Why the number of items in your FBA inventory is virtually meaningless at estimating your Amazon sales.
Your FBA inventory numbers are meaningless
Some of the biggest questions among new (and not new) Amazon FBA sellers go something like this:
- How many items do I need to have in my Amazon inventory to make $____ a month?
- How many items do I need to have in my Amazon inventory to start breaking even?
- How many items do I need to have in my Amazon inventory to quit my job?
The answer to each is “no.” Because they are predicated on a false assumption.
I’m here to destroy the following myth:
“There is a direct relationship between the number of items in your Amazon inventory, and how much money you make.”
There is almost no relationship between the number of items in your FBA inventory, and your sales.
Sound insane? Let me explain…
FBA inventory levels: A false metric
The number of units in your Amazon inventory is the worst metric of anything, because it says absolutely nothing about the factors that contribute to profit.
The factors that do contribute to your Amazon payouts are:
- How valuable are those items?
- How in-demand are those items?
And perhaps most importantly:
- How recently did they hit the Amazon warehouse?
Measuring your success and your Amazon business by how many items you have in your FBA inventory isn’t just misguided, it’s totally pointless.
The hard truth about the “FBA inventory / profit” equation
There are people with 500 units in their Amazon FBA inventory who are making more than people with 5,000 units.
Why? Because the size of your Amazon inventory has nothing to do with anything.
The Amazon seller with 500 units shipped everything in in the last 2 weeks. And the Amazon seller with 5,000 units ships in 100 items a month, with most of that 5,000 being over a year old.
Your profits have nothing to do with your Amazon inventory count
What does matter? How recently you’ve done an FBA shipment
The only question that matters is: How much have you shipped in lately?
(Or if you’re not an FBA seller: How many items have you listed lately?)
By lately, I mean in the last 30 days.
Why new inventory is better than a lot of inventory
200 units of new inventory is better than 2,000 units of old inventory. Why? Because most of what sells on Amazon will sell in the first 90 days.
And most of what sells on Amazon in the first 90 days, will sell in the first 30 days.
Two reasons new is better than many
- You bought items that had an Amazon sales rank of 90,000 when you bought them, have a sales rank of 3 million 6 weeks later, and historically only sell a copy a year, though the sales rank hinted otherwise at the time of purchase.
- With FBA items in particular, it’s difficult to reprice accurately and consistently, leading to prices of your inventory becoming increasingly outdated and uncompetitive the longer they sit in an Amazon warehouse.
There is also a mystical element to this I can’t explain. Even items that are well-ranked and remain well-ranked still seem to sit for awhile if they don’t sell right away. I can’t explain it, but I’ve noticed this for years.
How to see it for yourself
You don’t have to take my word for any of this. Stop shipping inventory in to Amazon and see what happens to your Amazon disbursements in a short 30 days, no matter how diligently you reprice (hint: You won’t like it).
Then ship in 250 units and watch it rain.
That’s how it works.
Jordan Malik says
Thank God you wrote this.
without a doubt that’s accurate. i went on vacation in the last week of february til the end of first week of march, and when i got home i was lazy and sent in two boxes (maybe 45 items total) in all of march. my payouts went from 3500 in feb to 500 in arpil. i sent in about 35 boxes the last two weeks. im looking forward to more money. i miss it!
This is so true. High inventory count for FBA is just potential energy…sitting there…and a liability if it is not managed well.
I currently find it most effective to manually price new inventory conservatively, then go through my year+ old inventory and get more aggressive to free up capital to reinvest. I can’t keep more than 1000-2000 books in stock now. I used to rely on a repricer and could not keep more than about 600 at a time. When I was a new seller I was thrilled that I could automate pricing. It did increase my revenue and sell through rate, but no matter how I program it, it’s spot on with some items, way off with others. My sales were great, but once I started a 4-month road trip and realized there just wasn’t enough time to source, list, ship AND have all the fun adventures that my girlfriend and I had planned, I had to squeeze every penny out of the limited inventory I had and could acquire. That’s when I realized I had left so much money on the table. My average $/unit sold grew from ~$13 to $22. My sales count dropped but my revenue stayed the same. It was a breakthrough. I am now using amazon’s Low Price Opportunities report to stay competitive on my items that recently have high demand, but may be priced too high. I don’t follow their recommendations blindly, but they do alert me when to position myself more competitively. I find this much more helpful than repricers, giving me more conscious control of easy sale opportunities. I still use a repricer, but just only about once a month to evaluate my pricing. I will not let it run on it’s own again. Set the minimum price to the current price on Seller Central Inventory Manager, run my repricer, Amazon deactivates items that the repricer lowered, then evaluate the results and set my new adjusted prices. It sounds like a lot of work, but it beats tying up my time having to source too much and putting all that wear on my car.
My goal is to keep the prices high and inventory low, as long as the sales keep coming.
Anyone have additional thoughts?
Problem with Low Price Opportunities and Repricers is they both don’t take CONDITION into account, and in used books that is a large factor for sales.
Be nice if repricers went into sub-condition and compared against new prices also. Someone needs to make one that does that.
Anyone know any Russian scraper experts who can code one for us booksellers on the DL? Peter, we know you have such contacts….lol.
I think you’re right on Peter. The question is…what to do with all the stagnant inventory? It does cost to keep it there. Books are cheap I suppose. Do you just leave it. Do you just dispose of it ($.10/item) or just keep it all priced at lowest even at loss? (which is better than disposing.)
I agree. Logically not all of the inventory you send in will fall into the “sells right away” category (especially books) and therefore could sit for a long time. Sending inventory in more consistently does not combat against the longer tail items no longer being long tail, it just adds fresher items, some of which will sell quickly. Sending more inventory in more frequently is clearly critical to selling more but so is growing your inventory count. I sell more now with exponentially more inventory than I did after my initial 26 item shipment.
Roland De Aragon says
This is exactly what I needed to know. I have inventory that is just sitting there for years and I need to get rid of them. I need a strategy of sending in inventory monthly and what $ targets to hit to earn a steady income. I need to reevaluate my business model. Any new recommended, video, sites, courses that touch on this topic would be awesome if any one can share. Please let me know.
Couldn’t agree more. I sell part-time and have about 300 items in stock at this writing, but I notice that sales spike up when a new shipment goes in. As you note, there are logical, legit reasons for this. I’d like to build my average inventory over time, but it’ll be little by little, and I’ll be repricing on a bimonthly basis page by page. There is no such thing as a business that maintains itself…at least not my little business! I must stay on it weekly or, for sure, monthly, at a minimum.
I would agree that regular shipments are important, and I see the difference when I send in more. My question, as relatively new seller (8 months aprx), is that I about to bump up against the 5000 unit limit (have been sending in about 600 avg per month). My sales (99% books) are increasing (about 300 units in August) but nowhere near the 8% per week that I read is a requirement to get increased allowable inventory. I know I have some junk from my early days sourcing and am thinking of trying a repricer for older stuff for a month or so and dumping some of the less attractive books to reduce inventory. I am focusing on higher quality books with <1 mil ranking for now but I hate to pass on long tail stuff that looks unique with high margins. As background (per Inventory Lab) my avg sale price is about $18 and avg profit about $11.00. I can see sales picking up obviously, but also wonder if I should take advantage of the higher sales months to get rid of more inventory, and then focus more on higher quality. Any comments from yourself or other readers is appreciated. As always, really appreciate all your info. I didn't get into the Zen program, but have been doing textbook online arbitration after listening to the seminar & have been adding about 10 books per week from Amazon. Thanks again s it looks pretty exciting. Lower profit margin, but more profit per unit sounds pretty good to me. Last thing, I would really be interested in seeing your video of sourcing, whether the 6 hour or the condensed version ( I prefer the full version), so put me down as your 1st customer when you have it ready.
Peter Valley says
I wish I had some insight here, but I think I got in under the wire, before Amazon started instituting these restrictions. Anyone?
KENNETH EDEN says
I would like to know if there are any UK fba sellers out there that would like to “team up” and share ideas/experiences by way of mutual help. If so please email me via FBA mastery. Cheers!