Rent the Runway will offer resale and limited-edition designer merchandise through Amazon Fashion.
Rent the Runway and Amazon have long represented distinct ecommerce marketplace models. The former started as an on-demand service with fashion merchandise consumers could rent for a particular occasion, while the latter offers merchandise to buy in an array of categories. Now, they are joining forces.
The news: Rent the Runway will start selling merchandise through Amazon Fashion. The storefront will feature new and resale items that Rent the Runway sells on its website alongside its rental service.
What will be available? The Amazon storefront will have two categories of items from Rent the Runway:
What does it mean for the two partners?
For Rent the Runway, it extends the company's foray into direct sales beyond its own site, and gives it tastemaker credibility in the meantime. Rent the Runway launched resale in 2021, offering a way for people to shop its site without subscribing to the core rental business. That has become a way to offer its merchandise beyond its website, as shown in a resale partnership last year with Saks Off 5th. CEO Jennifer Hyman said working with the largest ecommerce platform brings “incredible brand awareness.” Such partnerships can bring a new form of growth. “They also showcase demand for our products beyond our community and allow more customers to experience exclusive data-driven fashion from our top design partners,” Hyman said, in a statement.
For Amazon: This partnership welcomes a recognizable fashion brand and fellow digital commerce innovator onto the platform in Rent the Runway. With Design Collective, it is also a way for Amazon Fashion to showcase work from top designers, and get access to items that aren’t available widely. These pieces are among the most popular at Rent the Runway, and effectively turn the fashion rental service into a discovery platform for new designers and looks. Now, Amazon will reap those benefits, as well.
Key quote: “At Amazon Fashion, we continually expand our assortment through strategic relationships with brands to inspire and delight our customers,” said Muge Erdirik Dogan, president of Amazon Fashion.
Rent the Runway's bottom line: The focus in retail is on profitability this year, as executives seek to preserve margins despite an expected consumer pullback. Rent the Runway made progress in this area in Q3 as it lifted its gross margin by 7%, while shrinking its net loss down to $36.1 million from $87.8 million the year before. This came after it laid off 24% of its staff to reduce costs in Q2. Selling on the largest ecommerce platform can help reach the kind of new audience that boosts sales, and the company said the costs of the partnership were already baked into the previously reported numbers.
Open to Amazon: The splashy collaboration is the latest for Amazon in a year that also saw Peloton and Gap open storefronts with the ecommerce giant. For years, digitally native and established mall brands alike were reluctant to collaborate with Amazon. It meant giving up control over the ecommerce experience, and there were concerns about how Amazon would use data. But a shift is taking place in a tougher environment for direct-to-consumer businesses, and retail in general. Amazon has a marketplace with lots of traffic, and it's a place where many consumers already search for their items. Brands are finding a way in. By turn, Amazon may also be more open to collaborations that generate new interest in the platform, and add trending merchandise that gives consumers a reason to keep returning. It's also worth noting that Amazon has been increasing fashion resale offerings, as What Goes Around Comes Around also signed on for a storefront in 2022.
It offers an important reminder: Things change, and that’s especially true when the environment gets tougher. What once seemed like a hard and fast rule may now be bendable, and even the most known quantities may be changing their approach, just like you. Revisit assumptions and practices, and new opportunities may emerge, even with old acquaintances.
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.
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.
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.
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.
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.
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.
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.
