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  • Writer's pictureBrian Cummings

Calculate FBA Sell-Through Rate and Inventory Performance Index (IPI Score) to Improve Performance

Updated: Feb 27

improve IPI through avoiding dusty inventory, improve sell-through rate

Are you an Amazon seller looking to optimize your inventory management and increase your profits? If you're using Amazon FBA, one metric that you need to pay close attention to is the sell-through rate (STR).

The STR is a crucial measure that indicates how quickly your inventory is being sold within a specific timeframe. By understanding and improving your STR, you can make informed decisions about inventory replenishment, pricing strategies, and marketing effectiveness.

In this article, we will explore what sell-through rate is, how it is calculated, and why it matters for your Amazon business.

Let's see how your current inventory levels, poor inventory management, and average number of units sold in a month contribute towards improving your FBA business - and how your sell-through rate contributes to a proper inventory management system.

Need help in simplifying your inventory management? Read our article about Amazon inventory reports here.

Or take a look at our fulfillment services and pricing. The solution may just be a click away.

How to Calculate Sell Through Rate?

Calculate sell-through rate by dividing the total number of units sold by the initial inventory and multiplying by 100.

Why is sell-through rate important for FBA sellers?

Improving the sell-through rate is crucial for FBA sellers as it directly impacts their profitability, storage capacity, and overall success on Amazon.

By increasing the sell-through rate, sellers can reduce their storage fees and optimize their inventory management. This means having the right amount of inventory on hand to meet customer demand without overstocking.

A higher sell-through rate also contributes to a higher Inventory Performance Index (IPI) score, which is important for maintaining FBA storage capacity.

FBA sellers can improve their sell-through rate by optimizing their product listings, using Amazon PPC Advertising to drive targeted traffic, managing excess inventory effectively, and analyzing individual product sell-through rates.

Keep your sell-through rate in the green; this means your products are selling well and that you're effectively managing your inventory levels. On the other hand, a low sell-through rate may suggest that you have excess inventory or that your products aren't in high demand.

By calculating your sell-through rate, you can make informed decisions about pricing, promotions, and inventory management to optimize your sales and profitability on Amazon.

Looking for ways to optimize your PPC advertising on Amazon? Read our article about Amazon DSP here.

How can I improve my sell-through rate?

Increase your chances of selling more products by implementing strategies that optimize your inventory management and pricing tactics.

  1. Optimize your product listings and increase visibility

  2. Leverage Amazon PPC Advertising to drive targeted traffic to your products

  3. You might need to adjust your pricing to stay competitive and increase sales

  4. Encourage customer reviews to influence buying decisions

  5. Consider utilizing Amazon promotions such as Lightning Deals, Coupons, and Subscribe & Save to attract new customers and boost your product's sell-through rate

This will help you move products in stock.

Improve Your Sell-Through Rate and Improve Current Inventory Management

Sell-through rate and inventory have a direct relationship. Tracking your sell-through rate is part and parcel of maintaining your inventory at Amazon.

Calculate your weekly sell-through rate regularly so you don't run out of stock - or, conversely, incur "dusty inventory," or items in stock that aren't moving fast enough. All of these tips relate to good inventory management practices.

What role does sell-through rate play in determining inventory levels?

Understanding your sell-through rate is crucial for proper inventory management practices. A high sell-through rate indicates that your products are selling quickly, which means you have optimal inventory levels. On the other hand, a low sell-through rate suggests that your products are not selling as fast as you would like, indicating that you may have excess inventory.

By monitoring your sell-through rate over time, you can make informed decisions about inventory replenishment and avoid both stockouts and overstocking situations. This helps you maintain a healthy inventory turnover and optimize your storage space.

Ultimately, by aligning your inventory levels with your sell-through rate, you can improve profitability, reduce storage fees, and ensure that you are meeting customer demand efficiently.

How does sell-through rate affect the amount of inventory I should stock?

By understanding the velocity at which your products fly off the shelves, you can determine the optimal amount of inventory to keep in stock. Optimizing your sell-through rate would ensure that you always have enough inventory on hand to meet customer demands while minimizing storage costs and maximizing profitability.

A low sell-through rate may lead to an accumulation of excess inventory, which in turn results in increased storage expenses, the risk of stock becoming obsolete, and the potential for product value to decrease.

Understanding the FBA Sell-Through Rate and Your Inventory Performance Index

In simple terms, the Inventory Performance Index, or IPI, is a metric utilized by Amazon to assess the inventory performance of FBA sellers over a period of time. The IPI score evaluates the effectiveness and productivity with which you handle your FBA inventory.

What is the significance of the Inventory Performance Index for FBA sellers?

Inventory turnover is a key metric to monitor; it measures how often inventory is sold and shipped within a specific timeframe.

A high inventory turnover rate is indicative of effective inventory management, signaling optimal sales performance and well-timed restocking, which can contribute to elevated sell-through rates.

Conversely, a low inventory turnover rate may point to problems in the inventory management process, such as sluggish product movement, overstocking, or inflated pricing. These issues can lead to stagnant inventory, escalating storage fees, and diminished sales.

For the majority of sellers, an ideal inventory turnover ratio ranges from five to 10. This suggests that businesses are replenishing their inventory approximately every one to two months.

The stranded inventory percentage meanwhile quantifies the portion of your FBA inventory units that are currently unavailable for purchase on Amazon, represented as a percentage. When an item or items in your inventory encounter an issue and become unavailable for purchase, they are classified as stranded. This situation results in missed potential sales for these items, as well as ongoing storage expenses for items that are not contributing to revenue due to these unrealized sales. Fix stranded inventory to maintain a sell-through rate that's positive for your business.

It is essential to closely watch the sell-through rate, implement necessary inventory modifications, and devise management tactics that are aimed at enhancing the supply chain and boosting sales.

What are the consequences of having a low sell-through rate when selling on Amazon?

Having a low sell-through rate on Amazon can have several consequences for sellers.

  1. Increased storage fees: There are fees for storing inventory in Amazon fulfillment centers. If the amount of inventory in stock is quite large, you'll pay more.

  2. Lack of demand: If there's too much inventory, this could mean there's a lack of demand - which can result in lower sales and reduced profitability.

  3. Restrictions on storage capacity: Boost your IPI score to avoid this and other limitations imposed by Amazon.

Want to learn how to manage excess inventory on Amazon? Click here.

Conclusion: Maintain a Good Sell-Through Rate and Boost Your IPI Score

In conclusion, understanding and improving your Amazon sell-through rate (STR) is crucial for successful selling on the platform. By monitoring and analyzing your STR, you can make informed decisions about inventory replenishment, pricing, and marketing strategies.

Maintaining a good STR can help reduce storage fees, increase profitability, and identify popular products. However, sellers may face challenges in optimizing their STR, such as managing excess inventory and competing with other sellers.

By addressing these challenges and continuously improving your STR, you can enhance your selling performance on Amazon.


Do You Need FBA Prep, Storage, or Returns Management?

With over 10 years of experience in FBA Prep and Logistics, warehouses all over the west coast, and our own custom software solutions. We're confident we can help accelerate your FBA Success. We'd love to talk with you, just give us a call at +1-844-644-0088 or click the link to our contact form. 

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