01 Sep How to Improve Your Amazon Inventory Performance Index
While a seemingly small detail of your Seller Central account, your Amazon Inventory Performance Index (or IPI score) can hugely impact the potential of your business.
Besides the fact that your IPI score influences your FBA storage capacities and determines your eligibility for certain Amazon programs, it also plays a huge role in determining how much capital you could qualify for, should you choose to invest in scaling up. In the words of Yardline President Tomo Matsuo, “it tells us just about as much about your credibility as your FICO credit score.”
Thankfully, a dip in your IPI score isn’t a life sentence (as long as you catch and manage it early). Here are a few simple strategies for moving your numbers out of the red.
1. Make a “Sell-Through” Plan
One metric Amazon uses to determine your IPI score is your “sell-through” rate, which is calculated by dividing units sold and shipped by the average number of units stored at an FBA warehouse over the previous 90 days.
Great news if this happens to be the reason why your IPI score falls: Amazon provides tactical recommendations for improving your sell-through rate directly in your dashboard. Simply scroll down to “FBA sell-through” and click “Improve sell-through” to see tips such as “advertise listing”, “lower price”, etc. Of course, putting these recommendations in motion is sometimes easier said than done.
Start with optimizing your listing details with high quality photos and keywords (tips on how to do that here) to give yourself the best shot at maintaining your ideal price point. If you don’t notice much of a change in your score, then we suggest advertising a sale on the product.
Worst case scenario, you can also run an Amazon Outlet promotion to sell through your stock. Most sellers revert to this strategy for items that have essentially “missed their window” (I.e., seasonal products or flops).
2. Empty Your Storage
Short-term storage penalties will definitely chip away at your IPI score, but the biggest blow will come if your inventory sits idle for 365 days or more in an FBA warehouse. If this is the case, you’ll also have to pay out a sizable chunk in long-term storage fees.
A best practice is to analyze your sales forecast and store no more than a 90-day (ideally 30-60-day) supply of your product at any given time. But again, easier said than done—especially with our global supply chain in disarray.
If you find that you may have overordered and don’t foresee your product selling at pace with the market anymore (either because of competitors, outlived trends, bad reviews, etc.), liquidating could be your best bet. Or, you can always opt to have your product removed from the warehouse.
Doing this will cost you a fee as well, but if you weigh the price against the storage fees you could be facing instead, you might find it’s the best move for your business. Once removed, you can also try to sell the product through a different marketplace or donate it for a charitable cause.
3. Stay on Top of Listing Issues
Another reason your IPI score could tank is because of “stranded inventory”. If this is the case, you will be notified through your Amazon Seller Central dashboard. All this means is that there is an issue with the listing of a certain product, so there’s essentially no way for Amazon shoppers to order your product.
This could be because:
- You need to create a listing for new inventory or relist/edit your current product listing to reflect inventory changes.
- You deleted a listing because you no longer want to sell a product but neglected to have it removed from the FBA warehouse.
- You forgot to specify “Fulfilled by Amazon” on your Manage Inventory page.
All of these issues are typically quick-fixes, but if you don’t attend regularly to your dashboard to catch them quickly, your IPI score will pay the consequences.
The Bottom Line
Every point against your IPI score has to do with having too much inventory stored in an FBA warehouse. Amazon makes it very clear that stocking out of products (though inconvenient) will not affect sellers’ scores, “unless your most popular products consistently go out of stock, and the products that remain in-stock have low sales, or are excess or aged.”
The best long-term strategy for keeping your score above water? Invest in sustaining advertising strategies and R&D for new product launches, and keep liquidity on hand to cover stock-outs while waiting out supply chain cogs.