4 Expert Ways to improve your Amazon IPI score
How to Improve Your Amazon IPI score?
Successful Amazon sellers know how to manage their inventory well. The lower storage costs and increased profit can be achieved by teaching and practicing inventory management skills.
Amazon has built-in metrics to track inventory performance over time, including the Inventory Performance Index, or IPI. Amazon IPI score will let you know exactly what is happening with your inventory so that you can make the best use of your time. In what ways does IPI affect you? Let’s find out in this blog post.
What is the Inventory Performance Index score (Amazon IPI score)?
IPI measures your ability to manage your FBA inventory efficiently and effectively, according to Amazon. There is a scale ranging from 0 to 1,000, with a higher score being better. The inventory dashboard for Seller Central shows your IPI in the following way.
All sellers need to meet the minimum score to be part of the IPI score Amazon program. Your account will be restricted until your inventory health improves if you fall below this threshold.
You can improve your Amazon IPI score until six weeks before the end of every quarter, so Amazon will notify you before restricting inventory.
Amazon calculates your IPI every three months: at the end of each quarter and six weeks before the end of the quarter. During these two scores check weeks, if you score higher than the threshold, you will qualify for unlimited storage space for all storage types, including apparel, footwear, flammable, aerosol, and many other categories.
You can use certain Amazon programs, and your FBA storage capacities are based on certain factors that affect your IPI score:
- In order to maintain a balance between sold and available inventory, the excess stock must be avoided
- Keeping your documents in storage for a long time
- Taking care of listing problems
- To meet customer demand, stocking popular products
Amazon uses its own warehouse space efficiently to ensure its IPI score. The products selling in FBA warehouses have high demand and aren’t likely to sit unsold for an extended period.
4 Useful tips on how to increase IPI score on Amazon
For maintaining a healthy inventory performance, Amazon offers a few general recommendations. Four factors can improve your Amazon IPI score:
- Inventories in excess
- Sell-through rates
- Inventory that is stranded
- In-stock inventory
The higher the IPI scores of sellers, the better they perform with the individual influencing metrics. Increasing the IPI score will increase the storage limits. As a result, lower IPI scores lead to lower storage-type limitations. Slow-moving inventory must be quickly sold or disposed of, the sell-through rate of all ASINs must be maximized, and inventory must be kept at FBA, so it does not cause a stockout.
The seller should also be vigilant about solving problems as soon as possible. A few factors can be influenced more easily than others. You can improve your IPI score by following some practical and actionable tips.
1. Getting rid of excess FBA inventory
It is more important than ever to send a small amount of inventory to FBA because of the new storage restrictions. Rather than storing the majority of their inventory at 3PLs, Amazon sellers should send smaller, more frequent shipments to FBA in order to avoid excess inventory in the first place.
FBA gives a low priority to removal and disposal orders. A seller with excess FBA inventory must place a disposal or return order as soon as possible. The number of items in an excess inventory under removal or disposal orders no longer affects a seller’s IPI score. However, storage fees may still be incurred for the items prior to physical removal. It is essential to act immediately before these processes take weeks to complete to avoid high storage fees.
Additionally, excess inventory listings can also be transferred from FBA to Amazon Multichannel Fulfillment (MCF). From there, these excess listings can be sold through other sales channels like eBay or the merchant’s website. As a reminder, MCF will have a greater cost than fulfilling Amazon orders, and stocks will continue to impact Amazon IPI score and be stored until they are sold. FBA provides lower margins than MCF, but sell-through rates and IPI scores may improve. In spite of FBA’s storage limitations, most sellers realize you can increase revenue by adopting a multichannel strategy. According to Shopify, those who sell on three or more channels can experience sales increases of 200%. Multichannel marketing presents fulfillment challenges as well.
2. Increase the FBA sell-through rate
The sell-through rate must be clearly understood and the poor, fair, good, and excellent score. Sell-through rate can be calculated by dividing the total sales of each ASIN by the average inventory level of each ASIN over the past 90 days. Sell-through rate is discussed in detail in facts that affect Amazon IPI score. Let’s look at the details:
- Approximately 7+ units are sold every day at a time, with a less than two-week average time in stock. FBA considers this as an exceptional sell-through rate.
- 3 to 7 units sold each day, with an average of thirty days in stock, is considered good.
- Proper order is 1-2 units per day, with an average stock time of 90 days or less.
- Furthermore, poor product performance is defined as selling less than 1 unit a day with an average time in stock exceeding 90 days.
The sell-through rate largely determines Amazon IPI score, and it’s also good for business when it improves. It would be best if you started here since it is the fastest and easiest place to impact.
Learn how to improve your 90-day sell-through rate with these tips
- Improving the conversion rate of Amazon FBA listings
Review sites and high-quality content can help your visibility and conversion rates. Complete, accurate, and high-quality SEO-ed copy, photos, and videos should be used
- Invest in advertising and promotions to increase visibility
Marketing should always consider how advertising affects margins. A large spend on advertising without a compelling offer is a waste, but a well-executed campaign can yield good results. With Amazon Advertising and offers such as free shipping and BOGO, you can make your listings more visible and convert more shoppers.
- Free & fast shipping and the right price improve your search ranking.
Getting into the Buy Box doesn’t happen by accident; the right pricing and the Prime badge aid in that process. In order to maximize the average selling price of each listing, sellers must continuously monitor the pricing of their entire catalog. Most Amazon sellers think that increasing search rank with free and fast shipping can only be achieved by using FBA or adhering to strict Seller Fulfilled Prime (SFP) requirements.
Fulfillment networks offer an alternative to FBA’s restrictive fulfillment services, leading to disruption of the 3PL industry. With these best-in-class networks, customers can get deliveries in one or two days across the country and Amazon fulfillment services like SFPs and FBMs.
FBM listings don’t always win the Buy Box, but free and fast shipping and competitive pricing will give your FBM listings the best chance of converting. They also offer integrations with other shopping carts and marketplaces, such as Shopify, BigCommerce, and Magento. This can help boost growth with fast and free delivery on other shopping carts and marketplaces.
- Increase the number of fast-moving SKUs
Even though adding more SKUs that sell quickly might be difficult, it is an easy way to improve IPI scores.
3. The stranded inventory in FBA needs to be resolved
Inventory that is stranded in FBA does not mean items will become lost. A removal occurs if FBA has inventory, but its listing has been removed for some reason. Consequently, buyers are unable to find it, and sellers cannot make sales. The excess inventory metric is negatively impacted, but the seller’s bottom line has been hit by the storage fees related to these items.
Stranded inventory can happen in several ways. FBA inventory is sometimes mistakenly listed under FBM and becomes stranded. It may also be the result of a closed listing. It is also possible that Amazon shuts down a listing if the price triggers a price alert to prevent it from selling outside the price the merchant has set.
Relisting or fixing stranded listings should be the first step. This can be done by using Amazon’s automated tool. Secondly, removing the inventory may help with the excess inventory metric if the seller cannot fix the listing.
4. FBA stockouts should be avoided
Online retailers are rightly worried about stockouts due to Amazon’s recent storage restrictions, the company’s delays with goods deliveries in Q4, and the broader global supply chain crisis. The death spiral of stockouts can cause IPI scores to plummet and visibility and sales to diminish.
To conclude, Amazon sellers should create duplicate FBM listings for all of their top-selling FBA ASINs based on the recommendations we have already mentioned in this article. If Amazon experienced receiving delays or FBA inventory runs low, activate them. The availability of ready-to-go FBM listings may help Amazon sellers save their Q4 sales. Merchants can continue to sell their products without being concerned about losing sales.
If self-fulfillment is done from one location, then sales will suffer if the seller has longer delivery times, or if the seller is offering fast shipping, they will incur higher shipping costs. However, using an FBA alternative to fulfill orders can be helpful. Amazon sellers can still offer free, fast, nationwide shipping and protect their margins.
What is a good IPI score on Amazon?
The average Amazon IPI score is between 400 and 800. In contrast, FBA storage can be limited and overage fees can apply if a score is under 350. To avoid this issue, keep the inventory performance index score above 350. Especially six weeks before the quarter ends. Make sure you have enough stock on hand to last a month or two. If you have any stranded inventory, make sure you get it fixed as soon as possible. To conclude, we can say
- A minimum IPI score of 350 is required
- Above 450 is a good IPI score for Amazon
- Lastly, scores above 500 are considered top performers.
What happens when your Amazon IPI score falls below a certain threshold?
Having a low IPI score could result in Amazon restricting your inventory storage and charging you higher storage fees. Your account will also be restricted if you want to create inbound shipments. The Amazon website announces two score check weeks each year. During these weeks, Amazon evaluates and determines storage volume limitations. Thus, in either of those weeks, be sure to reach the desired IPI threshold. Therefore, your storage volume limits will be lifted for the following week’s check.
What factors affect your Amazon IPI score?
Amazon doesn’t explain IPI scores, but they discuss the top factors that contribute to them, along with tips on how to overcome them. Major factors include stocks of surplus inventory, your sell-through rate, stranded inventory, and the level of in-stock inventory.
Inventories in excess
Your excess inventory is a major contributor to your IPI score. Remember that Amazon does not want to serve as a long-term storage facility but as a fulfillment center and prefers that FBA-produced items reach customers relatively quickly.
As determined by Amazon’s forecasted demand, the amount of an item’s FBA inventory exceeding a 90-day supply qualifies it as “excess” or “overstock.” Using the Amazon Inventory Dashboard, sellers are given a good sense of product demand and how to restock. In addition to showing you how many units are overstocked, Amazon will also suggest ways for you to dispose of this excess inventory. As a general rule of thumb, keep roughly 30-60 days’ worth of inventory on hand to avoid overstocking.
Sell-Through Rate for FBA
You calculate your sell-through rate by dividing the number of units you’ve sold over the past 90 days by the average number of units you had at your FBA warehouse during that same period. The steps you need to take to improve your sell-through rate will be shown to you if Amazon thinks that yours is low. With this, you’ll be able to control how much you pay in storage fees, and you won’t have to pay long-term storage costs.
By clicking “Improve sell-through,” you will be taken to the “FBA Inventory Age” page. Amazon lists its sales rank for each low sell-through product over the last 90 days. It will also show the sell-through rate, available inventory, age, and estimated long-term storage fee. You will find their suggestions for increasing the sell-through rate all the way to the right.
The stranded inventory
When there is stranded inventory, it means that the product is no longer listed on Amazon due to an issue with its listing. The result will be lost sales and storage fees because customers cannot purchase the inventory.
As a result, fixing this issue is pretty easy since Amazon shows you precisely how many units are stranded and what needs to be done. You will see an alert and a “Fix listings” button in your inventory performance dashboard if you have stranded inventory. You will be redirected to the “Fix stranded inventory” page after clicking on “Fix listings.”.
When products are stranded, Amazon will list them, indicating how many units are stranded and whether they have an automatic removal date. Along with the reason they have been stranded, provide a relisting option.
Inventories in Stock
Keeping popular ASINs in stock is the one-way Amazon tracks your performance. During the past 30 days, Amazon calculated the number of FBA sales you missed because you were out of stock, based on the forecasted sales you had on those days. Your Amazon IPI score will not be adversely affected by this metric, but it can be improved.
Non-replenishable products can be excluded from IPI scores if they are non-replenishable. You can mark those items as “non-replenishable” to protect your inventory replenishment score if you sell the limited edition or discontinued products.
Amazon’s new storage limits recently introduced in May 2021 have an impact on your IPI score. Before we talk about how to improve IPI scores, you should be aware of the new storage limits.
Which Are The New Limits For FBA Storage?
FBA announced on April 22, 2021, that quantity limits would no longer apply to ASINs but rather to storage types. New restrictions place sellers’ items into six kinds of storage: standard, oversized, footwear, apparel, flammable, and aerosol.
In general, sellers cannot identify the items’ categories on their own. Instead, Amazon identifies these categories based on its product features. In addition to each category having its own boundaries, these boundaries are not interchangeable. In essence, this means that sellers cannot use more space in one category of their account for another category where they have run out of space.
What is the reason behind Amazon’s latest change in quantity limits?
As a result of the fact that Amazon’s ability to increase capacity far outstrips the demand for FBA, that’s why Amazon has consistently made FBA a better deal for themselves at the expense of sellers throughout history. There are no more shelves at FBA. Last year, eCommerce sales grew by 27% after increasing by 15% for years. The fact that Amazon signed up an additional 750,000 new sellers in 2020 illustrates its dominance of the global eCommerce sales and logistics space. These sellers are most interested in using Amazon’s FBA service. FBA is also needed as more and more top sellers sell on Amazon, contributing to the growing need.
It isn’t easy to sell much of what merchants need on Amazon because FBA is designed for fast-moving SKUs.
Amazon has had to continually tighten its criteria for how much inventory it’ll accept and for how long due to the overwhelming demand for FBA services.
In addition to reducing the time before long-term storage kicks in, introducing inventory limits, raising the price of long-term storage, introducing IPI scores. And now, setting limits on storage by type, they have implemented various changes. While building out capacity, they narrow the kinds of things they accept to only those best suited for their business, which is a great place to be. Unfortunately, what works for Amazon doesn’t work for sellers.
What are the implications of new FBA storage-type limitations on Amazon sellers?
1. New storage-type limits reduce Account-level inventory volume
As a result of these new limits, Amazon sellers were utterly surprised to discover overnight that their account inventory limits had been significantly reduced.
2. The storage-type limits reduce restocking orders and increase inbound deliveries
It is ironic that FBA touted the change as a way to offer its customers “more flexibility in shipping.”
Because of the new storage-type limits, shipments will need to be smaller and more frequent, leaving a larger hole in the budget for shipping, storage, and handling costs. A shorter time limit on storage means inventory can’t sit in the FBA network for very long. Because of this, many sellers can no longer send full containers to FBA.
To accomplish this, sellers now need to hire 3PLs and pay for things such as breaking up container loads, storing them, and delivering them to FBA in smaller quantities. There are so few limits that many sellers restock every day, causing shipping costs and overhead to increase.
As is its usual practice, FBA didn’t notify its customers ahead of time about this radical change. Due to this, many sellers cancel inbound orders and reroute them to third-party providers. They do this to avoid a negative impact on their IPI metrics. The absence of Amazon inventory means that the seller’s FBA stock must be stored elsewhere. This is not an easy task considering the global supply chain crisis.
3. Sellers of seasonal products are uncertain due to storage-type limits
The IPIs are reportedly based on the merchant’s sales from the preceding 90 days.
It is unclear whether FBA can handle sellers’ peak season sales due to ambiguity regarding seasonal adjustments. In the preceding months, the decline in storage-type limits was notable for merchants with numerous Q4 seasonal sellers. Receiving delays cause Amazon to handle just-in-time shipments in Q4, making it difficult to execute just-in-time shipments. We are unsure whether FBA will increase storage-type inventory limits in the near future.
4. New product launches are particularly challenging due to storage limitations
Launching new products was difficult with the earlier ASIN-level limitation of 200 units. Stockouts caused merchants to lose sales rankings after launching a popular new product. This problem has been fixed by changing storage-type limits, but a new one has appeared. The first 90 days of a new ASIN do not negatively affect IPI scores, but they consume storage-type limits for the merchant. Therefore, top sellers might have to give up their storage space for new products that are yet to be successful. A hot seller, however, can gradually influence IPI scores.
5. It is more important than ever to plan your inventory
Planning becomes more difficult because the new FBA storage-type limits are determined by total storage limits, minus current storage figures, plus incoming inbounds. When the bestseller products go out of stock, sales rank drops, IPI falls, and storage limits decrease, leading to further stockouts. We must be careful not to fall into the death spiral of unreliable stock levels and ever-dwindling storage space.
What factors are considered when calculating an IPI score?
FBA inventory management efficiency and productivity are measured through your IPI score. Various factors influence IPI scores, but action is the most important.
- It is essential to maintain a balance between sales and inventory on hand and avoid excess and dated inventory.
- Keep your items in a short-term storage facility.
- List problems should be fixed.
- In order to meet customer demand and ensure customer satisfaction, keep the most popular products stocked at the right levels.
In addition to considering recent and long-term inventory performance, your IPI score represents your overall inventory performance. It can take time for your inventory efficiency to improve once you improve it.
IPI allows you to protect your score from short-term fluctuations since your long-term inventory performance is designed to account for seasonality and unexpected disruptions in your business. In different circumstances, you can adjust your inventory and business accordingly.
How to improve IPI score on Amazon?
Though every seller’s business is unique, here are some general guidelines for managing your inventory
- Keep your year-round sell-through in the green (or “good”) range throughout the 90 days in order to improve your 90-day rolling sell-through.
To view inventory recommendations, go to Manage Inventory Health. FBA sell-throughs can be sorted by the sell-through age ranges or by the age range of the inventory. The two main ways to increase sell-through are selling more in relation to your inventory on hand and getting rid of inventory that doesn’t sell.
- Reducing excess inventory will reduce your costs. As a general guideline, maintain enough inventory to cover your expected sales 30 to 60 days in advance. You can find recommended actions on aged or overstocked products by visiting Manage Inventory Health. Amazon Outlet is the best place to sell overstocks, out-of-season, and out-of-stock products. You will find eligible products through the recommendation filter Create Outlet deal in Manage Inventory Health.
- Using a fulfillment center sooner rather than later can reduce or avoid long-term storage fees. Your account can be set up to remove aging inventory automatically.
- Resolve listing issues as quickly as possible. Keep an eye on the amount of stranded inventory. If you have stranded inventory in an Amazon fulfillment center, it means that there are sellable items that are unavailable for sale to customers due to no active listings. Listing issues should be resolved as soon as possible if they are causing you to incur fees without generating sales.
If you can properly manage your inventory, you are well on your way to becoming a successful and profitable Amazon seller. Moreover, in the above guide, we have mentioned some smart ways to improve your Amazon IPI score. If you are a brand-new seller and are unsure of the demand, send in a small amount of FBA inventory to test your product’s sales volume on Amazon. Pay attention to the metrics Amazon provides to avoid any overstock. It takes practice and patience to figure out exactly the right inventory levels for each ASIN you sell.
We hope this article provides you with beneficial guidance on the IPI score at Amazon, what factors affect the IPI score, and how to boost your IPI score.
Touseef Riaz is a technology analyst and provides optimal technology solutions for retail, e-commerce, and health care sectors. He also helps small to midsize e-commerce businesses and brands build a successful online marketplace strategy via technology.