How to Streamline Your Amazon Inventory Management - Interview with Chelsea Cohen

hi everyone this is eigor from Amazonia PBC and in today's episode I will be hosting Chelsea Coen Amazon Seller and inventory expert also a co-founder of sock.com we will be discussing a Hot Topic on how to avoid stocking out or overstocking to maximize sales revenue H Hi Chelsea and thank you for being my guest yes thank you for having me awesome uh so uh for everybody to to know who you are just give us a brief intro how you start selling when was it and how you ended up being a co-founder of so stock.com sure um yeah so I started selling in 2014 and uh we made our first sale in July of that year and uh became full-time sellers uh within a year of that so I've been selling full-time uh for for several years and in terms of inventory management it was something that I uh gradually recognized as a major um factor in losing margin and losing profitability looked at you know what are those things that I can actually control you know I can't control competitors coming in or prices having to be you know reduced or Amazon raising their fees but I could control the inventory side of things and I could avoid stocking out or overstocking and those were some things that were occurring in my business that were uh draining Reven revenue and draining profitability so I started diving into it uh learning more about Inventory management yeah awesome the first thing that I I noted that back in 2014 and and those initial years uh I cannot think how from my perspective and having in in mind what are the current issues with with Sellers and all the mess that uh is right now with Co and everything with with inventory back in 2014 even then you realize how important it is so yeah it's a great head start yeah yeah it and it we didn't realize when we started getting into uh Inventory management how much of a big deal because we started the the idea for so stock started in 2018 and um I was looking for a tool that would help me to automate the process because as I dove in and started learning more about it and started really becoming um more systemized with it it was taking a lot of time to actually get things right and so I thought well there's got to be a tool and so I've looked around tried other tools and those tools didn't seem to do what I expected them to do they weren't giving me what I wanted so I asked my Mastermind uh friends what are you using and the answer kept coming back well we've tried everything nothing seems to work we've gone back to spreadsheet so that to me you know that that's a common answer and even now we've got people um who are still using spreadsheets and we're talking eight figure sellers even using spreadsheets um so I figured you know that's an opportunity you know me being on the entreprene that I am never done you know anything in the software world but figured you know I've got to um you know find someone so I'll just find someone you know just you know just find someone you know just very casually thought that I would just find someone um but actually two weeks after I made that decision that I was going to find someone and do a software I met my business partner at an event he was a last minute Edition as a speaker at this small event right outside of Houston Texas um you know was a very very intimate event and he uh had been added as a speaker so we started hanging out because he was friends with someone else that I knew so we hung out the entire weekend as a little group and he kept complaining that he was bored and he needed a new software project I already yes and there was there I was you know looking for someone for software I knew him by reputation I had used his software before um I had hung out with him that whole weekend and seen uh that he was a a good guy and a smart guy and so I thought well this is just you know this is just Serendipity this is the way that it's supposed to be and I pitched him on my idea and he liked it and so we started so stock essentially awesome awesome that sounds incredible uh so um can you tell us a little bit more about uh the what was created out of those two brother Minds uh what are some the key benefits um obviously compared to the other tools we should not name them name them of course but uh let's give our listeners uh proof why they should uh leave the Excel for good yeah um yeah the the big question you know how are you different since you know these other tools out there we weren't solving the problem what was it that we could do that was different and so the idea was we needed to be more customizable we needed to add uh all of the things that that that you don't have you know a record of so there's two parts to inventory forecasting there's um the one side is what happened in the past and the other side is what's going to happen in the future and so you can use past data uh and that's sort of the science part of it you can use past data but then the the art part of it is the Future Part uh and it very much includes marketing what are your plans for marketing because you know what happened in the past is only a you know a portion of what could happen in the future and if you've got Lightning Deals or you've got got you know uh PPC campaigns you started working with a PPC agency and they said we're going to increase your sales by 20% on these SKS or you're working with an influencer and they think that they're going to move a thousand units you know by based on a sale that they're going to do all of those things are things that were not able to be done inside of other softwares so that was a big part uh of what we decided to do is you know putting in that customization and then also very understandable so it works like a spreadsheet we took the spreadsheets and we said what is working Within These this and we actually um within the first six months ripped out our entire forecasting algorithm and redid it from the ground up based on the spreadsheets of seven and eight figure sellers that we were working with we said give us your spreadsheets tell us what's working it's working but it's not working well it's prone to error there are other things in which that they could do aot of all yes exactly there was a lot of manual work so we automated that and then we did we added things that um just really datawise wouldn't be uh very possible with with what you're able to get from Amazon's uh downloadable reports it's what's available to Amazon's API and also how to process that data more quickly a awesome awesome yeah um the thing that probably most sellers really like about the Excel sheets is that as you mentioned the customize uh ability to customize everything and but it's really time consuming and and I don't see that working on a longterm basis I mean just putting so many hours in into into Excel sheets and it's PR to error as you said yeah exactly you get one formula wrong one little number or decimal off and you know you have a problem um and the amount of time it takes to apply changes across the board you know that was one thing that we made sure is that you could do bulk Chang changes so if you said I'm going to have a sale and increase you know the the sales on this on these products say these 40 products by 20% you should be able to tag that those products and then with a click of a couple of buttons make that change yeah what I uh what we've seen at Amazonia PPC even uh there are two kind of Sellers and both of those are experiencing big problems with inventory uh one of those is the really a young Stars Young by just starting on Amazon where they see a huge uh spike in sales but they were not prepared on on on the inventory side uh and the other uh end is the experienced sellers who are just not able to grasp all that growth so we saw them coming to us and they wanted to grow so we helped them uh on our side uh with bpc and everything else else but then weu a stock out and like everything fell apart so it's really um we really saw that Inventory management nowadays especially is a crucial thing for being successful on Amazon not to mention all the other issues um so uh can you tell us from your perspective a little bit more um how we ended up having such a a discrepancy with between marketing and and inventory and how sellers can benefit from that uh it's easy for me to say about and that sort of stuff but from your perspective as an inventory expert what is it like do you have some key takeways for for sellers that uh really can help them today to uh move the needle in the right direction yeah so there are um there are two things that I always say are needed in terms of building out your inventory systems I mean you know the first the obvious things are you you need to make sure that you're uh calculating your velocity correctly um and you know we talk about how we calculate velocity but uh the other things to apply are um something called buffer stock or Safety stock that is having that extra cushion that extra bit of inventory so you know let's say 30 units uh or 30 30 days Supply or you know you'll say 30-day Supply at Amazon and then also another 30-day Supply at say your your warehouse for example having this extra bit of inventory in case anything goes wrong and the more things that can go wrong the more of that buffer stock that you need so you know for example you don't want to ship inventory to Amazon when you're just about to hit zero you want to ship it in time especially because it's taking three weeks to check in you want to have uh enough inventory coming in and sometimes you know you keep you would keep buffer stock at your Warehouse in China some at your local Warehouse uh in the state that you're selling in the state and then other inventory at Amazon so that you can kind of weather those storms especially you know a lot of people have been increasing their buffer stock not inside of Amazon because of the restrictions but outside of Amazon uh simply because of the slowing along the supply chain since Co you know we we see it's going to be uh there's going to be delays until you know uh potentially well into 2022 so the buffer stocks that had to to be increased that of course you know makes cash flow a little bit more difficult but there are certain things that you can do you know with your supplier by you know splitting up the payments and that type of thing um so that would be the first thing and then the second thing that I always tell people to do is to get their inventory team and their marketing team to work together that is extremely important and that's not something that's often done because we started out as marketers a lot of people that came into this business started out as marketers or were only you know they were taught as much as they needed to be taught to get something live on Amazon and then everything that is sent our way has always been how to increase sales you know how to increase conversion how to increase traffic um and that side of things when we are being given that message and that's what we gravitate towards for you know 10 years and then now we're being to now we are having to really adopt this full holistic business uh mindset you know people talk about scale and they talk about how do you get more money um but inventory is that missing kind of that Missing Link Between You Know between marketing and cash flow uh and the ability to scale yeah I see inventory issues like a knowledge Gap you know uh both for for new Sellers and experience experienced one because uh nowadays uh Amazon sellers are so worried about so many things happening not just the co that that can be an excuse for many things but uh even without that uh we saw a lot of um sellers struggling with inventory and that's in my opinion uh because they need to worry about so many little details that make their life so stressful as a seller that kind of they they neglect that part which is the crucial one and for the new sellers they're focused on starting out choosing the the the product research and everything and they're even not prepared for success and and we we keep telling the because we we get so many leads and not all of them are unfortunately qualified to work with us but we always try to to give them something at least as a takeway by from contacting us and it's uh really often the case that we just share what we see what we keep seeing the issues that are keep coming back uh one of the things that uh I would kindly ask you to share with us a little little bit more information about U sellers who are just starting out uh because for for the uh for the old guys it's it's a clear topic but what what was happening with the with the brexit and the Great Britain and all of that mess that was created by by leaving the EU so what is it that they need to to take into account and to plan if there just starting out on on the European markets yeah so if they're just starting out on the European market um they may not that may not mean that they're starting out in that they're including the UK in their strategies we're seeing some people only working with the European market um for because of the the brexit because what has happened with brexit is that you know they've left the European Union and so there has become this kind of invisible Customs wall um so anything that passes through that wall is going to incur customs fees so you can no longer send inventory to say Germany and have it kept in Germany and then pass it to the UK or send it to the UK and then pass it to the rest of um the EU because it's going to incur that fee so it's going to be expensive so when you're when you are going to be launching in both or you are currently selling in both you need to kind of keep that in mind you need to know you know whether you have to have you know that in both places which normally you do and um they're actually we we just kind of dropped this on our our website today there is new uh restructuring of the the EU vat so that's something for people to keep in mind there is going to be for people selling you know outside who are uh established outside of the EU there's going to be changes and who are inside of the EU there's going to be changes um you can go to Amazon new for me I I didn't care about it okay I'm gonna look yeah so there's going to be you know there's going to be U fat taxes um you know imposed uh even even further that taxes andos Amazon's going to collect those and so you have to you know know where to remit them um based on your sales so it's kind of like sales tax in the US and so that's going in a little bit more um and then in terms of the UK you know you would have separate you have a separate that for the UK so you have to learn some of those things but then also on an inventory level um say you're shipping from China you would have two shipments one in the to the UK and one to say Germany or wherever it is that Amazon wants your EU ventory so you need to track your velocities for the EU as a whole and the UK separately so that you know the size of the order and then you have to do separate shipments so that's something to keep in mind is that you're tracking those differently and we when brexit was coming we actually built a a new structure for how you can structure uh your account to look at you know the EU minus minus UK and the UK separately so we can forecast you know orders to both of those places I see are you saying that um right now it's easier and less expensive to import goods from China to do to UK and to to other EU countries separately rather than trying to move inventory between UK and the other countries I mean you'll have to run the numbers um because each shipment is going to have the per shipment flat fees there are flat rates per shipment and then there are rates per you know for the size and the volume of the shipment so it probably will depend on uh the amount of goods you're sending are the flat fees Higher by sending two shipments or is the Customs fee going to be higher because when you send that inventory it's going to get a customs fee to go into Europe for example and then whatever you send to the UK is going to get a second Customs fee so you're if you're sending to each place you're just going to get that one you know entry Customs feed yeah it makes sense uh I'm thinking also maybe to some of the the sellers maybe having a having inventory filled or let's say ref refilled uh in time could be of a greater value than actually uh being more profitable just a thought because we we saw a a cases where they would even pay more uh some of them even be at loss but to actually just have uh inventory to sell and not to lose rank but I'm probably not wrong if it's not only about taxes it's about time that it takes now on the on the on the borders to finish all the documentation and inspections and everything else am I right yeah yeah it's it's taking a lot longer time there's also um kind of ships that are not able to get into Port there's CL there's a a clogging um of traffic at the ports so you'll have you know ships that'll be anchored outside of Port waiting to come in as well because there's such a slow and then we have the suet Canal thing you know influenced people um in influenced a lot of inventory coming in when there's a big ship that got stuck in this us Canal it held up another 300 ships uh and so there's things like that that you have to kind of pay attention to um but you know it is it is that there's just too much there's there's too much of a delay people are trying to get their goods and everything is more delayed uh for that reason um so yeah so I would say yeah that's correct right so I'm getting getting to to understand it finally yeah uh so would you would you like to to give us uh some of the key features of so talk and well how sellers can benefit from it sure um yeah I mean you know our the most important part of our of our software is the forecasting tool that's been the most robust we have worked with hundreds of sellers I personally uh when we were first the first two years of building the tool and we're about two and a half years out so we're finally bringing on um additional support team but myself and uh my partner Dan were handling all the support because we wanted to get all of the feedback we still have a system for getting that feedback we have a small team but that's been a big uh part of our approach is we wanted to the feedback is coming from seven and eight figure sellers these are guys who um they've been looking for a solution and they see it in so stuck but they're saying you know what about this let's tweak that so the forecasting it it uses um daily adjusted velocity and that's something that Amazon doesn't do and one of the reasons you talk about you know you talk about ranking and stocking out affects your ranking it also affects your restock limits it lowers the restock limits if you stock out and you're not making sales um Amazon's looking at your past say 30 days of sales and they're saying oh well you didn't sell during that time so let's look at what you did sell and we're going to give you storage based on what you did sell they're not looking at your main product sells a 100 units a day and it was stocked out for 10 days so there's a thousand units that you should have so we should give you you know a thousand units times three we should give you an extra 3,000 units of storage they're going to take those 3,000 units away if you stocked out and lost a th000 units in sales um so that's one of the incredible things that is uh occurring is that you've got these these stockouts so when we do the calculation we actually Factor the stock outs in we say you know you would have sold an extra thousand units in that month and so you need to order based on what you would have sold not based on what you did sell because You' stocked out so those are some of the main things is that looking at your daily velocity based on what it truly should have been if you had been fully in Stomp and then adding these additional plans adding these marketing plans are you going to be increasing your sales by 15% due to a PPC campaign uh do you have a lightning deal do you have an email campaign where you're going to push an ex thousand units this month all of those things that are now able to be added and then look being able to look back at you know seasonality and say you know what did I do last year you know did I have any stockouts and then we will plug in those stock out days with what you should have sold um and then being able to manually override if you're launching a brand new product let us know you can type in there you know I believe I'm going to start out selling 10 units a day and you can actually project you know new products as well and override any of the numbers or if you don't have any numbers be able to enter those that data in there yeah then that's so many data points that you mentioned clearly for thought for for most the of the people selling on Amazon yeah um right uh so um how people can get in contact with you and what's the best uh course of action for them uh is there uh maybe a demo I I don't know really uh or or whatever what is it that we can offer to them the actions that they can take after there so yeah so yeah so we have a stock.com hcconnect that's how you can get in touch with me and it also gives you a link to book a demo call if you're interested in learning about the software if you want to learn more about um Inventory management I teach a course on Inventory management via webinar so you can click on a link there that will take you to the webinar so you can learn about how to put some of these systems in place uh to be able to control your stock and then great yeah okay and what is it that they can uh can you share some bullet points from that webinar uh what is it that they're going to end up learning learning about yeah um how to calculate you know your buffer stock so what is it that you should keep in mind when you're planning on um instituting buffer stock how to uh how to put your you know marketing plans into your inventory plans and um you know just various different like what are those mistakes that people are making why do people Overstock why do people under stock uh and then putting systems in place to avoid the over and under stocking you know uh we've been looking at stocking out as a big problem but we have now been confronted with a change in policy that makes us have to look at you know overstocking a lot of people are looking at their Overstock and it's actually becoming a a marketing issue the marketing team can't do their job until they get rid of some of that stuff so the marketing team now has to actually figure out how do we get rid of some of this stuff or you know or it just gets pulled but the best way to do it is to do some sort of a flash sale and and somehow Market that inventory out of Amazon because marketing the the slow sellers out of Amazon will not just clear up that space But it will also um it will also help you to gain more velocity so you know we so we talk about some of these things you know how do we understand the Amazon algorithm a little bit better so that we can work towards that awesome awesome sounds really interesting uh as I said knowledge Gap is big I think on inventory so I'm really glad that uh you and some of your colleagues are really out there for sellers to really fill that Gap uh for the for the benefit so that's really awesome uh okay Chelsea um thank you very much for being my guest is there anything else at the end that you would like to share uh um I think that it's just that you know we have reached a point where as marketers it is our responsibility to get good at Inventory management I like to use the the phrase the term um playing the orchestra of your catalog marketers are now having to not just hyperfocus on the best sellers but actually market across their entire catalog so some of the most important things that you can be doing right now to sync inventory and marketing or to have the inventory team create a report that helps to isolate not only the product that'll stock out but then also a report that isolates those slow Sellers and those Overstock inventory that's something that we have in in so stock but it's something that anyone can do and the inventory team needs to get busy creating those reports and on a you know weekly or a monthly basis sending him to the marketing team um because the marketing team really needs that data to be able to spell across the awesome awesome and I like the word that you said responsibility and it really is it's responsibility to know everything about inventory uh okay Chelsea thank you very much for being my guest and again uh so stock.com and that's where everything starts yes thank you so much okay bye-bye bye