Q4, also known as the “holidays season”, is a huge undertaking for Amazon sellers. Especially now, in the wake of the global health crisis, shoppers are replacing the traditional brick-and-mortar stores with online holiday shopping. The shift towards e-commerce has dramatically increased sales for Amazon sellers, requiring comprehensive planning and preparation on all fronts, and especially in terms of inventory.
But although Q4 is usually at the focus of attention, Q1 also requires its own planning and preparation, as it includes major events, such as the Chinese New Year (12 February), Valentine’s Day (14 February), St. Patrick’s Day (17 March) and Easter (4 April), and of course the Super Bowl (7 February).
Here are 6 tips and tricks to consider when preparing for both Q4 and Q1 as an Amazon Seller.
Tip #1 – start preparing early
Generally speaking, sellers usually prepare for Q4 during the middle of Q3. They don’t want to begin too soon as they need to get a clear grasp of their inventory levels and which of their products are currently generating the most traction. However, supply chain delays and high demand for seasonal items may require you to begin even earlier.
Tip #2 - Analyze your inventory data
Planning your inventory is extremely important for Amazon sellers. Since storage space at Amazon’s warehouses is a premium, you’ll have to pay more for stored inventory during Q4. This means that finding out how much inventory you need during Q4, is extremely important, as you don’t want to end up paying much more for stored inventory, while on the other hand, you don’t want to end up without of stock items either, as it would mean losing sales opportunities and it can also end up hurting your rankings on Amazon and cause additional damage as explained here. Looking at historic unit sales allows you to manage inventory accurately so you can avoid “Long Term Storage Fees” that Amazon implements if your inventory is overstocked or stays in their FCs for a long period of time. Any inventory that has been stored for more than a year will be subject to long-term storage fees in addition to the usual monthly storage fees.
If you have been selling on Amazon for a few years, you have valuable data that can help you when preparing for Q4. The following data points may be important:
- Last Year Q4 (LYQ4) sales – indicates the amounts sold throughout the year during the holidays season. If your items are trending in a positive direction, you should be able to predict that sales during the same period will increase.
- Year To Date (YTD) sales – this refers to the period of time beginning the first day of the current calendar year or fiscal year up to the current date. This can give you a perspective on the growth trend that you are experiencing. For example, if your current YTD is higher than last year’s YTD, you may expect Q4 sales to be higher than the previous Q4 by more or less the same rate.
- Last year’s Prime Day sales results – indicates how customers react to special discounts, which can be an indicator for the discounts offered during Q4.
- Q3 sales thus far (or the last 3 rolling months) – indicates the quantities sold during the regular period. This data can be used with the assumption that Q4 sales are 30%-50% higher than Q3.
- Last year’s top-selling SKUs during Q4 – indicates which items are more likely to sell during this time period. Of course, last year’s trends may change this year, but there may be items that can sell well this year as well, regardless of the changing trends.
- Current inventory and manufacturing capacity levels – this very important data can help coordinate between manufacturing and inventory storage. As explained below, it is extremely important to track inventory levels with your manufacturer in order to prepare inventory for FBA.
Tip #3 - Track inventory levels with your manufacturer
In order to send products to Amazon, you need to prepare the products for FBA at your facility. Generally, it is always recommended to receive more inventory from the manufacturer during Q4 for top seller items. After estimating Q4 unit sales, add a 10-15% buffer so you can keep some units for Fulfilled By Merchant (FBM) if you temporarily run out of FBA stock during the holiday season.
Tip #4 - Prepare yourself for shipment delays
As you know you are not the only seller that is ramping up for Q4, so be prepared for shipment delays to occur during this period. To mitigate this risk, it is important to get your inventory in as early as possible. Amazon-owned trucks often get delayed in Q4 due to the high volume. The saying, “don’t put all your eggs in one basket” here as well. So, consider sending your high-priority ASINs in smaller FBA shipments more frequently to reduce risk. If a large shipment gets lost or delayed, this could really set you back a long time.
Tip #5 - Plan ahead for Q1 as well
Although it may not seem like it, but life continues after Q4. In fact, Q1 may be just as complex as Q4, especially for sellers who rely on Chinese factories for their products, because during this quarter China is gearing up for its longest holiday, the Chinese New Year. This holiday usually falls between late January and mid-February, and the resulting disruptions can last up to 40 days. This means orders from this region which typically take 60 days to fill, could take over 100 days, leaving you with potential inventory challenges if you are not prepared.
To prepare for Q1 try to get your Q1 orders as early as October and up to late November at the latest. It is recommended to provide your manufacturer with a forecast of your anticipated stock needs. Ask your manufacturer to order enough raw materials for your yearly needs. This transparency and planning will ensure they will have everything in stock and minimize delays when you place an order.
Tip #6 – make sure you have enough funds to ramp up your inventory
Inventory funding is also a big issue that you will need to prepare for well in advance. Getting the funds upfront is not that easy. You should consider the various funding options available for Amazon sellers. Especially Inventory Boost, which offers a risk-free inventory growth service for e-commerce sites that helps you earn more by selling more, without any upfront costs.