Retail Channels
12 July 2022
For Prime Day, Amazon puts its latest shopping tech forward
Alexa, live shopping and Buy with Prime are all involved in the two-day deals event.
Alexa, find the deals. (Photo by Nicolas J Leclercq on Unsplash)
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What you do on the day when everyone’s watching can say a lot about what you value. It can also point to where you’re heading next.
That’s true for Amazon Prime Day, which is a two-day event this year that began on Tuesday and runs through July 13. The annual sales extravaganza is a bonafide ecommerce holiday, as brands and retailers from across the landscape use the occasion to get the attention of a shopping public that is on the lookout for an online bargain.
The focus is first and foremost on all of the deals that are flowing in, and how sales are performing.
With one business day nearly complete on the East Coast, consumer insights firm Numerator offered some early numbers from its 2022 Live Prime Day Tracker. Here are a few insights so far, according to Numerator data updated at 4 p.m. EST on July 12:
- Order size: Average Prime Day order value so far this year was $52.22, while 46% of households placed orders for two or more items.
- Popular items: Items like Fire TV Sticks, Echo Dot 4th Gens and Frito-Lay Variety Packs are the most popular orders on the day at Amazon, per Numerator, while household essentials gained the highest category share with 36% of items purchased.
- Inflation’s impact: The survey results show inflation impacted 83% of shoppers, with 73% of shoppers who shopped both this year and last spending the same amount or less. This comes with the caveat that there’s still time to spend more.
The latest in shopper experience
Along with offering deals and signing up new Prime members, Amazon has used the occasion of its own holiday to test and grow new shopping features. Here’s a look at a few that we’ve spotted:
Voice
Alexa-powered devices aren’t only some of the top selling items on Prime Day. The voice technology is also a key part of Amazon’s efforts to let folks know about the deals being offered. On newer Echo devices, Amazon allows users to enable deal alerts. As opposed to needing to stare at the short-term Lightning Deals page for hours in hopes of the right find, this feature provides alerts that tell a user when an item in their cart, wish list or saved-for-later file goes on sale. While it’s especially useful for Prime Day, the company rolled this out for use anytime to all members earlier this year.
Live shopping
Amazon Live is the company’s answer to QVC for the influencer age. It is getting lots of use for Prime Day. In the run-up to the event, Amazon featured chats with celebrities like Kevin Hart, Australian model Miranda Kerr and actress Kyle Richards. During the event, influencers like Porsha Williams, Paige DeSorbo and JoJo Fletcher are going live to chat about the deals they’re seeing. As Techcrunch pointed out, Amazon’s livestreaming strategy is also a creator-forward strategy. Gen Z shoppers tend to trust creators over more traditional advertising, and livestreaming is one way to connect.
Buy With Prime
As MarketPlace Pulse pointed out, Amazon’s recently-unveiled service that embeds Amazon Prime’s shipping and delivery guarantees on websites beyond Amazon.com is also making a Prime Day appearance on the websites of a few merchants. Amazon has also curated a selection of the deals offered by these DTC brands. While a small experiment, these are the first time official Prime Day deals are available outside Amazon. In effect, it means the company’s reach is even extending to the halo sales events.
Another Prime Day
Perhaps the biggest innovation in Prime Day for 2022 is that there are expected to be two big deals events. After this summer Prime Day concludes, the cycle is poised to start over again for a Prime Fall event, CNBC and others have reported. For brands and sellers, it means there will be a chance to keep the momentum from this event going, and apply learnings quickly.
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Operations
31 May
5 strategies for optimal inventory management on Amazon
Accurate inventory is now essential for Amazon FBA sellers, writes Emplicit's Evan Sherman.
Amazon used to be a lot more laissez faire about how Fulfilled By Amazon (FBA) sellers used their fulfillment centers. Sellers could send in inventory, and, while the space wasn’t unlimited, if their sales were not as forecasted they would simply pay long-term storage fees. Sure, if a seller’s inventory management was poor enough they would have their inventory storage limits reduced and pay higher storage fees, but this was just an incentive not to let things slide too much.
However, in 2022 Amazon reduced storage limits overall to the point where some FBA sellers had sales and catalog size impacted, and in March 2023 Amazon revised their inventory system. There is now an incentive for FBA sellers to be highly accurate with inventory management because Amazon will reward them with increased storage limits. Precision is a carrot now, rather than a stick.
In this article, we provide five strategic methods that sellers can utilize to optimize inventory management on Amazon.
1. Leverage data to anticipate demand, and regularly monitor and adapt
Achieving successful inventory management on Amazon requires a profound understanding of past demand patterns and the capacity to accurately forecast future demand. Seasonality, market trends, historical sales figures, competitor activity and planned promotions all play a crucial role in determining the trajectory of sales.
At Emplicit, we advocate for the analysis of multiple historical data points, encompassing previous 7, 30, 60, and 90-day sales figures. Our logistics experts factor in internal factors such as stock availability, marketing spend, promotions, and sales and margin targets, and external factors such as seasonality, Amazon trends, new category restrictions and market entrants. A comprehensive review of shipments in working, shipped, or receiving status is also beneficial. Striking a balance between what has been sold, what is available, and what's en route to an Amazon fulfillment center is key to precise forecasting.
Inventory management isn’t a static task; it requires constant vigilance and flexibility. FBA sellers should regularly review and modify their demand forecasts, adjust their replenishment suggestions based on demand shifts, and update their minimum reorder points as required.
Sellers should review sales daily, plan replenishment frequencies to suit their needs, and maintain appropriate inventory levels at Amazon. Weekly replenishments can help keep a seller’s inbound pipeline full, minimize out-of-stock instances, and account for unforeseen supply chain disruptions.
2. Prioritize items based on sales and profitability
Amazon’s organic and paid algorithms prioritize products with high sell-through rates. This means best selling products end up selling better. Focusing on high-performing items allows FBA sellers to reduce monthly storage costs, avoid aged inventory and the associated fees that Amazon imposes, and curtail the need for costly removal orders. And sales velocity is the quickest way to get Amazon to increase your storage limits. Concentrate on the 20% of items that generate 80% of sales.
At the same time, sellers should prune their catalogs by removing slow-selling items. These items negatively affect Amazon’s Inventory Performance Index (IPI) score, which directly influences the space Amazon allocates to a seller’s inventory in their fulfillment centers.
If sellers are tight on inventory space, as well as the best-selling products, they should prioritize products with higher margins until Amazon provides additional storage, and they should reduce marketing spend accordingly – something which necessitates a close relationship between inventory and marketing.
Ranking products by sales and margins, and calculating the storage space each product takes up will go a long way towards understanding and anticipating demand on Amazon.
3. Capitalize on Amazon's capacity monitor for space management
Amazon’s capacity management system is a new system for allocating inventory limits to FBA sellers and allowing sellers to gauge their inventory capacity at Amazon’s fulfillment centers. It also enables sellers to bid on increases to their inventory limits.
Previously, Amazon had restock limits which were updated weekly based on the seller’s previous 90-day sales. Restock limits were determined by Inventory Performance Index (IPI) metrics such as sell-through, excess inventory, and stranded inventory. However, because the restock limits were updated weekly, it was challenging to plan accordingly, especially heading into a peak season or if a seller was about to run a promotion.
With Amazon’s Capacity Monitor program, sellers are given a monthly capacity outlook based on the cubic feet of space occupied by their products in Amazon’s fulfillment centers and their IPI metrics. Amazon not only provides a current month outlook on available space; they provide an estimate for the next three months which can aid in the inventory planning process.
To take advantage of the new system, it’s imperative FBA sellers understand their product's physical footprint in relation to the allotted space Amazon provides (Amazon does still provide unit estimates). Knowing a product’s cubic feet and the product tier designation allows for effective planning of inventory replenishment. Exceeding space limits means overage fees from Amazon, however, if a seller knows they have a peak in sales coming up they can bid for additional capacity (in cubic feet). However, selling-through this additional inventory means Amazon waives those fees, so it’s a win-win.
At Emplicit, we have seen the capacity monitor program benefit our clients, with many clients seeing an increase in the amount of inventory they can ship in – likely due to healthy sell-through velocity and other IPI metrics. The program has fundamentally changed the way we approach managing our inventory on Amazon, so everything sellers do regarding inventory planning should be within the context of Amazon’s capacity monitor program.
4. Consider Amazon-specific packaging
Smart sellers should already be considering the impact of their product packaging on their FBA fulfillment fees. If the actual product size allows, sellers can generate significant savings by reducing the size of their packaging. Amazon’s Small Standard rates are 15-20% cheaper than Large Standard rates depending on weight, and Amazon’s Small & Light rates are 15-27% cheaper still than Small Standard rates. However, fulfillment cost savings are not the only reason to reduce packaging size, smaller packaging can significantly increase Amazon inventory cost-efficiencies.
With Amazon’s capacity management system providing inventory space based on cubic feet rather than number of units, the space each product takes up is now more important than ever. While larger packaging sizes can sometimes improve sales in brick and mortar retail, sellers should consider developing smaller Amazon-only packaging. This will not only reduce fulfillment costs, but allow more units to be stored in the same inventory space. The combined savings can more than offset the cost of a redesign and second packaging print run.
Additionally, smaller packaging may qualify sellers for Amazon’s Compact By Design badge. This helps brands stand out, and increases click-throughs and conversions. (We suspect there are algorithm tweaks for brands with certain badges too, but it’s difficult to prove.) Amazon-specific packaging can help with Transparency (anti-counterfeiters) and help combat unauthorized resellers.
While it might seem like a significant investment and not something the inventory team typically gets involved with, reducing packaging size is a long-term way for FBA sellers to optimize inventory management.
5. Ship from China straight into FBA with Amazon Global Logistics
Amazon Global Logistics (AGL) offers a streamlined solution for sellers whose products are manufactured in China. AGL eliminates the need to use freight forwarders who would usually receive a shipment from China, then split up that shipment and forward on to multiple Amazon fulfillment centers per the standard FBA process. Instead, sellers can book shipments directly with Amazon, complete the necessary export/import documentation, and ship directly to US, UK or European fulfillment centers – sending the entire shipment to a single fulfillment center.
If leveraged properly, AGL can save sellers thousands of dollars in warehouse and 3PL fees and reduce the need for inventory to be processed multiple times before it arrives at Amazon’s fulfillment center, meaning inventory gets where it needs to be quicker.
AGL offers two shipping options – Standard Ocean Freight and Fast Ocean Freight – with the standard option giving sellers the opportunity to either ship via a full container load (FCL) or less than container load (LCL). Shipping partial container loads with Amazon doesn’t slow shipments down versus other carriers because of Amazon’s scale. Amazon’s economies of scale mean that AGL can offer shipping prices from mainland China and Hong Kong that most sellers are unable to match. And Amazon’s expert customs brokers get products cleared through customs quickly because Amazon has a vested interest in shortening the time to market.
This one-step international shipping direct to Amazon was actually something we pioneered before the advent of this service from AGL – working with our client Shapermint and their manufacturers in China and logistics team to ensure packaging and shipments were FBA compliant. However, now AGL offers this service, it’s an even easier solution to a common challenge. We suspect AGL will roll out in other international manufacturing markets, but Amazon is tight-lipped for now.
The importance of expert inventory management
Amazon inventory management is complex and needs constant attention. Sellers can hire a fractional inventory specialist because this is not something that should be trusted to an Amazon generalist. If sellers get inventory right, it will keep pace with sales. But if they get it wrong, their inventory can become the main thing holding them back.
Evan Sherman is the director of logistics at Emplicit.
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