To protect their brands on Amazon, businesses need to avoid allowing too much of the same inventory to be sold there at the same time. This article discusses a few of the risks this can pose, and offers some suggestions for minimizing these risks.
How to Manage your Amazon Inventory
The obvious worst-case scenario for a manufacturer or brand is that nobody will want their products. No interested resellers… and no retail buyers…means no business.
But once a brand has carved out a market for its products, and is regularly selling them through a resale network, that company has a new challenge to avoid: allowing too much of the same inventory onto the same marketplaces at the same time. It’s clearly a nice problem to have. But it’s still a problem.
In this post, we’ll discuss a few of the risks of allowing too much of your brand’s inventory out there at the same time – particularly how it could hurt your brand on Amazon and other online marketplaces. We’ll also offer a few suggestions for minimizing these risks.
3 Ways Too Much Inventory Hurts Your Brand on Amazon (and Everywhere Online)
1. Your retail partners will be tempted to violate your MAP pricing policy
The most immediate problem of oversupplying your resale channel with identical products is that you could be putting a lot of sellers against each other online. When they realize there are just too many competitors, some of your retail partners might drop their prices below your MAP policy’s allowed levels to gain an advantage over the mob of other sellers.
Remember, once the official detail page for your product has been created on Amazon, all of your retail partners are going to compete directly for the sale on that same page.
And of course, when one retailer drops its advertised price of your products, others will follow. That leads to online price erosion and, over time, it could damage the public’s perception of your brand, not to mention put pressure on your retailers to compete with the race to the bottom and destroy your long built relationships in the process.
This is one reason you need to manage your inventory levels to prevent this type of fierce reseller competition.
2. Some sellers might dump your inventory into the hands of an unauthorized 3P
Another risk is that once they realize there’s too much competition on Amazon to sell the products they’ve bought from you, some of your resale partners might decide to cut their losses and sell their inventory to anyone willing to buy. Unfortunately, those buyers will probably not be companies you have an official relationship with, and they’ll have no concerns about violating your MAP.
Worse, because they’re not part of your official resale network and don’t care about maintaining a positive relationship with your company, these unauthorized 3Ps almost certainly won’t offer the same buying experience as your genuine retail partners.
In other words, you should expect this excess inventory to end up advertising on Amazon or elsewhere for below-MAP prices, and that customers won’t have as positive an experience buying these products as they would if they dealt with your true resale partners.
You should also expect these negative experiences to lead to bad customer reviews and, eventually, damage to your brand.
3. Over time, your excess-inventory problem could lead some sellers to stop carrying your products
Finally, when they realize you’re selling the same inventory to a large list of retailers—all of whom are selling these same products on Amazon—some of your resale partners will decide it’s not worth continuing to buy from you.
A contracting resale network is obviously bad for business—lowering sales and revenue, reducing your product’s reach, and eventually diminishing your brand equity in the market.
So, What Can You Do About it?
Clearly, you don’t want to allow for a lack of your inventory on the market at any given moment, particularly in the Amazon era when consumers expect products to be in stock and available for shipment right away. If you under-supply your resellers, you could create a whole different set of problems for your business.
But as I hope I’ve demonstrated above, flooding your retail channel with products has its own risks, and those risks can ultimately hurt not only your bottom but also your brand’s reputation.
So, to strike the right balance, I’d highly recommend taking a few strategic steps:
SET UP AN AUTHORIZED DEALER PROGRAM
There are plenty of reasons to create an authorized dealer program, but one we haven’t discussed much here at TrackStreet is that it allows you to more systematically manage your inventory.
When you can track exactly which dealers are buying your products, in what quantities, how often, and—perhaps most important—where and when they’re selling those products, you’ll be in a better position to control your inventory flows to avoid both under-supplying and over-supplying the resale market.
SERIALIZE YOUR INVENTORY
A related strategy to help you monitor your inventory is to add some sort of unit identifiers, such as serial numbers, to your products.
Once you’ve established your invitation-only dealer program, you can require your wholesalers and distributors to regularly send you reports on the status of the inventory they’re carrying. If they have to report exactly when and to whom they’ve sold your products, this can help you get a better sense of the right amounts of inventory you should be distributed at a given time.
Typically we discuss serialization as a deterrent against wholesalers unloading products to unauthorized dealers, and—if that doesn’t work—at least as an enforcement mechanism for catching rogue sellers. But another benefit of serializing your products is that it can give you the business intelligence your company needs to avoid the dangers of saturating your resale channel with the inventory.
AUTOMATE THE WHOLE PROCESS
Finally, it’s worth pointing out that these steps—developing and managing a dealer network, preventing your wholesalers from selling to unauthorized retailers, monitoring and analyzing your inventory at the unit level—is going to be a complex and time-consuming undertaking.
To perform all of these tasks effectively, and reduce your brand’s risk of the too-much-inventory problem, you’ll want an automated reseller monitoring and enforcement platform helping you easily track and analyze your inventory levels, across all of your channels, at all times.