The Amazon Seller's Guide To FBA Liquidations
Dealing with excess inventory can impact your profit margins and long-term storage fees. As a result, many sellers decide to lower their prices and offer promotions to deal with unsold products. However, the best approach to this issue is using Amazon’s FBA Liquidations program.
If this is foreign to you, don’t worry. This Amazon Sellers guide to FBA Liquidations will walk you through the process of dealing with excess inventory without losing value.
Dealing with Obsolete Inventory
Excess inventory refers to items that have not been purchased for a long period of time. Moreover, this inventory is near the end of its product cycle, making it less valuable.
The reason why sellers might end up having excess inventory include poor management strategies, issues with the products, or bad forecasting. If not managed properly, obsolete inventory and customer-returned items represent a risk for your business. For that reason, you must learn to properly manage your inventory to prevent profit loss.
What is FBA Liquidations?
The Amazon FBA Liquidations Program helps FBA sellers recover profit from obsolete inventory and returned items while avoiding fees. This helps sellers avoid the need of having unsold FBA stock returned to them, which can be unnecessarily costly. Under this program, you can leverage FBA Liquidations to find a buyer, who will transfer the recovery value of the stock, minus fees, to your account. This value is typically 5-10% of the stock’s sale price.
How Does Amazon FBA Liquidations Work?
Once you submit a liquidation order, Amazon values your excess stock based on your prices and sales history. After this process, Amazon will find a trusted wholesale liquidation company. These liquidators will resell that inventory through other eCommerce platforms or brick-and-mortar stores. They can’t resell that FBA inventory on Amazon.
Dangerous goods are not eligible for liquidation. Any products that have expired, are defective, or categorized as “warehouse damaged” cannot be liquidated. The only unfulfillable inventory items eligible for liquidations are:
- Customer Damaged goods
- Carries Damaged goods
- Distributor Damaged goods
How to Place an FBA Liquidation Order
To create a removal order and submit excess inventory for liquidation:
1. Go to the inventory pages on Seller Central
2. Select single or multiple ASINs.
3. Click ‘Create removal order’
4. Click ‘liquidate’
Keep in mind that you can’t cancel the liquidation order, although you can still use the stock and sell it to customers while the liquidation is pending. This inventory will immediately stop accruing monthly and long-term storage fees.
After you submit your liquidation order, 30 days will pass by until the order status changes to ‘completed.’ Then, the net recovery value will appear within 60 days in your Seller account.
The FBA Liquidations program is open for all FBA sellers selling in the US marketplace, regardless of their residence country.
Benefits of Using Amazon FBA Liquidations
Besides giving sellers the opportunity to avoid paying storage fees and dispose of unwanted stock without losing profit, using Amazon FBA Liquidations has many other upsides.
For instance, having obsolete inventory lowers your Inventory Performance Index Score (IPI). When using FBA Liquidations, you get rid of excess inventory, thus protecting your IPI score, which greatly influences your FBA sell-through rate. If your score is too low, it can generate overage fees and limits on your storage. Furthermore, you might even be unable to send products to the fulfillment centers, a crucial aspect for high volume sales periods.
To keep track of your inventory and prevent excess stock, you can use inventory management software like RestockPro to keep track of your sell-through rate. You can also try to create bundles or kits as another way to prevent obsolete inventory.
Other Liquidations Solutions
Although using the Amazon FBA Liquidations program is one of the best ways to deal with excess or obsolete inventory, there are other solutions available you may want to consider first.
Combine a less popular product with one of your best-selling items to decrease your excess inventory. Bundles help increase perceived value, whereas discounts have the opposite psychological effect. Bundles should be your first option as they tend to be more profitable long-term than discounts.
Lower Your Prices
Discounts can help drive sales and this should be your second option. Try gradually reducing the price of your products, matching your competitor’s prices, or slightly undercutting them. Discounts during holidays can be particularly effective for getting rid of excess inventory.
Enhance Your Ad Campaign
If you don’t want to compromise the price of your products, you can try to increase the budget of your ad campaigns or revise it to attract more customers. Improving your ad campaigns can drive more traffic to your listings, which can ultimately reduce your excess inventory.
Are you having trouble creating a good ad? Read our guide on how to make social ads that convert to generate a high return on ad spend.
One thing that is important to note is that if the problem is fundamentally with your product, spending money on ads may not be the right solution. If customers are complaining about the product, that is a good indicator that your issues lie with customer satisfaction, not customer acquisition.
Use FBA Donations
Another strategy is to donate products that aren’t selling. When paired with the right cause and PR campaign, this can be a positive marketing strategy for the brand, while simultaneously benefiting communities. There are also some positive tax implications to this strategy. If you keep your inventory in US centers, you can use the FBA Donations program to automatically donate unwanted inventory to selected US charities. Bear in mind that disposal fees apply for this option.
Effective inventory management is one of the most important aspects of being a successful Amazon seller. If you find yourself in a hard position, especially with bulk excess inventory, cutting your losses using FBA Liquidations is a great way to recover some value while protecting your IPI and sell-through rate.