Amazon FBA is a popular way to sell products on Amazon in exchange for money. It’s an easy and fast way to get your product off the ground, but inventory levels are important when you’re selling online. Learn how much inventory you need for different categories of items.
Amazon FBA has a lot of requirements. You will need to have enough inventory for your products, as well as a warehouse and storage area to hold the products. The amount needed varies per product type, so it is best to do some research before you start selling on Amazon.
One of the first things you should ask yourself before starting out selling on Amazon is how much inventory you’ll need for Amazon FBA.
It’s no secret that Amazon has one of the world’s most sophisticated fulfillment networks of any online retailer. It’s also no secret that Amazon collaborates with other vendors.
In fact, third-party vendors accounted for over half of all purchases on Amazon only last year. Furthermore, two-thirds of these vendors used Amazon’s FBA platform.
The quick answer to the issue of how much inventory you need to ship to Amazon FBA is that there is no minimum requirement (other than storage limits).
Note: You can easily get around this by hiring a 3PL business to drip feed your items into Amazon.
This implies that you might theoretically send in only one unit, which is typically done by individuals who wish to test a product.
This will result in a rise in total transportation costs and a decrease in profitability, but only in the near term.
However, there are a few factors to keep in mind when transferring merchandise to Amazon FBA. This article will go through a few of them, as well as others. So, if you’re thinking about using Amazon FBA, keep reading to learn more!
Consider the danger
This is perhaps the golden rule of successful business practice: search for asymmetric risk/reward possibilities to decrease risk. To put it another way, you want a bigger possible return for a smaller potential risk.
In our perspective, selling a good product and investing in inventory is a solid asymmetric risk.
There are, however, certain limitations. One is that buying too much inventory increases the risk side of the equation without raising the potential return enough to compensate for the increased risk.
This is the polar opposite of an asymmetric opportunity.
So, when it comes to inventory for FBA, how much do I need? In most cases, the answer is between 300 and 500 units. This is generally approximately the MOQ (minimum order quantity) for full sale manufacturing firms found on Alibaba.
Some of the greatest Amazon private label goods cost between $20 and $50. These goods range in price from $5 to $15 per unit. Your overall inventory risk is estimated to be between $1,500 and $7,500.
There’s a good chance you’ll run out of stock, which is never a good thing. On the other hand, having too much inventory means having too much of the incorrect product.
Consider Inventory Quantities For An Amazon Launch
When introducing a new product on Amazon, every new seller aims to do the following:
- Obtain high organic keyword rankings
- More inventory is needed.
- To prevent having to relaunch a product, never run out of supply.
Unfortunately, this is seldom, if ever, accomplished. Everyone, especially newbies, runs out of supplies. Taking everything into account, this isn’t the end of the world and is almost inevitable.
We’ll use the following hypothetical scenario to show how to order the proper amounts of goods for a successful Amazon launch:
You introduce a product and sell 5 units each day during the first week, totaling 35. Sales increase to 10 units every day over the next week, totaling 70 units, after your debut promotion. You’ve sold 105 pieces in two weeks (35 + 70).
You might think about restocking at this time to avoid running out of stock. It takes five days to make an order and pay for it. After that, production takes 30 days, followed by shipment and processing through Amazon FBA, which takes another 40 days. That’s a total of 75 days (7 + 30 + 40).
You sold an average of 10 units every day throughout the time period, therefore you’d need an additional 750 units to stay in stock during the restocking process (75 10).
In order to avoid running out of stock during your first two weeks of sales (105), you’ll need to buy 855 units (105 + 750) before launch.
As previously stated, items typically cost $5 to $15 per unit, therefore based on the aforementioned number of units and the $5 to $15 price range, you’d need to budget between $4,275 to $12,825 up front.
Most novices, as you would guess, would not be ready or able to spend these amounts up front for their initial Amazon product launch.
That’s why, despite the fact that you’ll probably run out of stock, the first section’s advice of 300 to 500 units is the greatest.
Think about how you can figure out how many units you’re likely to sell.
This is a difficult question to answer, particularly if you’re doing it alone. As a result, the first consideration in fixing this issue is how successfully the product is launched.
Following a strong launch plan correlates to selling a large number of items, and vice versa.
The product’s selling power is the second aspect to evaluate. This is, however, a rather straightforward problem to solve.
A variety of Google Chrome Extensions are available that enable you to obtain a general approximation of Amazon sales for nearly any product.
Jungle Scout, Manage by Stats, and Helium 10 Xray are just a few of the chrome extensions available.
Think about what happens if you run out of stock.
Even if you have to relaunch the product, running out of supply isn’t the worst thing that can happen.
However, running out of stock has financial ramifications, such as cash back offers and free product giveaways to gain rankings, as well as perhaps some unnecessary marketing expenditure.
The fact that you won’t have another ‘honeymoon’ period as an Amazon new product will also work against you.
It practically goes without saying that if you don’t run out of supply, your product will be more lucrative (and succeeds).
However, there is a significant chance of a novice seller selecting the incorrect product. It’s better to run out of stock than to have to liquidate large volumes of stock. It also means that your initial risk is reduced.
Additional Reading:
Conclusion
While there is no minimum inventory requirement for delivering to Amazon FBA, it’s doubtful that you’ll be sending only a few pieces at first.
That said, we’ve attempted to focus this conversation on novices to Amazon selling and those looking to make money on the marketplace.
The first recommendation to purchase 300 to 500 units to begin selling on Amazon is based on the premise that you’re offering a regular private label product that sells for $20 to $50.
Naturally, this inventory quantity will differ depending on whether you’re selling a more costly or less expensive goods.
To put it another way, there is no correct answer to the question of how much money you need for Amazon FBA.
Because Amazon FBA does not specify a minimum amount, the quantity you choose will be determined by a variety of variables. If you’re interested in learning more, see the instructions above.
The “amazon fba calculator” is a tool that allows you to calculate how much inventory you need for Amazon FBA. It also includes the cost of storing your items.
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