Being nimble is crucial to being a successful FBA seller. While you can’t always control what happens, the smartest sellers know how to react when unexpected problems occur. For example, if you stocked up on Frozen toys for the holidays and they didn’t sell as well as you’d forecasted by mid-December, you’ll need to put a plan into place to liquidate that inventory while incurring minimal profit loss. It’s never too late to take action and recover.
We put together some tips for you to maximize your holiday sell through rate by utilizing historical data, and how to be prepared for the worst should sales be slower than expected.
Maximizing Holiday Sell Through
Use your historical sales data to predict if you’ll have leftovers after Christmas and lower prices if the outlook is bleak. This is where knowledge of your item’s price elasticity–how demand changes in relation to price–will be key in knowing exactly how much to lower your price floors.
Sales Curve Forecasting For the Holidays
You’ve already ordered for the holiday season based on expected demand. Use that existing daily sales data to create an accurate sales curve for your business to see how sales are tracking to your predictions.
Sales data varies from business to business, as well as between categories, so it’s important to have this information available for your own use throughout the year. If you’re in a category like lawn and garden, you know your sales will peak in the spring and summer. Your sales curve will show you these patterns and allow you to make accurate restocking decisions, ensuring that you have accurate levels of inventory throughout the year.
Price Elasticity: How Much More Will You Sell On Sale?
In addition, it’s important to perform price tests throughout the year in order to better predict your sales and gauge customer response.
For example, does cutting your prices in half result in a linear 2x increase? Do sales perform better or worse? Having this data on hand will give you a good idea of the price elasticity of each of your items, and allow you to recover quickly should sales be slower than expected.
This will allow you to apply results that you determined from your price tests if sales are low, and end with less inventory on hand than the current run rate indicated.
In the sample forecast above, you can see that this particular seller had an 3.5x increase in sales after employing a 50% off sale. This allowed him to liquidate slow-moving SKUs and increase their amount of cash on hand. With this capital, he was able to invest in newer, more profitable inventory and start off Q1 on the right foot.
Track the Competition
Finally, you can ‘hack’ your own pricing by figuring out how much inventory your competitors have. As you can see below, we’ve entered in a large number and can see that our competition has only 3 Disney Frozen microphones left.
In a hypothetical scenario, you would refrain from lowering your prices knowing that your competitor will soon stock out. Once they stock out, your sales velocity will pick back up.
How to Handle the Post-Holiday Hangover
You thought you’d forecasted your holiday inventory levels correctly, but it turns out you have more leftovers than your Aunt Edna’s fruitcake. In order to avoid those pesky storage fees, you know you need to get rid of all of that excess inventory.
Here are some ways you can liquidate your surplus of holiday inventory and free up your cash flow for the new year:
If You Keep Items in FBA…
As you already know, lowering prices (usually) results in an increase in sales. This boost in sales will in turn increase cash flow, helping you turn your stale inventory into liquid assets to invest in more profitable SKUs.
One way to lower prices is to use an automated repricer. Setting a floor on your repricer will ensure that your items remain priced within the threshold you’ve deemed to be profitable.
Utilize Multi-Channel Fulfillment
This is a useful option that requires no Amazon commission. Sellers are able to take advantage of FBA’s logistics, UPS rates, and quick shipping.
Some downsides are that your shipments will only ship within the US and will come in Amazon packaging.
The table below shows the cost of various fulfillment options for a standard (non-oversized), non-media, 5 pound package being shipped from Boston to San Francisco.
It’s clear that Amazon’s fulfillment program is much cheaper than its competitors. Find out more information about Multi-Channel Fulfillment here.
Take advantage of the Amazon Promotions function in Seller Central. Under the ‘Advertising’ link in your seller account, click on ‘Promotions.’ Then click ‘Create’ and select the type of promotion you would like to offer your customers.
The Amazon Promotions function is often under utilized by sellers. We recommend taking advantage of this program, as it will have a strong impact on your sales. It’s also a great way to get around MAP restrictions your supplier may have put in place.
Sellers are allowed to create three different types of promotions:
- Money off
- Ex. Spend $35 or more and receive $5 off
- Free Product
- Ex. Buy 3 candles, get 1 free
- External Benefit
- Ex. Get a free cookbook with grocery item purchase
To learn more about Amazon Promotions click here.
Take Advantage of Sponsored Products
Amazon now offers a Pay Per Click (PPC) ad program that allows you to advertise your listings on Amazon’s search pages. Sponsored Products are a great way to increase sales through greater visibility of your product. It’s important to note that in order to be eligible to place a campaign bid, you must be winning the Buy Box.
There are two types of campaigns: manual and automatic. Automatic campaigns are easier for sellers that are new to the program, while some sellers find manual campaigns to be more beneficial given the ability to implement your own strategy.
However, automatic campaigns allow you to gauge which keywords will get you the most impressions, as well as pick up any keywords that your manual campaigns may be missing. This is why we ultimately recommend that you run both types of ads simultaneously.
If You Recall Items from FBA…
FBA removal orders are useful for clearing out excess holiday inventory that will soon be subject to long-term storage fees. Amazon typically processes these orders within 10-14 business days. However, during peak removal periods like February, March, August, or September it may take up to 30 days.
Recalling your items from FBA is surprisingly cost effective, but ultimately it’s up to you to decide if this is the right move for your business.
Here are the removal fees for standard (20 lb or less with dimensions not exceeding 18″ x 8″ x 14″) and oversized items:
These fees include shipping as well.
You are able to submit a bulk removal order by uploading a tab-delimited list of items. To learn more about removal orders, visit Amazon’s website.
Sell on Alternate Channels
There is always the option of selling on any of the other major ecommerce marketplaces, or your own .com site or brick and mortar store. These options won’t have the customer base that Amazon has, but each marketplace has its unique benefits. Learn more about alternate marketplaces here.
One especially profitable option for selling your products is Groupon Goods. The sign-up process is simple and it has proven results.
Lastly, companies like Joelister make it is easy to crosslist your products on both Amazon and eBay. Click here to get your first five listings free, a special offer for Teikametrics blog readers.
Find a Jobber
A jobber is defined as “a wholesaler who operates on a small scale or who sells only to retailers and institutions.” These wholesalers may be willing to buy excess inventory off of you for resale.
The amount of cash you receive for your items will usually be below cost, but payment is immediate. Jobbers will promptly take items off your hands so you can rotate that inventory into liquid assets.
Private label sellers will want to establish ground rules for resale when negotiating. For example, you may not want your products sold at downmarket retailers.
Finally, jobbers often specialize in particular classes or categories of merchandise, so you’ll want to do some research on which ones will be the best fit for your products.
Here are some resources for finding jobbers to purchase your excess inventory:
Create Bundles or Multipacks
Another option for dealing with excess inventory is to recall your inventory and repackage items into multipacks or bundles in order to increase the purchase price of a single sale.
One example of a multipack would be various colors of socks packaged together, or other variations of parent products.
Bundling is packaging together items that are highly complementary to each other. An example of this would be providing a knife sharpener along with a knife.
Return to Supplier
Finally, you can try negotiating with your supplier for return options. Here are some of the options you may want to discuss:
- Buyback program
- Direct exchange
- Return one product, buy two
- Take back inventory at ‘X’ fees
Use your historical sales data to create a sales curve forecast for individual SKUs. This curve will help you predict accurate inventory levels at different times throughout the year.
It’s also important to perform price tests at different times of the year to gauge price elasticity and customer response to changes in price.
Lastly, when your sales rate calculations let you know you are going to end up with excess inventory at the end of the holiday season, remember to be nimble–it’s not too late to take action and turn that inventory into cash.
It’s up to you to decide if keeping your items in FBA or recalling them and finding alternate methods to liquidate will be most profitable for your business.