Private Label business on Amazon FBA have its own cashflow cycle. The amount we invest over inventory, require a flow at three points that is Factory, Transit & Warehouse. Once this cycle is complete, we are almost good for the longer period of time. The money invested at these three places will never come back to us for the life of product.
Cycle of Cashflow
- Transit – Air/Ocean
- Amazon FBA Warehouse
Shopping spree during Christmas, Easter, Black Friday, Cyber Monday, Amazon Prime Day etc we need inventory planning a head of time. If this is your first private label business over Amazon, you will need to find past history of your competitors during season with respect to high relevancy to item you are selling and around your organic keywords position in Search Results
Sales hike some niches, have their own increased sales at random month of year. Just like shopping spree, we need to take care of high sales months of our niche, for same inventory planning
Inventory Performance Index (IPI) is a metric at Amazon, that tells, if your inventory is becoming burden over Amazon, as you are not able to sell enough items? Therefore, while planning your inventory, take really good care of IPI score.
Amazon’s Storage Fees applies when you are unable to sell enough items for a given period of time. In order to keep our profits, we need to take really good care of stock level.
Minimum Order Quantity – MOQ
If production time of our item is a month and we are sending inventory via sea shipping, then usually it takes anywhere from 60 to 70 days for your inventory to reach Amazon FBA.
If you want to go slow, you will either order 2-month inventory at once or something, point is, you want to never go out of stock.
What if you order three months inventory? you will get good rates from supplier, you will have your inventory ready well ahead of time, no?
- You’ve confidence over your product’s success
- You’ve estimated your inventory intelligently
- Enough capital to buy 3 months inventory
So, if you meet the pre-requisites and order three months inventory in advance, you will be in good hands. All you will need is to order for 4th month, at second month of your launch. The fun part is that, you will not need to influx to order this 4th month’s inventory, rather, you will order from your earnings of 1st month. Thus a cycle of cashflow is maintained.
This three months inventory will definitely increase your investment, but you will be calm seas and enjoy smooth cashflow, down the road.
All the best!