Out of FBA Means Out of Business! Sales Velocity and Lost Revenue

November 22, 2024   FBA


The amount of sales lost when your top-selling products are out of FBA depends on several factors, such as your product’s sales velocity, ranking, competition, and customer preferences. However, the impact can be significant.

AMZing Marketing Agency is giving in-depth analysis of what you might face:

(we helped over 5 clients to reach 1 million dollar sales at Amazon)

Sales Velocity and Lost Revenue

Your sales velocity (units sold per day) is a key determinant. If a product sells 20 units daily and is out of stock for 10 days, you lose 200 sales. Multiply that by your product’s average selling price to calculate the revenue loss.

For example:

· Daily Sales: 20 units

· Price per Unit: $50

· Stockout Duration: 10 days

· Lost Revenue: 20×50×10=$10,00020 \times 50 \times 10 = \$10,000

2. Impact on Amazon Ranking

Amazon’s algorithm favors products that sell consistently. If your top-selling product goes out of stock:

· Your product ranking will drop, making it harder for customers to find your product even after restocking.

· Recovering lost rankings can take weeks or months, leading to prolonged sales losses.

3. Customer Behavior

When a product is unavailable:

· Customers may switch to competitors who have similar products in stock.

· Some buyers may abandon their purchase altogether, especially for non-essential items.

4. Buy Box Impact

If your product is unavailable for FBA, you lose the competitive edge of Prime benefits (like free and fast shipping), which may:

· Reduce your chances of winning the Buy Box, especially if competitors offer FBA or Prime options.

· Lead to a decline in conversion rates, as customers are less likely to choose non-Prime products.

5. Long-Term Revenue Loss

The ripple effects of a stockout can include:

· Loss of repeat customers.

· Negative reviews from customers who expected the product to be available.

· A tarnished brand image due to perceived unreliability.

Calculating Sales Loss

Here’s a formula to estimate sales loss during a stockout:

Sales Loss=(Daily Sales Velocity×Price per Unit×Stockout Duration)\text{Sales Loss} = (\text{Daily Sales Velocity} \times \text{Price per Unit} \times \text{Stockout Duration})

For example:

· Daily Sales Velocity: 50 units

· Price per Unit: $30

· Stockout Duration: 5 days

Sales Loss=50×30×5=$7,500\text{Sales Loss} = 50 \times 30 \times 5 = \$7,500

This doesn’t account for additional losses from ranking declines, which could amplify the total loss.

Mitigating Sales Loss

1. Use Inventory Alerts: Set thresholds to reorder stock proactively.

2. Diversify Fulfillment Methods: Switch to FBM (Fulfilled by Merchant) temporarily if FBA inventory is depleted.

3. Prioritize Top-Sellers: Allocate resources to ensure high-demand items stay in stock.

4. Increase Safety Stock: Maintain buffer inventory for best-sellers to avoid unexpected stockouts.

5. Communicate Delays: Keep customers informed about restock dates to retain loyalty.

By proactively managing your inventory and mitigating stockouts, you can minimize lost sales and maintain customer trust. The key is to combine demand forecasting with technology and flexibility to ensure continuity.

 




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