In Q3 2020 we started advising CARIOCA, one of our clients in the Toys & Games industry, to help them expand their business beyond Italy and Spain in EU6. We saw room for improvement in inventory management and we worked together to implement Pan-EU FBA Logistics, which allows businesses to sell smoothly across Amazon’s European marketplaces by enabling placement of their inventory closer to customers.
Businesses can send their products to an Amazon fulfillment center and then leave to Amazon to allocate the inventory for storage across the European fulfillment network to meet the anticipated local demand of customers.
Timing represented a strategic variable for the client as the collaboration started in July and September is a key period for the category.
In less than 8 weeks we had to create the catalog in 4 countries, optimize product pages, set up advertising campaigns, and change logistics management.
In Q2 2020 the client had 70m3 of merchandise in the Amazon fulfillment center while the storage limit was 16m3.
Simultaneously Amazon introduced new storage overage fees: effective August 1, 2020, overage fees apply when the inventory in Amazon’s fulfillment centers exceeds the storage limit during any day of the month.
These come in addition to monthly inventory storage fees and, if applicable, long-term storage fees.
At this time, Carioca Inventory Performance Index, an Amazon metric to gauge inventory performance over time, had a score of 300 (Amazon’s IPI is a number between 0-1000).
IPI score measures how efficient and productive a seller is in managing FBA inventory.
Multiple factors can influence the IPI score, and the main actions sellers can undertake to improve their results are:
- Maintain a balanced inventory level between sold and on-hand inventory and avoid excess inventory (overstock)
- Avoid long term storage fees
- Fix listing problems
- Keep the most popular products in stock at the right levels, when possible, to meet customer demand and maximize customer satisfaction.
We needed to reduce the inventory as soon as possible to restock high-moving items in the high-season period and minimize the financial impact of the overage fees.
- Maximize the brand exposure: we needed to exploit high-season periods so as to give visibility to slow-moving items
- Increase conversion: showcase the unique value proposition of the brand through product pages optimizations
- Promotional activity to increase inventory turns: deals planning to accelerate sales and reduce FBA stock on selected items
- Negotiation: direct dialogue with the Amazon Seller support and challenge of their initial response in regard to storage overage fees
From the beginning of its collaboration with Witailer in July 2020 Carioca Sales on Amazon have grown by 733% YOY, while Conversion Rate has grown from 5.4% to 7.9%. In 2020 alone 73% of Sales were realized in H2, and 16% came from the four European Marketplaces added (FR, DE, UK, NL). We managed to effectively tackle the unplanned logistic emergency and indeed the storage limit was raised from 13m3 to 38m3, while the client Inventory Performance Index went from 300 to 461, a marked improvement over previous results.