The Amazon Inventory Performance Index (IPI) is a critical performance metric for Amazon sellers who use Fulfillment by Amazon (FBA). It measures how efficiently and effectively sellers manage their inventory in Amazon’s fulfillment centers. Maintaining a healthy IPI score can be the difference between thriving on Amazon or facing unnecessary limitations and costs. A higher IPI score allows sellers to maximize their available storage space, avoid overage fees, and maintain or even improve the visibility of their products.
If your IPI score drops below Amazon’s required threshold, your business can face significant hurdles, including storage limitations, higher fees, and restrictions on sending more inventory to FBA. Therefore, it’s vital to continually monitor and improve your IPI score. This article discusses four effective ways to improve your IPI score, allowing you to optimize your FBA inventory performance and keep your business thriving on Amazon.
What Is the Amazon IPI Score?
Before diving into specific ways to improve your IPI score, let’s break down exactly what it is. The IPI score is calculated by Amazon based on four key factors:
Excess Inventory – This measures how much excess stock you have sitting in Amazon’s warehouses.
Sell-Through Rate – The rate at which you’re able to sell your products relative to the amount of stock held in Amazon’s warehouses.
Stranded Inventory – This refers to products that are stored in Amazon warehouses but are unavailable for purchase due to listing problems.
In-Stock Inventory – Amazon values sellers who can consistently keep popular products in stock, rewarding them with a higher score.
The higher your IPI score, the more storage space Amazon allocates to you, and the fewer long-term storage fees you incur. Amazon sets a minimum IPI threshold (which often fluctuates but is generally set around 400). If your IPI score falls below this threshold, you could face storage limits and fees, negatively impacting your business.
Now, let’s look at the four strategies you can implement to improve your IPI score.
1. Optimize Your Sell-Through Rate
One of the primary ways to boost your IPI score is to optimize your sell-through rate. Your sell-through rate measures how quickly your products sell within a given time period relative to how much inventory you have in Amazon’s fulfillment centers. The faster you sell your products, the higher your IPI score will be. Conversely, slow-moving inventory can drag your score down.
How to Improve Your Sell-Through Rate
Competitive Pricing: Adjusting your prices to be more competitive can significantly impact your sell-through rate. By monitoring your competitors and using Amazon’s pricing tools like the Automated Pricing Tool, you can dynamically change your product prices to encourage faster sales.
Run Promotions and Discounts: Offering promotions, discounts, or limited-time deals can create a sense of urgency among buyers and increase your sell-through rate. You can use Amazon’s various promotional tools, such as Lightning Deals or coupons, to boost sales volume during slower periods.
Leverage Amazon Ads: Amazon’s advertising platform can help promote your products to a larger audience. Using tools like Sponsored Products or Sponsored Brands can increase product visibility and sales. Investing in targeted ads for slow-moving inventory can improve your sell-through rate and help clear out excess stock.
Bundle Products: One effective strategy for moving inventory is to bundle slower-selling items with fast-selling ones. For example, if a particular product is moving slowly, bundling it with a more popular item at a discount can help push it off the shelves and improve your overall sell-through rate.
By focusing on increasing your sell-through rate, you’ll free up storage space, reduce long-term storage fees, and ultimately improve your IPI score. Regularly reviewing your pricing strategy, running periodic promotions, and advertising effectively are all powerful tactics to ensure your inventory is constantly moving.
2. Minimize Excess Inventory
Having excess inventory can be costly—not only does it lower your IPI score, but it also incurs long-term storage fees that can cut into your profit margins. Minimizing excess stock is essential for maintaining a healthy IPI score.
How to Handle Excess Inventory
Conduct Inventory Audits: Regularly assess your inventory using Amazon’s IPI dashboard. It’s important to identify which products have been sitting in storage for too long. Products that have been sitting in Amazon’s fulfillment centers for over 90 days can negatively impact your IPI score.
Liquidate Unsold Inventory: If you find that certain products simply aren’t selling, consider using Amazon’s FBA Liquidations program. This program allows you to recover a portion of your costs by selling excess inventory to liquidators, avoiding storage fees and preventing further damage to your IPI score.
Use Removals and Returns: If liquidation doesn’t seem like a viable option for your business, another route is to remove excess inventory from Amazon’s fulfillment centers. By using Amazon’s Removal Orders, you can either have the unsold items returned to you or disposed of, which helps clear out excess stock and keeps your inventory lean.
Avoid Overstocking: A proactive way to prevent excess inventory is to forecast demand more accurately. Utilize Amazon’s demand forecasting tools to help predict which products are likely to sell and adjust your ordering process accordingly. A data-driven approach to forecasting will help ensure that you only order what you’re likely to sell, avoiding excess stock.
By effectively managing excess inventory, you’ll avoid long-term storage fees and maintain a high IPI score, helping to keep your Amazon business efficient and profitable.
3. Reduce Stranded Inventory
Stranded inventory is stock that is stored in Amazon’s fulfillment centers but isn’t available for sale due to listing problems. Stranded inventory not only takes up space but also affects your IPI score. Products can become stranded for various reasons, such as expired SKUs, listing errors, or non-compliance with Amazon’s product listing guidelines.
How to Fix Stranded Inventory Issues
Regularly Check for Stranded Inventory: Amazon provides tools within Seller Central to help you identify stranded inventory. The “Fix Stranded Inventory” tool gives you a breakdown of all your products that are not currently available for sale. It’s essential to check this tool frequently to identify and fix stranded inventory issues promptly.
Resolve Listing Errors: The majority of stranded inventory arises due to listing errors. Make sure that your product listings are accurate and compliant with Amazon’s guidelines. Double-check product descriptions, images, and categories to ensure they meet Amazon’s standards.
Automate Monitoring: You can use inventory management software to help automate the process of monitoring your listings and detecting stranded inventory early. These tools can alert you as soon as a listing issue arises, giving you time to fix the problem before it starts affecting your IPI score.
Stay Compliant with Amazon Guidelines: Stranded inventory often results from non-compliance with Amazon’s listing guidelines. Stay up to date with any changes in Amazon’s policies regarding product categories, listing formats, and content rules to avoid unnecessary listing suppressions.
Stranded inventory can significantly harm your IPI score if left unresolved. By staying proactive and addressing any listing issues promptly, you can minimize the chances of stranded inventory dragging down your score.
4. Maintain Healthy Inventory Levels
Finally, maintaining balanced inventory levels is key to improving and sustaining a high IPI score. Stockouts and overstocking both negatively affect your IPI score, so it’s essential to strike the right balance. Healthy inventory management ensures that you can meet customer demand without incurring unnecessary storage fees.
How to Manage Healthy Inventory Levels
Monitor Stock Regularly: Consistently monitor your stock levels using Amazon’s Inventory Dashboard. This will give you an up-to-date view of your inventory, helping you determine whether you need to restock or reduce the amount of a particular item.
Set Reorder Points: Avoid stockouts by setting automated reorder points for your top-selling products. Using inventory management software can help determine the ideal time to reorder based on sales velocity, ensuring that you have the right amount of stock available at all times.
Use Amazon’s Restock Recommendations: Amazon provides restock recommendations based on your sales history, helping you avoid stockouts and overstocking. These recommendations are tailored to your inventory turnover, allowing you to maintain optimal stock levels while avoiding storage issues.
Seasonal Planning: Be aware of seasonal sales trends and adjust your inventory accordingly. Products that sell well during peak periods like holidays or special events might require higher stock levels, but it’s crucial to scale back once the season ends to avoid excess inventory issues.
Maintaining optimal inventory levels allows you to fulfill customer orders without overstocking or running out of stock. This balance is critical in keeping your IPI score healthy and ensuring your business remains profitable.
Conclusion
Improving your Amazon IPI score requires a combination of strategic inventory management, consistent monitoring, and a proactive approach to resolving issues. By focusing on the four key areas—optimizing sell-through rate, minimizing excess inventory, addressing stranded inventory, and maintaining healthy stock levels—you can significantly improve your IPI score. A higher IPI score ensures greater flexibility in using Amazon’s FBA services, reduces the risk of long-term storage fees, and keeps your business running smoothly.
For sellers looking to take their Amazon business to the next level, optimizing your IPI score is crucial. By following these best practices, you can stay ahead of the curve and maintain a competitive edge in the marketplace.
At Ecomm-Guru, we specialize in helping Amazon sellers manage their inventory more efficiently. Whether you’re looking to boost your IPI score, optimize your listings, or streamline your FBA strategy, our team of experts can provide tailored solutions to meet your business needs. Contact us today to learn how we can help you maximize your success on Amazon!
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