One of the first things you should ask yourself before you begin selling on Amazon is how much inventory you will need for Amazon FBA.
If you’re a fan of online shopping, you’ve probably heard that Amazon has one of the most advanced fulfilment networks of any online store. Third-party vendors are also well-known on Amazon.
Almost half of all sales on Amazon last year were made by third-party vendors. More over two-thirds of these vendors were taking advantage of Amazon’s FBA service.
In a nutshell, there isn’t a minimum amount of inventory needed to ship merchandise to Amazon FBA (other than storage limits).
Note: Using a 3PL (third-party logistics) provider to drip-feed your items into Amazon can always get around this.
To test a new product, you might theoretically send in just one unit. In practise, though, this is more common.
This will lead to an increase in transportation costs and a decrease in profitability in the near term, although this is temporary.
However, shipping products to Amazon FBA requires careful consideration. In this essay, we’ll go over some of these and other topics. In that case, keep reading to learn more about Amazon FBA!
Look at the Possible Consequences
The golden rule of excellent business practise is to search for asymmetric risk/reward possibilities in order to mitigate risk. By this I mean that the larger the possible payoff, the lesser the risk you’re willing to take.
A good asymmetric risk is when you sell an excellent product and buy inventories.
However, there are exceptions to this rule. As a result, purchasing too much inventory increases your risk without raising your potential gain enough to pay for the higher risk monetarily.
This is in direct contradiction to the idea of an asymmetric advantage.
How much do I need to stock in order to sell my products through FBA? Between 300 and 500 units is a reasonable range to aim for when estimating your total. The minimum order quantity (MOQ) for whole-sale manufacturers on Alibaba is normally around this amount.
Private label items on Amazon may range from $20 to $50 in price. These goods cost between $5 and $15 per unit. Between $1,500 and $7,500 is your overall inventory risk.
There’s a good chance you’ll run out of inventory, which is never a good thing. On the other hand, if you have an excessive amount of inventory, you may end up with an abundance of the incorrect kind of goods.
Think About the Quantity of Stock for an Amazon IPO
Whenever an Amazon seller launches a new product, they want to accomplish the following goals:
- Achieve high organic rankings for targeted keywords
- Increase the stock on hand.
- To prevent having to relaunch the product, never run out of supply.
As it turns out, it’s quite unusual for this to be done. Everyone runs out of stock, but this is especially true for newbies. This isn’t the end of the world, and it’s almost to be anticipated given the circumstances.
This is an example of a potential launch on Amazon where we show how to order the correct quantity of inventory:
During the first week of sales, you sell 35 units of your new product, an average of five units each day. The next week, you sell an additional 10 units a day, for a total of 70 units sold from your debut campaign. You’ve sold 105 items (35 + 70) in the last two weeks.
Consider restocking to avoid running out of stock at this time. Ordering and paying for the item takes 5 days. After that, 30 days are required for production, followed by 40 days for shipment and processing through Amazon FBA. That works up to a total of 75 days.
An additional 750 units would be needed to keep the item in stock during the reordering process (75 x 10), which is what you’ve sold over the time period.
In order to avoid running out of supply, you would have required to buy 855 units (105 + 750) before the introduction of your product (105 + 750).
With the aforementioned number of units and the pricing range of $5 to $15, you would need to pay between $4,275 and $12,825 up front to get your product in the $5 to $15 price range.
Most newbies to Amazon aren’t going to be able or willing to put up this kind of money up front for their initial product launch on Amazon, as you might assume.
As a result, the first section’s advice that you stock 300 to 500 units is optimal, despite the fact that you’ll almost certainly run out of stock.
How to Calculate the Number of Units You Can Expect to Sell?
Even if you’re going it alone, it’s important to think about this. Therefore, the product’s debut is the primary consideration for tackling this issue.
This means that if you follow a good launch plan, you will be able to sell a lot of things.
The product’s selling power is also an aspect to consider. However, this is a really straightforward problem to solve.
It’s possible to acquire an approximate approximation of Amazon product sales using Google Chrome Extensions.
However, these Chrome extensions include, but are not limited to, Jungle Scout Extension, Manage by Stats, and Helium 10 Xray.
If You Run Out Of Stock, What Happens?
There is nothing more frustrating than running out of stock, but it isn’t necessarily a disaster.
However, there are also financial repercussions to running out of stock, such as cash back incentives like free products given away to boost search engine results, and maybe unnecessary ad spending.
Having no second “honeymoon” period as an Amazon new product will also be a disadvantage.
It nearly goes without saying that keeping a steady supply of your goods will increase its profitability (and succeeds).
As a result, a new seller runs a very high risk of selecting the incorrect product. Having to sell a large volume of stock is better to running out of stock. Additionally, your initial risk will be reduced as a result of this.
Concluding Remarks
Even though Amazon FBA has no minimum inventory, it’s quite improbable that you’ll start off with only a few products.
However, we’ve attempted to focus this conversation on novices to Amazon selling and those who hope to make money on the marketplace.
It’s assumed that you’re offering a conventional private label product with a retail price of $20 to $50, thus the initial idea is to purchase 300 to 500 units to get started selling on Amazon.
Naturally, this inventory quantity may differ whether you’re selling a more costly or less expensive goods.
As a result, there is no one-size-fits-all solution to the question of how much money you need to start selling on Amazon.
Because Amazon FBA doesn’t have a minimal amount, you’ll have to make your own decision based on your own needs. However, if you’re interested in learning more, refer back to the aforementioned resource.
