From a purely mathematical point of view, the increased fees for Amazon sellers don’t look like good news for profit margins. That being said, sellers still have other options besides sitting back and watching their profits head south. Even the newly announced inventory limits, which are likely to disrupt the way sellers manage and fulfill sales, could be turned into an advantage for those who are ready and waiting for the right opportunity.
The situation for Amazon sellers is less than ideal, but it’s still possible to turn things around. First, it’s important to have the right perspective. Second, you need to make decisions based on accurate data, not educated guesses. And in order to do that, it’s hard to find a better tool than Shopkeeper, a profit calculator that helps you manage every aspect of selling on Amazon. From item-by-item views of your profit margins, insights into Amazon orders pending, inventory tracking, and much more, Shopkeeper offers a way to easily access relevant data so you can make smarter, faster decisions for your business.
What could this look like in real life, though? Even though each seller’s approach will look a little different, there are a couple of tips that all of them could benefit from considering.
Pay attention to the people who know what they’re doing
Even though the enthusiasm surrounding the habits, routines, and disciplines of “successful people” can border on the ridiculous, it certainly wouldn’t hurt to take a look at how Jeff Bezos approaches business. Your respective morning routines might look vastly different, but it’s still possible to copy his viewpoint when it comes to your own Amazon store.
Case in point: Amazon’s new inventory limits for sellers who use FBAs. There was never any question about whether sellers would be happy with the decision; in fact, it’s clear that this makes their jobs more complicated. Even so, Jeff Bezos doesn’t consider seller’s reactions when he’s raising fees or lowering inventory limits; he considers his bottom line.
As a matter of fact, FBA warehouses were running into a bit of a problem before the inventory limits were implemented. Due to rapid growth and the rising numbers of sellers who were using FBAs, they were quickly running out of room for everyone. The first-come first-served approach wasn’t working out, and Amazon would either have to construct more warehouses, or put tighter limitations on the inventory in their existing facilities. Since Amazon doesn’t put seller satisfaction before their profits, they chose the second option.
What can sellers learn from this? For one thing, that businesses have to act out of self-interest in order to be successful. Even if you’re the one who gets the short end of the stick, it’s still possible to recognize a savvy business decision when you see one. For another thing, you can turn right around and apply the same principles to your own strategies. Even if Amazon is making it harder for sellers to enjoy the same profit margins as before, those same policies could be the catalyst for improvements in the way they do business.
How to turn the situation around
As mentioned previously, your perspective can make all the difference here. Will you have a victim’s mentality, or a victor’s mentality? On top of that, you need to be able to take advantage of opportunities before your competitors do, so you can get to the front of the pack.
Here’s what that might look like, based on Amazon’s recent changes to inventory policies. Say you and a few other sellers have the same item in your stores, at $40 per unit. You make a pretty good margin on it, and it always sells quickly too. Then the inventory limits go into effect, and suddenly sellers can’t send as many items to FBAs as they could before. In many cases, they end up with too many of the slow-moving items, and not enough of the best-sellers – but they don’t realize that at first. You, however, made sure to calculate how many of each item you’d need.
Pretty soon, most of the people who carry that one item are out, and you’re among the few who still have it in stock. Now you get to enjoy the rise in sales as customers flock to your Amazon store, but that isn’t all – you can also bump up your price, because you’re basically the only option at that point. You could charge $80 for that previously $40 item, and you’d still see the sales coming in because 1) you had the foresight to manage your inventory before you ran into problems, and 2) since you’re the only vendor with that popular item, customers have to choose between shelling out more cash, and going without.
Take note of what wasn’t a factor in that decision: the reaction of the people who were now paying 200% of the usual price. Just like Amazon limiting inventory in FBAs, the reaction of the people affected by this decision shouldn’t influence what happens; it’s all about the profit margin.
Practical steps to make informed decisions
In the scenario above, one of the crucial parts of the process is to know exactly what’s going on. As in, how much inventory you need based on how much you sell, being able to see the moment when your sales spike because of increased demand, and so on. Efficiency is key here, and your data should be just as efficient as you are. That’s why Shopkeeper is so good at providing insights into your profit margins, sales, inventory needs, and more – it displays everything in real time, so you never have to play catch-up with the opportunities that come your way.
With that level of insight into your business, you can let the data do the work for you as you make bolder, more powerful decisions. Whether you want to identify low-margin vs. high-margin items, improve inventory forecasts, or just keep tabs on how everything’s going overall, Shopkeeper is a great way to keep your business moving forward. To see what Shopkeeper is all about for yourself, try their extended 30-day free trial.
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