What’s the first step in improving your Amazon selling strategy? Simple – strive to improve your Amazon IPI score. Whether your sell hybrid cookware or customized magnets, having accurate stock levels to meet demand in your Amazon 1P or 3P is a dealbreaker. Since many eCommerce sellers are selling across multiple marketplaces, they run the risk of a rapidly depleting inventory. Businesses that experience shortages of high-demand products will lose sales from potential customers and be punished by Amazon algorithms.
On the other side of the coin, stockpiling more inventory than you need to meet demand wastes money you can spend better elsewhere (in addition to paying additional storage fees). To maximize profitability, supply chains need to be as efficient as possible. Unlike brick-and-mortar stores, there are no backorders or clients who will wait patiently and just pop back in whenever a product isn’t available. Amazon shoppers will go straight to your competitors. Let’s explore the Amazon IPI score a bit further.
What is an Amazon IPI Score?
Launched back in 2018, Amazon Inventory Performance Index (IPI) is a number between 0-1000, which measures FBA inventory health.
More specifically, this score examines low inventory and excess inventory levels of your FBA ASINs. Too few units of inventory results in out-of-stock items and lost sales while excessive units rake up holding and storage costs at Amazon’s overflowing warehouses. Calculated each Monday, Amazon’s IPI score combines the preceding three months of sales, inventory levels, and expenses into a unique rolling metric updated each week.
How to Check Your Amazon IPI Score
STEP 1: Log into your Amazon Seller Central account.
STEP 2: Scroll over to Inventory on the top navigation menu and click on Manage Inventory/Manage FB Inventory.
STEP 3: Select Inventory Dashboard.
STEP 4: Click on the Performance Tab.
STEP 5: Once you arrive at this dashboard, you can review suggestions provided by Amazon to optimize your performance and raise your IPI score.
What Factors Influence Your Amazon IPI Score?
While the eCommerce giant doesn’t flat out state their rubric for assigning scores, Amazon gives some not-so-helpful hints. According to Amazon, “the best way to increase your IPI score and minimize your FBA storage fees is to reduce unproductive inventory and keep your productive inventory at lean levels while ensuring you have enough on hand to minimize lost sales.” As of 2021, Amazon advises brands to focus on these four elements.
Excess Inventory Percentage
Excess inventory measures where your profitability may take a hit due to storage fees and holding costs for slow-moving FBA inventory. Use this formula below to calculate the excess inventory percentage.
FBA Sell-Through Rates
Your sell-through rate measures how well you’re managing inventory against sales. You can calculate this rate with this formula.
FBA In-Stock Inventory
The percentage of time your FBA ASINs have been in stock during the previous 30 days, weighted by the number of units sold for each SKU in the prior 60 days. When an ASIN is out of stock, you’ll should flag that ASIN as non-replenishable in the Restock tool. Use this formula for calculating your FBA in-stock inventory.
Stranded Inventory Percentage
When inventory is not available for purchase due to a listing problem, it results in lost sales and storage costs. Amazon provides a “Fix listing” option which goes on to detail the exact reason that your inventory has been stranded and provides you with the steps to resolve the issue. You should check for stranded inventory on a regular basis as you may need to edit a listing or create a removal order. Calculate this percentage with the following formula.
What is an Ideal Amazon IPI Score?
Not too long ago, Amazon set the minimal IPI score at 350. However, the COVID-19 outbreak forced Amazon to make some revisions to this requirement. During the early days of the global pandemic, Amazon pushed the minimum score up to 450 to prioritize shipments due to high demand on in-home products during the COVID outbreak. In 2021, scores above 450 indicate good Amazon health while scores above 500 rank as upper-level performers.
Amazon will calculate your IPI every three months: at the end of each quarter and six weeks before the quarter ends. If you score above the threshold during these checks, you will qualify for extra storage space for each storage types (standard-size, oversize, apparel, footwear, flammable, and aerosol). If you receive a sub-350 score at least six weeks before the end of any given quarter, Amazon will send you a notification that your storage may be limited. Amazon will limit your account if you fail to act, thereby inhibiting your ability to send more inventory. Furthermore, they’ll impose a $10/cu ft fine on any excess inventory sitting in their warehouse.
How to Improve Your Amazon IPI Score
Amazon computes your IPI every Monday based on your three months performance data. The best part about your IPI score calculation is that Amazon will inform you if you still have time to increase your IPI score before they set storage limits.
Amazon will give you recommendations to follow if you want to improve your IPI score.
- Increase your Sell-Through Rate (the number of products you sell with stock on hand): try running a sale to encourage conversions, advertising your products, sharpening your keyword targeting strategy, and using more compelling listing images.
- Avoid overstocking.
- Improve the in-stock quality for popular items.
- Fix all stranded inventory.
- Manage excess inventory: Lower your prices to sell any excess inventory ASAP and remove any excess inventory you haven’t sold
- Monitor your shipment status daily.
- Create shipments in advance if you think you will fall below 400.
Take Charge of Your Amazon IPI Score Today
Amazon is the largest online retail marketplace in the world, bringing in over 386 billion dollars in revenue during the year 2020. A streamlined and comprehensive Amazon inventory management strategy will help your brand thrive in the competitive landscape, especially during Black Friday and Cyber Monday. More importantly, meeting consumer demand will also improve customer satisfaction and retention. So, take the extra step and make IPI tracking being an integral part of your daily Amazon operations.
At Premiere Creative, we offer a deluxe collection of Amazon marketing services. We focus on deploying Amazon’s best practices, such as catalog health, pricing optimization, product reviews, and IPI monitoring. Further, our Amazon marketing specialist will help you capture future revenue opportunities, strengthen your brand’s presence, and provide maximum visibility of your products listings. Dial (973) 346-8100 to learn more about Premiere Creative’s suite of Amazon services.