Heading Toward an Inevitable Stock-out?

Updated: Oct 4


In a matter of weeks, COVID-19 has shaken us all, setting off a series of chain reactions that are rocking the entire supply chain.

Temporary Halt on FBA Inbound Shipments


As of March 17th, Amazon has announced that it will suspend any new inbound shipments to its warehouses in order to prioritize logistics support for medical supplies and essentials, until April 5th. Some experts speculate that this date could potentially get pushed out even further. This means that many of us that rely solely or heavily on FBA will eventually run out of stock at Amazon.


The first reaction for most has been shock and panic. Loss of sales, rank tanking and the inability to place purchase orders predictably - everything is at stake. This comes as a bummer to especially for those of us who were actually experiencing a huge surge in sales because of the new work-from-home reality. Now we are left unsure of what to expect.


How are we going to respond to this?


As a solution provider for Amazon PPC, we've been talking to customers and industry experts to help us come up with the best strategies for dealing with this tough situation. As many of our products at Amazon warehouses head toward the inevitable stock-out, what should our approach be as far as advertising goes? Should we stop advertising? Should we slow down sales? Should we increase prices?


Here are the 5 key steps we've decided to follow with our managed services client accounts. Feel free to adopt, make note of, or disagree with what we're about to share.


#1: Keep the ads running


Sellers are terrified of going out of stock. Why? Because they know they will lose the sales rank that they worked so hard to build. So they resort to tactics such as artificially slowing down sales by pausing ads, cutting out traffic or raising prices. Each of these choices come with consequences.


What we have learned, is that an artificial slowdown in sales just to stay in stock, could potentially give Amazon a different signal about the popularity of an item. Since sales velocity is one of the most important ingredients that goes into calculating BSR, you probably don't want to mess with that.


There is a way to maintain sales rank even if you go out of stock (point #2 of this article), so we've decided not to halt any of our sponsored ads for products that are on their way to a stock out. Our tests have shown that a hot selling item, one that has a good track record, almost invariably bounces back to the same sales rank as before in no time after stocks are replenished. We have been running these experiments for a while now and have some evidence to back this up.


Here is one product (orange line) that recovered right after it was back in stock after a month. The Sales Rank had dropped to 374 right after stock out. But it bounced back to position 108 the day after stock in and went on to an even better sales rank within a month of being back.


Even keyword rankings have shown to bounce back to pre-stock-out levels if the product has kept up a good sales velocity historically. Here is an example of the main keyword for another product that ran out of stock several times. You can see that it quickly recovered its keyword rank after we were back in stock.



If this is so, we believe that it is better to keep advertising, keep the sales velocity high, and let a product run out of stock on a "high note". This gives Amazon all the right signals about how successful this product is and you are likely to recover very quickly once you are back in stock. This is the approach we plan to take with our clients.


#2: Close your listings once you stock out


The one thing that could potentially help you preserve your rank after you come back in stock is if you close your listing. We do this routinely for any product that goes out of stock.


You can close a listing by accessing the SKU from your Manage Inventory tab on Seller Central. Click on the Edit tab and chose Close Listing.


You will get a scary warning when you hit that button, so don't freak out!



Note, that Amazon won't let you close a listing as long as the "Business Price" field is populated. So you have to delete your business price, wait ~15 minutes for that change to apply on the Amazon side, then you close it.


For sellers facing this issue in Europe, closing the listing in one marketplace doesn't automatically propagate out to other EU marketplaces. So you need to go through this delete business price, then close the listing process for each SKU in each European marketplace.


#3 Monitor the data more closely


We're observing an elevated number of clicks for a lot of categories right now. Not all of these are good clicks. The two notable trends at this time are closely tied to the increase in a work-from-home workforce.


1) Increased clicks on products that are lockdown essentials, or that support our new work-from-home and/or kids-at-home life.

2) Increase in clicks that won't result in immediate sales. People are bored and the social distancing is forcing us to spend more time online.


We are being careful about clicks that are resulting in poor conversions at this time. We are obviously continuing to monitor performance very closely to prevent any signs of bleeding, bad clicks, as well as to discover new opportunities. While this is part of the normal optimization process, we're switching to doing this more frequently, looking at CTR, conversions and spend more closely.


#4 Make sure to run Product Targeting ads


If your business is somehow benefitting from the COVID-19 outbreak, and if you haven't yet started advertising with Product Targeting ads, this is the time to do so. A lot of your competitors will be running out of stock soon and you should have funnels targeting their products in place. Read our previous posts here to get caught up on ways to set up these ad types.


In addition to the regular product targeting ads, we are also targeting ASINs from within an account's own catalog that are predicted to go out of stock. This is a great way to channel traffic, and prevent ourselves from losing sales to competitors.



#5 Switch to FBM/3PL alternatives for distribution and logistics


The next best thing to having Amazon lift the inbound shipment freeze sooner than the April 5th date, is to focus on your non-Amazon distribution channels. Look for 3PLs or other delivery channels that might be willing to hold your inbound stock that might be on the water before April 5th. Or partner with FBM resellers that are open to selling your stock through their channels.


Having access to an Amazon Advertising account (previously AMS) might allow you to advertise items that lost the buy box because of going out-of-stock. Our approach is to advertise ASINs if they are available for sale through channel partners even if we don't have them in stock.


Conclusion


These are unprecedented times for all. Hopefully some of the PPC strategies we shared can help you see positive outcomes from the constraints that we are all being subjected to. Keep calm and carry on.


Did this post spark your curiosity or trigger a question? Comment below or email us at support@ppcninja.com. We'd love to hear from you!

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