Sometimes, Amazon sellers inadvertently commit mistakes that can easily put any business in peril. These are the top 5 blunders Amazon sellers make and ways to prevent them.
1. Overselling
Mismatched quantities between available inventory listed on Amazon and actual inventory held in the fulfillment center expose the seller to the dangers of overselling. Overselling is risky not only because it affects the Order Defect Rate (ODR) due to order cancellation, but also because it drives away customers and pulls down sales and profits. Overselling can be preempted by conducting regular inventory checks, and comparing actual versus listed quantities. Inventory monitoring can be performed manually by retrieving inventory reports from Amazon and fulfillment center/ warehouse and comparing for variances, or done automatically through scheduling the system (in-house or outsourced) to run comparison reports many times daily.
2. Fixed Pricing
Some sellers, particularly those who are new to online retailing, usually set a fixed price for each product listing. There is nothing wrong with fixed pricing except that it limits profit-making opportunities for the company as online product prices change over time with respect to supply and demand fluctuations. Competitive pricing is so important that setting a price range for a product becomes indispensable. Fixed pricing increases opportunity loss when a product is priced less than what customers are willing to pay. On the other hand, a seller also loses sales when the product is priced more than the prevailing market price. Flexibility is the key. A product price can respond to competition automatically by setting price ranges (the upper and lower limits computed in parallel with target profit margins) using a repricing tool.
3. Overall Supply Blindness
Data on stock quantity sold and availability of all competitors within a marketplace are usually kept out of sight. The lack of this critical information for decision-making is dangerous. Inability to foresee overall supply and demand can lead to overstocking and understocking. Both situations can cause losses to a seller in the form of inventory storage costs, obsolescence costs, sales opportunity losses, and customer dissatisfaction. Overall supply and demand blindness can totally be avoided with quantity tracking software (e.g. Amzpecty) installed in the seller’s browser. This extension provides all the quantity and price information of every seller per product listing instantly.
4. Underpricing
Whether a seller is waging a price war, pursuing price competitiveness, or simply making a price miscalculation, pricing below the target profit level is undermining the company’s future in the long run. In calculating the product price, all costs must be considered (material cost, labor cost, packaging, shipping, and selling fees) to avoid incurring unintended profit losses. Some tools like the FBA calculator will help the seller compute for the product listing’s ROI, net profit, and profit margin. It is also essential to compute the product landed price (net of shipping fee) based on a target maximum and minimum profit to be able to come up with a rational price upper and lower limit.
5. Not Investing in Tools
To thrive in the competitive world of Amazon and the online retailing business in general, it is all-important for sellers to invest in tools that will keep their operations running smoothly and efficiently. Few of these are actually available for free, but most come with reasonable price tags. These tools vary in price, function, and purpose (e.g. price and quantity trackers assist vendors in making purchasing, stocking, pricing, and listing decisions; repricing software moves prices up and down in response to competitors’ quantities and prices, and many others). To help a seller maximize profitability and protect his/her business from the pitfalls of blunders, keeping these tools at hand is highly recommended.
