One of the concerns that new handmade sellers on Amazon often have is around Amazon inventory and whether they will be able to produce enough stock.
That makes sense, Amazon is a massive marketplace with millions of customers and for some categories staying in stock is a real challenge.
The good news is that there is no minimum amount of inventory that you need to have to sell on Amazon.
Amazon Handmade also differs from the rest of Amazon when it comes to production times.
Amazon recognises that handmade products are generally made with a lot more love and care than other products and take longer to produce as a result. It enables handmade sellers to set production and delivery times within your product listings so that you have plenty of time to create and ship your products.
In this article, I look at what you need to think about as a handmade seller when it comes to managing Amazon inventory.
How do you want to fulfil your orders?
In order to determine how many products you need to create and your production times, you need to decide how you are going to fulfil your orders.
When you sell on Amazon you have 2 main options for fulfilling your orders – you can either fulfil your orders yourself from your location (known as Fulfilled by Merchant or FBM) or you can pay Amazon to fulfil your orders for you (known as Fulfilled by Amazon or FBA).
It is also possible to fulfil your orders using third party storage and fulfilment but most handmade sellers will use the FBM or FBA models.
Fulfilled by Merchant (FBM)
If you choose Fulfilled by Merchant you will be responsible for storing your products, packing and shipping them to your customers, as well as handling returns.
If your products are customised or made to order then this is the fulfilment option you would choose.
It’s important to bear in mind here that Amazon is very hot on customer service and it will closely monitor your orders to check that you are fulfilling orders on time and handling returns promptly. Failing to fulfil your orders on time will negatively impact your seller performance rating (the metric Amazon uses to rate sellers).
A poor seller performance rating can mean that your products show up lower in search results which will impact your sales, so it’s important you keep an eye on it.
To help with managing your orders, Amazon allows handmade sellers to set production times in your listings so that customers have a clear timeframe for when they can expect their products, giving you plenty of time to create and send the products.
Fulfilled by Amazon (FBA)
One of the major advantages of selling on Amazon is that you get access to Amazon’s amazing fulfilment network through the FBA programme.
If you sell via FBA, then Amazon takes care of product storage, packing, shipping and returns. You simply ship your products in bulk to Amazon’s distribution centres and then Amazon will take over distributing products to customers and handling returns. There is no minimum amount of inventory which you need to send into Amazon.
If you use the FBA programme then you will pay an FBA fee and storage fees and these will be automatically deducted from your payments from Amazon.
FBA fee
The FBA fee is a flat fee which you pay on each product sold based on the product type and the size and weight of the product.
Storage fees
Storage fees are charged on a monthly basis and are based on how much space your products take up in an Amazon warehouse (Amazon calculates this as the daily average volume in cubic feet per month). The fee varies throughout the year with prices increasing during October to December.
The fees for selling via FBA often work out cheaper than storing and sending products to customers yourself, plus it’s a lot less work! If your products are fulfilled via FBA then they will also be eligible for Prime which gives you a significant advantage over sellers who don’t offer Prime delivery.
Many customers will specifically look for sellers offering Prime delivery/free shipping, particularly during busy buying periods like Christmas, so you have the potential to make a lot more sales
Using FBA also means that you can easily sell your products in international markets regardless of where you are based.
Through Amazon FBA, a UK based seller can sell on Amazon.com and sell products to US customers by shipping products in bulk to an Amazon distribution centre in the US. It’s incredible when you think about it.
All you need to do is send your products to an Amazon distribution centre in the US and Amazon will take care of the rest.
This is a really easy way for sellers to expand their business and build a global customer base without all the challenges that come with building an international fulfilment network. It can be absolutely game changing for a small business.
Summary
Although managing Amazon inventory can be an intimidating topic, it’s actually a lot more straightforward than it seems. If you’re planning to fulfil your orders yourself (FBM) then remember to set up your production and delivery times so that you have plenty of time to create and ship your products.
If you’re planning to make use of Amazon’s amazing fulfilment network through the FBA programme then you just need to ship your products to an Amazon warehouse and then Amazon will take care of the rest. Whatever way you choose, it is up to you how much inventory you want to produce and you just need to consider what is most suitable for your business.
If you’re looking for a bit more information on inventory, why not check out my video below: