• Amazon IPI Score

    By ZonSupport | Posted on June 15, 2021| Blog

    Your Inventory Performance Index score is the make or break of your Amazon business. We see over time this is becoming more and more a tool that Amazon uses to “control” Sellers, or rather to support the ones generating the most revenue for them.

    This is where you will find it: IPI Score

    Covid gave Amazon a jolt and really made them focus on the throughput of goods. There was even a time that they gave priority to FBM sales as their infrastructure could not handle the volume of FBA sales. They have since tinkered with the score and no doubt will continue to do so as they learn more and there is an inevitable shakedown of Sellers.

    While Amazon will not disclose the math behind their final calculation, they have highlighted four key metrics that Sellers need to manage closely. Here they are in order of priority:

    Understand your 90-day rolling sell-through rate. 

    Your FBA rolling 90-day sell-through rate is the number of your units sold and shipped over the past 90 days divided by the average number of units available at fulfillment centers during that time. 

    Visit the Inventory Age page to see recommendations on your inventory. You can filter by inventory age ranges or sort the FBA sell-through column to see products with the lowest sell-through. If your sell-through rate is low, you must have a laser focus on doing all you can to increase sales.

    Reduce your excess (overstock) inventory.

    This follows on from the step above requiring a laser focus on driving sales. The cost of creating a removal order to send stock out to a 3PL to later return it to Amazon is seldom viable. Visit the Manage excess inventory to see recommended actions on products that are aged and overstocked. 

    One option is to use Amazon Outlet to sell your overstocked and out-of-season products. On the Manage excess inventory page, select the recommendation filter Create Outlet Deal to see products that are eligible for Amazon Outlet. However, you are much better to create a coupon and focus on selling through to generate fresh cash wherever possible. This sort of option is a last, desperate step to solve the problem.

    However, our go-to service provider to help when you finally realize you need to move this stock outside Amazon is Back-Track. They have a range of services to help you try and maximize the return on this stock. After all, it represents a sizeable investment so you need to recoup some value.

    They will salvage what they can and return it to Amazon for you. However, most of our customers take advantage of their liquidation service by way of them managing the sale to excess stock retailers or managing its sale through eBay. If you often have parts issues they will even strip the unsaleable products to retrieve an agreed parts inventory. Then, when a customer has a problem that just needs a part, they will ship this direct to the customer.

    We recommend all clients get set up with them in advance so when circumstances hit, they can take action right away.

    Avoid long-term storage fees

    Amazon hates these as much as you do getting the bill! It means you are treating their business like a storage unit so they are not making money PLUS you are using up space they would rather give to a Seller who is moving stock. 

    This is no different from trying to get space in an ecom-enabled 3PL if you are selling on Shopify for example. Most have a minimum eg 500 or 1000 sales a month and if you don’t hit this threshold, they will charge you regardless.

    As with all things in life, you should pause to try and understand where the other sides point of view. They have a team of employees to keep busy, so if they have no work then that’s a fast way for them to go broke!

    You can set up your account to automatically remove aged inventory. BUT, we strongly recommend you diary this action three weeks before the due date so you can make the right business decision depending on your current circumstances. If you automate and forget, you may realize too late that you would have taken different action.

    Take instant action on Stranded Inventory

    This means you have sellable products in an Amazon fulfillment center with no active listing, and therefore cannot be sold to customers. You must take action as soon as you see this. It is generally highlighted on your login page. This is the easiest of the four areas to keep under control!

    In summary, plan your inventory carefully to ensure you are selling through your stock within 30-days. Think of each product like a pot of Yoghurt – it has an expiry date on it and the closer you get to the expiry date, the more difficult it is to sell. Why? Because you just can’t turn on a promotion or dial-up your PPC to get a magic bump in sales and solve your problem overnight. 

    There is actually a 5th which although not affecting your IPI Score directly, it affects the FBA sell-through rate and FBA in-stock rate metrics highlighted above and is often overlooked: Unfulfillable Inventory

    Unfulfillable inventory is still considered as units on hand in Amazon’s fulfillment centers even though they cannot be sold. So, they are included in your sell-through rate so have the effect of dragging this down. (As they are counted, they also limit your restocking ability as well!)

    In addition, since unfulfillable inventory affects your sell-through rate and available inventory, by default it also affects your FBA in-stock rate. 

    You can automate the removal of your unfulfillable inventory which is our strong recommendation. Go here to learn more on this:

    In summary, watch your Inventory Age page like a hawk. The first band is 0 – 90 days which is too long so you will need to manage this in tighter bands yourself ie 0 – 30 days & 30 – 60 days. So, get up close and personal with a spreadsheet and update your sell-through rate weekly to ensure you really do understand your current position and take action accordingly.

    As always, ask us anything. If we don’t know the answer, we’ll know someone who does!

     

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