So much of your effort as an Amazon seller is focused on the screen - advertising KPIs, Sponsored Products and Brands, bids, clicks and conversions. It is equally important to look at the physical part of your business, the actual movement and storage of the items you are selling.
Plenty of metrics measure your advertising efficiency and your sales power, but how do you track the inventory backbone that supports it all? Through Amazon’s Inventory Performance Index (IPI).
The IPI is a measurement of how efficiently and productively your FBA inventory is managed over time and how well you can drive sales by stocking high-demand products. It will rate your business on a scale from 0 to 1,000, quite conveniently presented on sliding scales from red to green. Anything over 500 indicates very good performance, while a sub-450 score typically means you need to optimise your inventory.
It is meant to give you a view of your overall inventory performance, taking into account both your recent and long-term performance. Inventory will of course see fluctuations in behavior during seasonal ups and downs, but the IPI is designed to factor those into the score, weighing the long-term performance to protect from potential downside in short-term fluctuations.
It's something you will want to keep track of, which you can do straight from the main page of Seller Central via a link to your IPI dashboard where you can see your red-to-green scales.
Ultimately, the higher your score, the more stock Amazon will take on at fulfilment centers - an allowance you always want to maximize as a seller.
What determines the score?
There are a number of factors that will affect your IPI score, but the ones that have the most influence are:
If you keep your score above 500, you will not be subject to Amazon storage limits. Dip below the threshold, though, and you will enter into a quarterly cycle of inventory limits that you cannot exceed, as Amazon will prioritize storage for sellers that have a higher likelihood of offloading theirs. This may have potential knock-on effects on your overall revenue prospects.
The score is calculated on a quarterly cycle, both at the end of the quarter and six weeks before the end of the quarter, leaving you some warning time in case you are at risk of going under the threshold.
Tips to improve your score
This will vary from seller to seller depending on a number of factors, but there are several general guidelines Amazon gives that will make it easier for the score to go up.
Amazon will actually give you somewhat customizable help here - if you go on your FBA Inventory Age page you can access a list of your low sell-through items over the past month-and-a-half, and it will give you suggestions to improve sell-through, such as advertising the listing, improving keywords or creating removal orders.
Don’t stress too much if you are just bringing new products into your lineup, as you will be given a sort of grace period to iron out the wrinkles in your inventory for it, as the first 90 days of a new ASIN will not count towards your IPI score.
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