had the UK detached from the rest of the EU, which made the UK its own entity, versus being one country like it was till now.
Pearl: So what happened was, is Amazon actually had two programs in the EU which made it possible for you to be able to expand your business there. And the two programs were the EFN program and the PAN EU program. So the EFN program was the European Fulfillment Network option, which basically meant I'm able to ship my inventory into one fulfillment center anywhere in the EU. And at that time, that included the UK or Germany. It was all one. You were able to ship it there, and then Amazon would then ship to a customer from your inventory wherever it was. So if it was in the UK, and somebody from Germany placed an order, Amazon would then ship inventory from the UK. Then they had another option, which was the PAN EU option, which meant I'm able to take inventory, again, only ship it to one place, but then what Amazon did like they do in the US right now, they diversified where my inventory was.
Pearl: So they took chunks of my inventory, and wherever they saw a trend of where customers are ordering from, they would then ship larger amounts to those fulfillment centers. So what obviously that helped with was better optimization, better rankings on your product, because the way the algorithm works, wherever my product is, the closer it is to the customer, when somebody searches for my item, it's going to come up higher on the search rankings. The issue is right now with Brexit, you cannot do PAN EU anymore, because the UK is a separate entity. So the issue people are facing right now is that they were shipping, let's say to the UK, which was a very easy way to ship. The government wasn't so restricted on customs, and you don't have to be so clear on what you're shipping to the last letter, the way the German government, for example, is. So the issue is that people lost the opportunity to be able to ship to the UK, and then Amazon distributing it very easily for them to other places in the EU, because there were no customs involved, it was considered all one country.
Pearl: So people had a situation where they found themselves with their sales down by 50% because maybe they were shipping to the UK, but most of their sales might have been coming from Germany, which happens to be for most sellers, a bigger marketplace than the UK. So the issue people are facing now is, how can I get inventory, and how could I ship into the rest of the EU? So we actually just literally launched a new service, which is really exciting. Together with Amazon, we've been doing a beta program where we're shipping from the Netherland into the rest of the EU. We're using that as a gateway. Why? Because shipping into Germany, as I'm sure most of the audience over here if you've been trying to do that, it's close to impossible. Obviously, everything is possible, which is my motto personally. You can say, no, we'll figure it out. But in this case, the list of information the German government is requesting from sellers has been almost impossible to provide.
Pearl: Or if you did provide it, you found yourself with your shipment at the border and they're like, oh, we just actually came up with this as well, we need this too. So it's been impossible. So what we're trying to do is come up with creative solutions on how we can actually help people keep their inventory in check in the EU. Let's not consider the UK for a minute, because for most people, the EU has been much stronger. So thank God it's actually been going really great. And actually, this is the first webinar that I can actually announce that this is ready for people to actually get onto. And if people are excited to join our beta program... Again, I want to mention, it is a beta program because we're learning as we go along, but it's been going really well.
Pearl: So we're using the Netherlands to be able to get into Germany, which is what people are trying to get to. Getting into Germany has been where the money is. So this is something that will help sellers keep their inventory, and people shouldn't shy away where, okay, the Europe market is just not exciting anymore. Because what's interesting is, people were like, let's try Canada, and we've seen a tremendous amount of people trying to get into Canada the last two months, and all of a sudden they shut down their Brampton warehouse because they've had a crazy outbreak of COVID there. And people were like, it's just impossible to have this one place that you're really focusing on, you really need to have that correct balance of obviously do what's right for your business and don't just start expanding to every single marketplace when you haven't scaled pretty much anything in the existing marketplace that you're in, but if you find you're ready for it, then absolutely go for it.
Pearl: So when things like this come up where a warehouse is shut down from Amazon in Canada, you're like, okay, well we're okay because we have our European marketplace going. So yeah, from our perspective, we try to recommend, don't just say we go with sea only because it's cheaper, go with the options that are actually reliable and switch it up, and make a shipping plan that will work for you for the long run, and not I'm out of inventory because my sea shipment is still on the water. So yeah, that's basically it for me.
Colleen: Great. Well, kudos to First Choice Shipping for helping to find a creative solution for sellers to still get into Europe. And again, as you mentioned, you've worked closely with Amazon on this, so obviously it's on the up and up, Amazon's totally involved and on board with it. And to your original point, you can't put all your eggs in one basket. I mean, that was a big lesson everybody learned this past year. So-
Pearl: You bet. Sure.
Colleen: Thank you. Thank you. All right. So we've talked about how to fund your items and how to ship them, and Matt Lovell, of course, from Well Insurance, he's going to talk to us a little bit about how to protect that investment. Let's start with if you are choosing to ship over the ocean, tell us about the ocean marine cargo insurance? I don't think many sellers know about that that's even out there.
Matt: I appreciate you having me on, Colleen.
Colleen: Sure.
Matt: There's a nice little policy, and it's called an ocean marine cargo policy. Basically, it will cover your products as soon as they enter the shipping container, whether it's via ocean or via air, we also cover airplanes, as Pearl was referring to, but it's going to cover that shipment while it's being shipped to the US, while it's being shipped to foreign countries. We just have to pick a destination as far as where it is intended to go to. It will cover it in port, we can also include domestic transportation while it's being transported in the US, and then there's also some inventory coverage for it while it's in a named or an unnamed warehouse. It's a pretty nice little comprehensive package. And honestly, if you're shipping more than five or six times a year, typically it's a little less inexpensive than paying per load. A lot of sellers don't even know that it's available, so just thought we would throw that out there to kind of see if any interest would pique and see if we could help any sellers along the way.
Colleen: Great. And you mentioned the unnamed warehouse, so that would cover when they're in the FBA warehouse?
Matt: That would cover when it's either in an Amazon FBA warehouse or even any other third-party warehouse while it's waiting to go out to the customer. So basically we can cover it from the time it leaves the manufacturer in China, basically until it's in the customer's hands, so to speak, and everywhere in between.
Colleen: Great. And I know there's been some changes in your part of the industry. Just in the first quarter, Amazon updated some policies about what is required of sellers in terms of insurance. Can you elaborate on what a seller needs to make sure that they have?
Matt: Yes. In Amazon's terms of service, there's always been an insurance requirement. A lot of sellers don't read the terms of service, they didn't realize it was in there. Amazon's not enforced it until about two months ago where they started sending out emails, if you're considered a professional seller, which by Amazon's terms is selling $10,000 or more for three consecutive months, then you're required to carry a general liability policy. That policy needs to be $1 million in coverage, needs to include the products liability, needs to list amazon.com as an additional insurer, and then provide them with a certificate of insurance. We can handle that from start to finish as well. Typically those policies, they're based off of the gross sales and the products that the seller is selling, so they vary seller to seller as far as expense goes on those.
Colleen: Okay. And as far as the classification goes, e-commerce sellers, are they classified as an e-commerce seller, an online retailer, a manufacturer? Where does that differentiation take place?
Matt: Great question. If a seller is a reseller only, buying either wholesale products or arbitrage products, and they're just turning around and listing those name brand products and doing a markup, then they can be considered an e-commerce seller, an online retailer, however, if you're sourcing products from overseas, China specifically, that essentially turns you into the manufacturer of those products. You can't subrogate back against a Chinese manufacturer, because they don't carry insurance. So that shifts all of that product's liability exposure back to whatever brand it is, or whoever the seller is. Even if they're purchasing products from say a supplier like Alibaba, and they're not rebranding or not repackaging or relabeling those, you still can't subrogate back against that Chinese manufacturer. So you essentially become the manufacturer of those goods and need to be classified as the manufacturer of those products, whether that's a plastic manufacturer, wood manufacture, toy manufacturer, whatever that might be. Lots of times it's a very wide class, but it needs to be pretty specific to the products that you're actually selling.
Colleen: Okay. So you've talked about quite a few different types of insurance. Are there any other types of insurance that an Amazon seller needs to consider?
Matt: We typically see some workman's comp if they have some office staff. Typically states, if you have an employee, will require workman's comp. Some companies have warehouse employees where they may be repackaging shipping products, or they just may have a sales associate that's basically doing data entry, but the states typically will require that. Also business auto. If you're using your personal auto to run to the UPS store, run to the bank, run to the post office on company time, and you're involved in an accident, your personal auto policy may not respond. So it's good to get the auto coverage on there. That way, you will extend liability from the commercial general liability policy to that vehicle in case you're involved in an accident and a lawsuit arises.
Colleen: Okay. And I've heard about cyber insurance, but I'm not familiar with that. Can you elaborate on what that is?
Matt: Yep. So cyber insurance is, basically if you're collecting any personal data, any payment information from the customer and your system is breached, hacked, or so you even store personal information on a laptop, and you're in an airport, and you forget that laptop, and someone has access to it, a lot of personal information there that you could possible for sending out letters, paying restitution, so the cyber and the data liability would help to cover that and help close any of those exposure loopholes there.
Colleen: Okay, good. A lot to learn about protecting your business there. It's a big investment. So any other tips that you have for sellers in regards to insurance?
Matt: Be proactive instead of reactive. Insurance, generally speaking, is inexpensive, and it's an easy, easy process. I get a lot of responses back saying, I would've done this two years ago if I would've known it would've been this simple. So just reach out. We do a lot of one-on-one consulting. Each business is different. One person needs, the other person doesn't. So we do a lot of consultations, and we're happy to jump on the phone and chat with somebody.
Colleen: Great. Thank you. Okay. So we've talked about how to fund, and how to ship, and how to protect your inventory, now I want to talk to Joe Hyatt, the product manager at eComEngine. He leads the RestockPro team here. And so I want to turn to him to talk about how to forecast and manage that inventory now that it's at the warehouse, whether that's your warehouse or FBA. So, Joe, let's start out first to talk about the inventory performance index. That's a hot topic that a lot of sellers have questions about. So can you explain why it's so important to keep an eye on your IPI score and what sellers can do to improve it?
Joe: Yep. Yeah, that's a great place to start. The IPI is probably your single most important Amazon FBA inventory metric, and it's really a combination of several metrics that make up one score. So your IPI is a number, ranges from zero to 1000. Amazon calculates this number, assigns it to all FBA sellers, and really it's just meant to gauge the sort of health and performance of your FBA operation. There's a threshold you want to stay above. So currently that number is 450. Amazon's changed this a couple of times since the IPI was first introduced in 2018. It went up to 500 in the fourth quarter of last year, and then back down to 450. It just changes based on their market factors and what they want to see happening in their fulfillment centers. You are not going to get a lot of warning about this before it changes, so it is important to keep your IPI just in good shape all the time, rather than getting above whatever the current threshold is and just hoping it doesn't change.
Joe: Being above the threshold means that you get unlimited storage, and being below the threshold means you are subject to storage limits, which can be pretty restrictive, and the long term storage fees. So Amazon really just doesn't want to be in the business of warehousing. Their space is a very finite resource, and what you send in, they want to be fulfilling, they want it to be sold. So yeah, Amazon hasn't made the exact algorithm known, so you can't really figure out exactly how they calculate your score, but it is not nearly as mysterious as the Buy Box algorithm or some other Amazon policies. There's really four components to it, and they make this clear in their documentation.
Joe: The first two, excess inventory and your sell-through rate. They're sort of opposite sides of the same coin. So excess inventory is exactly what it sounds like, you are overstocked, you've got too much stuff sitting in an Amazon fulfillment center. Amazon calculates this based on what they think you need to restock over a 90 day period. If you have more units than that, that's excess. These can contribute pretty significantly to a poor IPI score if you have too much inventory, but you can fix it in a few ways. Plan A is always going to be sell it. So you want to either maybe put some of these products on sale, lower your price a little bit, maybe put them drastically on sale and actually liquidate what you've got there, you can advertise more aggressively if that makes sense, or really some combination of those factors. Plan B would be create a removal order and just have Amazon send it back to you so you don't get the double whammy of not only not selling it, but also paying them to store it.
Joe: The sell-through rate, likewise, is also a 90 day metric, and that's calculated by the number of units you've sold over those 90 days divided by what you had in storage over those 90 days. So a rate of zero would mean you didn't sell anything that you had there, 100 would be 100%, you sold everything that you had there. Neither one of those numbers is all that great. Zero is obviously bad because you're not selling anything, 100% isn't ideal either because you are running out of stock, and for many reasons, you don't want to do that. So in general, you want your sell-through rate to be as high as you can comfortably get it without risk of running out of stock.
Joe: Obviously stockouts are bad. You can't sell what you don't have in stock, but it also affects your IPI as well. And then that rate is a 30 day metric. So rather than calculating that over 90 days, they look at the percentage of days that you were in stock over the last 30 days and just calculate it that way. So you do have time to adjust that within a quarter by quarter basis. I should note that that only applies to replenishable products. So if you are not planning on restocking a specific product, you can mark that as non-replenishable in seller central, and it will not count against you when you run out. So yeah, staying in stock can be pretty tricky. Good software can help, I like to think.
Joe: You really want to understand your lead times, your processing times, all of that work and time that is required to order, repackage, label. All that stuff that's required, you want to try to make as efficient as possible to stay in stock. The fourth pillar of the IPI is sort of its own little thing, but still important, its stranded inventory. So these are units that just can't be sold for one reason or another. You might have a listing error, you deleted a listing but left the inventory in the fulfillment center, that sort of thing.
Joe: Amazon will let you know in Seller Central what inventory is stranded on a regular basis, and you can usually just click through and fix whatever that problem is right from your dashboard. So it's a big deal. You should be checking for it very regularly and just fixing issues as they come up. So yeah, that's really the rundown on IPI. It kind of sounds like a lot, but you are naturally going to have a good IPI score if you are staying in stock and selling stuff, and vice versa, if you're running out of stock, if you're overstocked, if you're struggling with your inventory management, it's naturally going to go down.
Colleen: Thanks. Good. And we actually, we have an IPI checklist that we're happy to share as well that gives some pointers and kind of recaps what Joe said, so we can share that in our chat here in just a minute. But Joe, now that you talked about IPI score, let's talk about best practices for getting accurate forecasting and restock suggestions because it's all a delicate balance. So you mentioned that good software helps, but what tips do you have, or best practices?
Joe: Yeah. Yeah. So accurate, timely forecasting, timely restock suggestions are really the key to maintaining a good IPI and keeping your business running smoothly. It really affects every component of that score. I did mention having a good software tool can help. I think sellers that are doing really any volume of FBA sales can benefit from a tool like RestockPro. So what RestockPro does is, it brings together this huge data set, I think it's 80 different unique data points now into one big table that can be overwhelming if you're a new user, but we have support to help you out. And so in that table, for every SKU in your product catalog that we import from Amazon, you can see all kinds of key information. You can get information about what you've sold recently and historically, your current inventory levels at Amazon, in your local warehouse, on order from your suppliers, what your competition is up to.
Joe: So how does your price compare to the buy box price, if you're not winning it, is Amazon a seller of something you're selling, which is always a big deal. All of your own sort of custom cost data that goes into generating accurate profit margin estimate, all of that is on the same screen in RestockPro. So all that is obviously very important to bring together when you're making restocking decisions, and we put that all in one place for you to reorder. What we like to think our customer's bringing to the table, is sort of that secret sauce and their expertise. So that's knowledge about your product and how it's performing in its category, industry trends, different fashions and fads that are going to come into play when you're planning to reorder, all that sort of higher value stuff, the research that you're doing and should be doing really instead of emailing around and putting stickers on boxes. Let RestockPro handle that, and you work on that sort of higher order stuff.
Joe: So once you've decide actually what to reorder, RestockPro sort of makes the rest much easier. You can... Yeah, this is a little mock-up without any real data of restock suggestions on the screen there. So from that screen, you can actually create a purchase order with all of your restocking data, send it to a supplier, and then from that purchase order, create an inbound shipment to Amazon complete with product stickers, if you need them, box content, box labels, all of that RestockPro will help you do. So you're really getting support at every state in the supply chain, from deciding what to reorder, all the way to making sure your inventory gets received at the right fulfillment center. That's what we're trying to do here. So yeah, it's a pretty complex product. It does a lot, and we're always looking to add to it, and that's what I hope everybody takes away today.
Colleen: Good. Thanks, Joe. And I'll just touch on one other piece regarding inventory management, is take a look at your product reviews. That might not seem like it's associated with your inventory management, but looking closely at your product metrics and the analytics and reviews can tell you if it's an item that you should think about restocking more of. Obviously, if you start to see a big spike in reviews and your product is a hit, then that's a good sign that you might need to stock more of that. Obviously, if it's the opposite direction, then it's a sign that you might need to take a closer look at that product or pull it from the shelf if it's starting to get some negative reviews. But following your top ASINs can really give you a lot of insights into how they're performing and whether they're on the incline or decline, so you can make good restocking decisions and then maybe reach out to Kickfurther, because you need to make some huge investment in the product again because you have a hero product. But anyway, FeedbackFive does help you to monitor ASINs. I just wanted to mention that.
Colleen: This is just a very brief screenshot of some of the analytics that are shown in FeedbackFive. But I just wanted to kind of wrap it up and we'll open it up here for questions. I did see a couple come through. But thanks to everybody who shared today, everything from how to fund, ship, protect, manage, and forecast your inventory. I think it was a really good discussion, a lot of good points that you all shared. We did have one seller that asked for Matt just to recap the different types of insurance that you mentioned, whether you can do that in the chat or you want to just verbally recap those different types of insurance. So, Matt.
Matt: I mean, every seller needs to start out with a commercial general liability policy. That will include the products liability. That's what Amazon needs to be compliant. And then as a seller grows and scales, they might consider the inventory coverage to cover the inventory while it's in the warehouse, possibly if they're shipping from overseas, that's where the ocean marine cargo comes into play, and then possibly an umbrella at some point, the business auto, the cyber and the workman's comp. I would say those are the main players as far as an e-commerce seller goes.
Colleen: Okay. Thanks for recapping. And then a question for Sean at Kickfurther, what type and size companies do you fund?
Sean: So Kickfurther, our minimum metric is $150,000 of trailing 12 months revenue, and we fund exclusively product businesses that have physical goods that we can put onto a consignment contract.
Colleen: Okay. All right. We have a couple more questions, but I'm going to just share some special offers that we have before we get into the next couple questions. So I'll keep these up here on the screen, but eComEngine, we do offer a 30 day free trial of our tools, RestockPro and FeedbackFive, with the coupon code. First Choice Shipping offers 10% off your first shipment. Just make sure to use coupon code SHIP10. And Kickfurther offers $10 credit when you sign up as a backer. And Well Insurance, Matt is offering a free insurance review, so free consultation, no obligation. All of our websites are listed there. Feel free to contact any of us if you have any questions or want to learn more. But I have one other question here. It looks like this one's for Pearl. Do you guys also offer the IOR needed to ship into Amazon?
Pearl: Yes, we offer the importer of record that's needed. I know that's a question that many people always have, so thanks for bringing that up. Yeah, so we definitely offer that. Any Amazon marketplace that you need to get into, we'll offer service along with it.
Colleen: Okay. We have another question for Matt. With FBA inventory insurance, what does that cover? So maybe that's an unnamed warehouse or...
Matt: Possibly so. We could pick that up under an inventory property policy, or under the ocean marine cargo policy, either one. There's a couple of different avenues that we could go to to get that coverage in place, it would just depend on the individual seller.
Colleen: Okay. Keep sharing any questions you have. I have one more here for Sean. How does your funding coexist with other lenders?
Sean: Because we have this underlying consignment contract, and the actual way things work with Kickfurther is, our community buys and owns your inventory, we actually play really, really nice with other lenders. So you can be working with factors or a bank that has a lean on all assets, and technically when you fund a new inventory production for Kickfurther, what you're doing is you're selling our inventory. We buy it, we own the title to it, we ship it to you, you sell it on consignment for us. So it's a separate asset. Depending on how you account, you can even keep it off of your balance sheet so it's not a debt, it's not a liability, it's an asset you're managing on our behalf.
Colleen: Okay, great. All right. And then one other question about the product review analytics and the cost on that. So I will just go ahead and just put that in the chat so you can access our pricing for product review monitoring. Again, everybody here on the call today has these special offers and links to their website. We will send everybody the recording of this webinar in case you or anybody else on your team wants to take a look at it. And it does not look like we have any other questions at this time. So I'll take one last look, and I think that pretty much covers it. So again, thanks to all of our Amazon experts for being here today, taking the time to talk to us about everything regarding Amazon FBA inventory management. And we will definitely be in touch with a follow-up email that includes all of these offers on it as well. So thank you so much.
Pearl: Thank you. Thanks for having us.
Matt: Thank you.
Sean: Thanks very much. Have a great day, everyone.
Colleen: Thanks. You too.
Originally published on March 31, 2021, updated October 20, 2022
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.
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