Inventory Management 101: How to Leverage the Power of Amazon

welcome to the ecommerce podcast with matt edmondson a show that brings you regular interviews tips and tools for
building your business online
[Music] hello and welcome to the ecommerce
podcast with me your host matt edmondson uh it's great to be with you great that you're here on what can only be
described as a very chilly day from here in the uk but welcome uh to the show this week we
are looking at leveraging the power of amazon uh we're gonna get into this
whole thing i'm really looking forward to this one actually uh this is in fact the final episode of season seven yes it
is so uh i hope you've been enjoying this season so far it's been a cracking season really enjoyed this one probably
one of my favorites not gonna lie uh and really enjoyed it and we've got some great stuff coming in
season eight so if you've not already subscribed to the show make sure you do because in the new year when season
eight launches you are gonna wanna be around trust me we've got some great guests coming on some great topics we're
going through uh i'm just really excited really i just love this because i get the whole thing about this podcast we get to talk about
e-commerce and digital stuff and marketing and all that kind of thing with some amazing guests and it's
brilliant for me because i get to ask them all the questions and i feel like i learn more than just about anybody else
when i have these so it's just a real privilege to talk to experts from around the world about e-commerce and about how
it's going to help us grow our own online business i say that i try and have the conversation with them that you would
get to have if you sat down and had a cup of coffee with them maybe we should rename the show e-commerce chat and
coffee or something equally benign as that i don't know anyway let's move on
so this week as i said we are talking about all things amazon
so do you have goods that are in demand on amazon well if so you are not alone
there is a huge opportunity for any business owner mompreneur or entrepreneur who has
products they want to sell online especially on amazon especially following the pandemic it has been
colossal right so the question is how do i manage all of this and what are some of the things that i need to know
so that's what we're gonna dig into uh with this week's guest chelsea cohen uh in like i said the final episode of the
podcast uh for this season um all that we're gonna do by the way is take a few weeks off and then we'll be
back early in the new year so don't panic it's not the end end it's just a little break before christmas and what a
way to go what a way to close out the season with chelsea as she is gonna share uh her secrets to how to leverage
the power of amazon with inventory management or if you're listening from the states inventory management we do
like to pronounce this word in several different ways just to keep it interesting uh we hear buzz terms like
customer demand warehouse management supply chain management amazon fulfillment renters third-party sellers
inventory management strategy and so on and so on if you're like me honestly when you hear words like that what do
you think boring right boring alone but let me tell you having done e-commerce
now for a pretty long time let me tell you massively massively important topics
to get your head around at any stage if you want to be successful online especially with amazon because trust me
it can go wrong very very quick so let me tell you a little bit about today's
guest chelsea is an amazon inventory management expert and that's not easy to
say let me tell you she is the co-founder of sostox.com which is an amazon inventory management
software uh chelsea herself right is a sega
let me start that sentence again chelsea herself is a seven figure amazon seller
herself so she has walked the walk so to speak uh she is also a speaker and a
consultant and coach and all that kind of good stuff and we are going to get into everything with chelsea so without
further ado let me bring on chelsea cohen chelsea welcome to the show how are you doing
good thanks so much for having me all right it's great that you could be here all the way from sunny austin texas
yes sir it's actually kind of kind of dreary out today we're finally getting
some fall weather finally yeah yeah yeah and uh i i let's not trade temperature stories because
i'm sure we're going to lose massively [Laughter] on the old temperature thing there now
you're from austin texas which i we were talking uh about before the start of the show i've never actually been to austin
been to dallas many times uh and i was subsequently told uh and uh maybe this
is true maybe it's not but austin is is a a much nicer city than dallas in
every way so uh i definitely need to go there at some point austin yeah there's a lot of people
moving here and there's a reason i mean you know texas is great but austin is is the best yeah the best city i think
absolutely well you know let's go with that why not there's um uh there's a food uh in in texas
the texas barbecue i and you understand i appreciate this is a podcast about e-commerce but can we just wax lyrical
about how incredible you guys do the barbecue it was the first time i'd ever seen a barbecue
which was the size of a semi truck this thing was colossal it you know it cooked
like odd cows or whatever it was cooking at the time it was insane i'd never seen anything like it and the food
was extraordinary so yeah i can see why you love it it's shocking that it's just salt pepper
and smoke like you eat it you think there's got to be something else going on but that's it it's just the meat salt
pepper and smoke yeah yep i don't know how to do it but i i know how to eat it
that's the main thing that's well yeah it's um it's it's incredible the
yeah and the and the the guacamole and arches i'm just going back in my head now to the
last time i ate in dallas and it was phenomenal food so very very envious of both the weather and the food you get to eat in austin so
uh thank you for taking time out from the dinner table to come and join us on the show much appreciated
so how was your story um i mean you know i said in the intro in the notes i've got here you're a sec seven-figure
amazon seller yourself right so what's your story did you start off in amazon and then just then go i've got a huge
problem i need to write some software or was it the other way around yeah so i started selling in
and it was just going through you know going through the business and you know year over year the margin crunch just
where is my where's my profit going so it was looking at my you know
you know profit and loss statement and saying you know it's the margins are getting worse what can i do about it and
realizing that although i can't control what amazon decides to charge me in fees i can't control what happens with my
competitors what i can control is avoiding stockouts and not over ordering
and paying all these storage fees and uh loan interest on
inventory costs and all of this stuff that i that we're just basically really
bad mistakes when you make a when you make a mistake with inventory it becomes very very expensive either in stock outs
or in fees uh because of your your your overages right so i decided well
i've got to figure this out and dove into inventory it became a whole other job
so much time that was being wasted putting together these inventory projections
and i realized there's got to be a better way to do this looked for softwares the software that i was trying
wasn't doing what i wanted it to do so i went into the mastermind community
that of other sellers and asked them what they were doing and they kept saying you know everything nothing works
everything sucks we're back to spreadsheets and that's you know and if you ask most
people what they use they still most of them still use spreadsheets and it was because nothing was working right and i
figured being an entrepreneur that's an opportunity you know entrepreneurs are
taught to find something that a problem that needs solving and go solve it yeah so i decided that was what i was going
to do but i had no no experience in software at all and i really didn't want to find someone on upwork to lie to me about how you know
we've all been there we've all we all feel your pain well done yeah yes yeah so so i thought okay well fine i'm
just gonna meet someone who can do this with me and it sounds very airy fairy but two
weeks later i met somebody to do it with me and uh it was the founder of thomason.com if
you ever uh use thompson back in the day thomason was
being used by a ton of amazon sellers to get video reviews because thomason
connects brands and influencers and so people were using that as a tool to do that in that all changed
because of the review uh the the terms of service for amazon reviews
changed and that was no longer allowed but uh
long story short i met i met him in we showed up at an event
speaker is an event he kept saying he was bored he needed a new software project i had a software project that i
wanted done i somehow convinced him to do it with me and you know three years
later we have built so stocked into what it is now and uh we also have never ever seen
each other again in person really yes well that's the next obviously he's not a big fan of austin
texas then i i yeah i mean it doesn't it doesn't you
know help that i was in la for some time and then he you know and then covet happened but yeah we just you know
everything has been virtual and um we've built the company we've talked we talked like multiple you know
every it was every week or multiple times a week it just depends on what's needed but it's you know the the way that this
world is you never know who you're going to meet and how it's going to how it's going to change the trajectory of your business life
that's such a i mean it's very true i i've just sold my um i've just sold one of my e-commerce
businesses um and the the business partner i had there
uh the story of how we met was just extraordinary do you mean and it's it's and you and you just never know where
something's gonna go and somebody comes in and says oh i need or uh this sucks
you know i think was your exact phrasing you just you just you never know where that statement can lead you when you sort of follow it along
uh yeah and um it's just quite extraordinary and i i like that and i think that's how most
people work it's just certainly most entrepreneurs it's like i see an opportunity words like that sucks almost
become music to your ears because you're like oh what can i do here to resolve this right
so um so you started out what can i ask what were you selling on amazon in
uh yeah kitchen products so kitchen kit uh kitchen gadgets yeah yeah
sorry that was my uh siri joining in the conversation then kitchen gadgets uh was what you were
selling online and why did you decide to start selling kitchen gadgets online was that just
yeah it was interesting i was it wasn't even on my radar selling on amazon i wanted a business and um so
i got roped into a multi-level marketing company and we were going around from bugging our friends to join our deal
and our friends kept saying you know that that's great but i'm committed to this course they teach you how to sell
on amazon so our ears perked up we started asking around and we had a friend who was who had done this course
previously and she was now doing a month on amazon no experience and we thought well if she can do it we can do
it you know and so we decided to do it and
launched a product within seven weeks of signing up for the course and made a sale before we even had inventory in
stock which is a whole other story in itself but yeah the first product took off and
you know started started things out for us we were able to quit our jobs and go full time and all of that
so have you i mean amazon of uh i imagine looks very
different to amazon of um is it is it a case of these days
uh someone can just go literally from zero to hero from zero to grand in a month just watch a course and away you
go or is it as i suspect probably slightly more complex than that these days
yeah it's definitely harder you have to there's more rules that you have to follow um there are
people that can go you know that can launch a product and have extreme success uh quickly if they know what to do when
they are following the right people and following the right things um but it is definitely more challenging
you know the reviews back in the day we used to a person didn't have to buy the product we went
literally went and said hey here try this this is my sample test it out write a review
and they didn't have to buy the product now you have to have verification you have to you know you can't there's review manipulation um
[Music] rules there's now ranking manipulation rules that we've recently amazon has
been slamming uh slamming down they some of these guys who had software that was
connected to amazon lost their api connection just basically due to you know the fact
that they don't want any of these you know incentivized or ranking manipulation they call them ranking
manipulation by giving giving out rebates to drive sales to boost up the
ranking so there's all these regulations that you need to understand i guess does get a lot more complicated but if you
know how to kind of sear between the lines and you follow there's a lot more very brilliant people
nowadays to follow though i will say uncharted territory there was you know
one course and everyone did the one course and now there are a lot of really smart people
that are available a lot of times you will have to pay to get into their their
masterminds but it's often worth it versus falling on your face and failing and never
you know getting off the ground in the first place so that's i mean that's a really
interesting point so you if i were i'm just thinking of people who are listening to the show um chelsea if i'm
honest with you and i'm thinking um there for me has been an insane amount of interest in things
like amazon recently because of the pandemic right and people wanting to get
forward to a better expression wanting to get on that gravy train and
um i remember when i first started out in e-commerce um it was
i mean if you had if the the main barrier to entry was obviously the website and creating a website in early
s was not straightforward at all uh there was no squarespace there was no shopify but if you could get over that
the barriers to entry after that were relatively little and you could you could do a lot of interesting stuff
apparently just by being alive you know i mean it was just like you build it and they came and it's no
longer that case and you can obviously still build ecommerce businesses i still do
but the rules of engagement are very very different to what they were say years ago and i just i the reason i asked i
imagine it's the same for amazon so do you are you an advocate of and
please feel not free not to mention any names or anything like that but if you're if someone was coming to you uh
like a close friend or a relative or something said i wanted to build an amazon business um
are you an advocate of one doing that if they've got a reasonable product and two before you do go and learn something
from these guys over in this mastermind course it's worth the investment yeah so um first of all yes if it's if
you have a reasonable product and you have the right mindset there are you know it's not a get rich quick thing it's do you want to
do this as you know a legitimate either side hustle because usually those things start as a side
hustle and you're willing to put in the time and you're willing to not go to the barbecues for a while and not go out to the movies for a while and you're
actually going to build something in uh and then see it grow it's not this set it and
forget it type of thing things are changing all the time so first of all what do you actually want that type of
business are you willing to sometimes work harder than you're working now at your nine to five
uh you know that's just the truth of it and sometimes people think that it's this easy thing that you you know can do
so first of all is this something that you feel is you know your career path
and second of all you know um there are a couple of i mean there's a lot of different different people who you could
go listen to but uh two of the two of the mastermind groups that
we have had a lot of people come come to us through uh one of them is the
titan network titan network was uh run by athena sivari and dan ashburn and
they have the thing that i really like about the titan network is they have um a structure for helping each section to
grow so if someone's just starting out and they need to get their product they have
training on that but they also have these these group huddles where they meet on a regular basis and
if someone's not getting their product and they need to talking to like athena's gotten in there and said hey you guys you need to pick your
product like what are you doing quit right now if you're not going to pick your product and you know and sometimes people need that
and and it gets you know and it causes people to actually take action but then once they're at a different level
they'll move on to another group and they can graduate onto these different groups so that is extremely valuable um
the the key is to pick the right type of group for you you know we have a lot of
different people some people just focus on helping people who are in a certain income you know a sales bracket so
there's a group called the million dollar sellers group which is great for some of these guys that that come through us and say hey i'm looking for a
group that is doing you know seven figures seven figures a year
then there's a million dollar sellers group uh which is also very a very beneficial mastermind type of
group um so those would be like first first places to start i mean i started with a
course called the amazing selling machine way back in the day they're still around amazing.com
and so those are kind of some of the places that a beginner would start and then there are people that you can follow afterwards
that's very helpful advice uh chelsea thank you so um so you started your
business and you you started to experience these problems around inventory or inventory um inventory
invento i get so confused now i'm gonna pronounce this word so many different ways um
you sort of started to see what were some of the problems that you started to see that you felt like you needed to solve
yeah stocking out you know stocking out for say a month at a time sometimes or
or i had a problem with amazon uh not getting my inventory checked in
before christmas so we lost a whole christmas worth of sales ordering too much of a product having
taken a loan out to pay for that inventory and then having it not sell like we thought it
was going to sell and paying on loan fees on that paying storage fees on that just all of those those things that i
call it death by paper cuts you know when you when you have money out you think you know okay it's not bad you
know it's just this and it's just that and it's just an extra fee here and a mistake that caused me two thousand
dollars there but eventually all of that eats up all of your profit and
you know you have been working really hard and you say well where is all my money and that happens to so many people and it's not
something the supply chain the inventory portion of things is where i noticed i could probably have the the greatest
impact on my bottom line yeah i think uh one of the things that i noticed uh in our business when we moved
um we we did a really significant move in our business and our business model
and the warehouse like i mean everything changed around for us as a business um
the one that i just sold and i remember we'd set up this new warehouse system and uh there was this huge bag in the
corner and i'm like well what is that you know what's that bag oh that's all the products that have been returned all the all the parcels
that have been returned to us and i'm like well why have they been returned uh and they were returned because we'd sent
them the wrong product or because you know the mail company screwed up somehow um and we were like
well i did some calculations i remember sitting down the afternoon we totaled up all the products that had been returned
to us because we'd sent out the wrong product uh and it was colossal it was like it
was co because i had to pay not only um for the postage there i had to pay the return postage there was the customers
dissatisfaction i have no idea what the cost of that was but there was all kinds of things going on i couldn't use the pro anyway we totaled the cost and it
was thousands it was every month thousands was going out the door because we were just the guys picking and packing were just
not doing their job well so we made some changes it cost like two grand to make
these changes to my warehouse um and it changed and we saved like thousands every month as a result um
yeah and so i i get what you mean with this sort of death by paper cut thing and this whole um inventory management
because it's like a simple thing that i would not have
thought about had i not seen for my own eyes this bag in the corner yeah it was just
because you're right on its own it's just one parcel there's a couple of quid or a couple of dollars and you don't really think about it
collectively it's thousands going out the door so i i understand that statement very well yes
so um so i get i mean the question we've got
here is why do sellers need an amazon inventory management solution why why if
i was going to sell on amazon why would i do that i know that there are i mean you've mentioned you've touched
on some of those problems are they going to affect me if i'm just starting out or are they just for the the big boys
i think that someone needs an inventory management system even when they're just starting out we
our tool we just we'll say you know maybe it's not ready right for you we
focus a lot on there's more complexity to our tool adding your marketing adding you know
your your other warehouses at you know marketing and selling across multiple different marketplaces across the world
all of those things so people starting out in amazon may be able to just use
one of the inventory modules of a we call them software suites like a
helium or something like that where they can do their keyword research they can do all these different things and
then there's a little bit about inventory those are not complex tools when you start getting into more
complexity across your supply chain or if you just want to set
set it up right from the beginning and you're scale minded that would be something where you would want a more
complex tool but regardless you need some sort of system to be able to tell you when to place an order when to ship
you know we used to be able to send things straight to amazon and amazon has created inventory restrictions they're
called restock limits and so basically they have said you're no longer allowed to send anything that you want which was
not the case for the bulk of our careers on amazon
it started in where they said okay we've got restrictions now you can only send x
number of units so sellers now have to keep inventory in a
third-party warehouse and so they need to know they're now have what i call simultaneous forecasting
which means you need to know when to order from your chinese supplier because most people are sourcing in china but
you also need to know when to ship from your third-party warehouse into amazon because you're you've got amazon has
your inventory and you've got inventory that now is being held outside of amazon
so you have an order forecast and you have a transfer forecast and that in itself is complexity but then you add
more skus and you had more uh regions if you're selling in europe and then we had brexit and you know you
have to do a separate calculation for brexit and now you have you know if you're selling in canada canada is a whole other thing and
they have a whole other limit on their you know because they have less warehouses and they're shutting down their warehouses all the time so it's
all of this complexity that goes on and now a lot of people have to do their own
fulfillment where they have a company that they use to do what's called fulfilled by merchant because amazon has
these restrictions or they're not reliable at checking in their inventory it takes five weeks to check in inventory at amazon and so
people can't rely on amazon being their only distribution center even if it's their own people's
channel that's a really interesting i i i wouldn't have thought
um and maybe this is my naivety chelsea i wouldn't have thought that amazon were having issues
such that you've talked about it sounds like one they're running out of space and two they're not getting stuff checked in as quickly as as possible so
the whole one of the i mean there's when i think about would i want to sell on amazon there's a number of things
that appeal to me one is obviously their customer base uh it's you know it's huge it's colossal and two is the ability to
use um fulfillment by amazon because of amazon prime right it's a big deal and so
um has that become a lot more complex now and and do you know why
yeah and it's interesting one of the things that i've started saying is that your
warehouses like your third party your your external warehouses and your your shipping agents your carriers
are some of your best allies and n not enough of us are utilizing them
because i started asking those questions you know i did a
a small event here in in austin and one and i was responsible for putting together the inventory panel
so i reached out to my pl owner had him fly out and i said let's talk about what can we talk about with this inventory i
really want to talk about trucking because we're going into the fourth quarter we we need to know what is
happening with trucking our stuff is already on a boat or it's here how can we make sure that we don't run out of
stock from this to the end of christmas and he started talking about how amazon is
built what why are we having these delays and amazon's created something called amazon
freight they bought hundreds of truck trailers and they will let
trucking companies or independent truckers sign up say i'll be a driver and i'll drive some some freight into amazon so
they'll drive the freight but they are contractually bound and it's a similar thing with something called amazon
partner carrier when you sign up for amazon partner carrier you get much cheaper uh
freight much cheaper shipping but what amazon has contractually bound
these truckers to is you drive your stuff up and you drop it you drop your your trailer you can pick up an empty
one and you can leave and that was working really well until it wasn't they started having labor problems and they
have had their turnover from july to october they
there were workers that ended up quitting
days or weeks after starting so they have had this crazy amount of turnover they're getting
you know the california is breathing down their neck about their labor um
their labor inequities and so they have this labor problem they can't
unload those trailers fast enough so these truckers they have to drop their trailer and they're leaving and there's no empty trailer for them and so and
then those trailers just sit there and they don't get unloaded and that's why you have okay my stuff has been
delivered for five weeks and it still hasn't been
checked in it's because it's sitting there in in a parking lot somewhere whereas
non-amazon partner carriers the ones that are not contractually bound to drop their trailer
they are able to pull up to the loading dock and unload their stuff so even if they're
the delivery time because they each have an appointment if they get a later appointment
but they can but you know that at the appointment time that's when your stuff is actually gonna get checked into
amazon i started talking about what i call net check-in time which means even if your
delivery date is later the net check-in time is a lot faster with these non-amazon partner carriers you're
paying more but your stuff is getting checked in and you're not stocking out so you're continuing to make sales so it's one of
those things where for years the the obvious choice was amazon partner
carrier and it was only me having this conversation with this pl owner
that i actually discovered what we've been doing and we've been you know you go on amazon you
create your shipping label you send it to your warehouse and your warehouse ships it out your warehouse doesn't have time to call everyone and say hey by the
way there's a new way that you should be handling is they're just busy trying to get boxes out of in and out of their
warehouse so talking to these people it could be three three months from now that that's completely cleared up and that amazon
partner carrier is the better choice because it's cheaper but right now it's not that's what it's all but all the chaos that's happening at amazon that
we're dealing with right now that's really uh that's fascinating especially because i'm thinking goodness
me i mean in the uk uh yeah i don't know if you're familiar but we've had
issues with um uh we truck drivers lorry drivers uh you have
to have a special license to be able to drive these huge vehicles up and around the country and thanks to brexit thanks to the
pandemic we haven't actually got an awful lot of truck drivers at the moment and so deliveries are taking longer
um of course we've got the pandemic the shipping containers are a small fortune now because you can't get them in other
docks quick enough because of the labor shortages so there's this huge backlog we've now
got to work through which is what happens when you put your whole country unlocked down right just these yeah there are these consequences we don't we
don't really fully understand until they happen um and so parcels aren't getting delivered
as quickly as we would like and it's interesting that amazon are also struggling with this especially you know
due to labor shortages especially as we're coming up to what can only be described as the craziest time of the
year for just about every online business thanks to amazon actually who created the whole black friday
phenomenon yeah it's it's fascinating and then there's christmas of course and
again christmas is great the pre-christmas rush but the last two weeks of december you may as well forget
about it because no one's going to do anything everyone's away on holiday at that point right so it's um
it'll be interesting to see how long it does take them to recover from this uh chaos
yeah yeah we're gonna see more of it for sure in they just put out um a
statement that they are they now have more warehouses in the u.s and that space is not a problem um
we haven't seen it we haven't seen it trickle down to us and there's still you know whether it's a with a pr
statement or a true statement we haven't seen any it's probably because even if space isn't a problem labor is a problem
yeah and there's obviously the backlog which is also a problem in resolving the whole backlog thing
that's really interesting so this is where your uh amazon inventory management solution is actually quite
important because of all this chaos going on and just going back to perhaps something that you said earlier on this is where a mastermind group would be
really helpful because you can talk about this stuff can't you otherwise you're just stuck into this default way
of doing things and it's like hang on it's been delivered but it's i'm out of stock five weeks later what's going on
guys you know and amazon don't want to talk to you because it's all computers and so
i i i can see now the benefit of these of these groups especially when you're so dependent let me ask you maybe a
question which is a little bit uh off-piste if you are starting out today selling on
amazon you were you were starting your own business um again because you know the name the
marketing the the customer base amazon prime you know
assuming that amazon could take your goods you can use their delivery systems would you would you throw all your eggs
in that basket or are you going to say to yourself i'm going to do that on amazon but i'm going to set up my
website here and i'm gonna um i'm actually gonna maybe
ship that stuff through amazon prime and i'm gonna ship my stuff separately or maybe even sell stuff on amazon but ship
it yourself i don't i don't know what the what you're thinking is on this at the moment yeah um
starting out i would say definitely focusing on amazon it's a completely different
business model to have a website versus amazon it's a completely different skill set and so you'll have amazon sellers where
of their business is amazon they have a website but they it's a different skill set there's some
products that don't do well on your own website you know commodity products that don't have
their own unique you know unique positioning um people aren't going to seek you out the
amazon has that trust they do have the the audience it's there's it's a different way of driving
traffic the traffic is already there it's just getting your pr your product you know in front of those eyeballs
whereas it's a lot harder to get someone to trust you and put your their credit card into
some random website and then if you charge them for shipping you know i know that i usually bounce if i don't get
free shipping and amazon has kind of conditioned us to think that way and to feel that way it's easier to just you
know get it on amazon so you know i would say focusing on amazon
definitely taking advantage of fba and also having an fbm backup even if
it's just you know where you would send inventory if amazon couldn't check your stuff
when you say fb i understand fba fulfillment by amazon fbm what's fbm fulfilled by matt i don't know
built by merchant so it's fulfilled by you yes yeah yeah okay um
that's interesting so despite all the pain despite all the agony this for you is still a good road to go down um just
understand the the boundaries in which you're operating and get yourself a good inventory management solution and just
understand there are things there are there are different sets of problems aren't there you're going to have to tackle with amazon it's not
plain sailing so with all of that said right you've got all of this going on at
the moment how do you even analyze your inventory how do you know what's working what's not working
yeah so the first thing i mean really inventory it's it can be very complex because of a lot of moving parts but
really the things you want to know is how much do i need to order or send and
by when and those are basically the two things and then of course logistics is how do i send it
um the the how much do i need to order is all based upon getting this the first number
right and that number is your daily adjusted velocity so it's how many sales i'm in my how many units am i selling
per day of this particular product we call it adjusted velocity because sales
spikes that are not going to recur and stockouts are supposed to be factored out of that
so if you've stocked out if you're looking at your -day average and you want to say okay my daily adjusted
velocity based on my -day average is x but if you stocked out for five of those days then you need to
re-analyze that data and adjust it to ensure that your average doesn't include
that stock out so daily adjusted velocity would be the first thing to understand and to get right
and then it's how many days of stock do i need and usually days of stock are based on
how how much you need to order like what is your lead time from the point i order to the point it arrives you know maybe
that's days take days to get my inventory into amazon and then i want an
extra cushion so you have your lead time how long does it take and then you have what is my cushion i want an extra
days just in case anything goes wrong so i want days of stock so when you place your order you place your order
knowing that you have to have days before you stock out and that's those
are kind of the basic formulas for figuring out inventory that's that's fascinating because i mean
i'm it's fascinating talking to you chelsea because i my experience with amazon is uh when we
sold on amazon we sold to amazon and amazon sold it themselves so they just sent me an order they're like i want
this product and i want it delivered at this location at this time i'm like okay cool there you go have at it right that
was easy so my whole experience of selling online
is very much a case of um i have the stock i'm gonna ship the stock to you
you're gonna buy it uh you'll enjoy it hopefully and not return it and come back and buy again so i've only ever i
think the maximum amount of stock i've ever carried in my whole
uh e-commerce uh life this is going to change slightly going forward but up until now has been
nine days so when i hear you talk about days worth of stock i'm like
how do you even right how how do you even sit there and thinking
in june july right i need to order my stock for black friday how do you i mean that would just send shivers down my
spine how do i get that right how do i think about that yeah so you need historical data becomes
important if it's a new product then usually you can look at okay well what was the increase
historically for our other products or similar products you can say okay well at percent increase for prime day so
you can start planning those things out you set and our and our you know software
created something we created something called an inventory timeline and i think i've never seen it anywhere else but i think it's crucial it's you know for we
for a whole year or you know whatever time period you're looking for looking at let's plan out into the future if i
know that it takes days for me to get inventory from point a to point b
then i'm gonna have to plan at least four or five months into the future so
you look at historically what have you done um and and what is your daily velocity and then you look at
all the sales along the way that was a big piece that was missing for amazon marketers we're marketers first and we
like to try new things and so we would mark it in a vacuum and we wouldn't plan these things out
and i had a client um who he did a sale
and it was a mother's day sale and it was on a whim so well mother's day say let's do send a bunch of emails out
and the next day the next month i say okay what about father's day he goes oh uh
we're canceling lightning deals we're running out of stock and it was because he did that mother's day
sale on a whim now he's pumping the brakes running out of stock well he just gave off coupons on inventory that he
could have sold full price and not run out of stock so being able to create this timeline and
planning out do i actually have enough inventory to do this if i'm gonna run an ad campaign am i going to run out of
stock and you know being able to plan those things out and tie your marketing plans to your
inventory plans and play it out for the next six months to a year becomes extremely important
especially when it takes so long to get inventory restocked yeah that's such a good point
so planning that out i mean we i'm involved now in a with a company where i have to think about manufacturing which
is a whole new world for me you know you go from nine-day stock to thinking oh there's a six-month lead time on some of
these products you know that we get manufactured um there shouldn't be but there is just because of the pandemic and and stuff
that we live in and you you're kind of thinking have i got enough stock to carry me through the next six months
it's it's such for me it's such a different way to think then have i got enough
stock to get me through the next six days knowing full well i can call myself i used to operate on this for the longest time i could call my supply and
have whatever stock i wanted the next day uh just and often free they would ship it to me
free i didn't even have to pay for shipping so what i was never incentivized to carry a shed load of stock
which was just that's crazy it's like a wish from a magic you know a genie from a magic bottle or something
for anyone yeah if you could give grant one wish to amazon sellers right now you know it would be that right uh just in
time wasn't it the japanese came up with the just in time system i remember learning about this when i was doing economics at school they're just in time
system and we i i just use that philosophy that obviously doesn't seem to work with amazon you can't order
today and have it on the shelves tomorrow um so
what does the amazon i assume amazon has some kind of algorithm and and what does how does
that work and how does it handle your stock once you once you have it
badly
fair play i just decided it's a great way to answer the question yeah yeah so we talked about daily adjusted
velocity they have velocity daily velocity and they or you
know they'll look at that period of time they won't factor in stock outs
so it's whatever you've sold so if you've stocked out for a week and that was
a thousand units then oh well so one of the things they
they make recommendations based on this they say oh you should send in this much based on what you sold not what you
could have sold but you stocked out based on what you sold so they don't have a daily adjusted velocity and that
didn't seem to be much of a problem they would make these recommendations and they had you know simple amazon
recommends you send in this this many units and that's fine most people didn't listen to it or pay attention to it but
when amazon put these restock limit restrictions where they said you can only sell send in this many units
and once you sell down you can send more in when they put that restriction in the daily
the daily velocity the calculation that they used meant that if you stocked out you might
get into a stock out cycle because you'd stock out your limits would would drop then you would be
unable to send in what you really needed to get yourself back and rolling again then you would stop out again and it was
just this this vicious you know restock uh cycle
so they yeah so it handles it badly so this is again why you would manage this separately so
you you're in much better control of your stock i think i i get why people would
would think that amazon would know the right answer do what i mean so if you're if you're selling something on amazon
and amazon say says to you i recommend that you send us a thousand widgets this week
my brain would go they probably know what they're talking about just because it's amazon but the reality of it is
they they probably don't and you need to check it out for yourself uh i think yeah what i'm hearing
yeah so it's it's important for people to understand most of the time people don't realize
amazon has different types of sellers that are selling so you have private label sellers they're the only ones who are selling
that product but then you have other sellers who are selling other people's brands and there are multiple sellers on that listing so if you stock
out you're like oh well he's stocked out it doesn't really matter to me i shouldn't give him more limits
because maybe he was just gonna sell that and then get rid of it or you know there are other people that are selling
this product as well so it doesn't it doesn't really matter they don't really expect because because one day
someone could drop their price and you were selling you know five units a day of this product and all of a sudden you sell zero because this other guy is now
selling the product he's winning what we call winning the buy box if so there's
that whole competitive side of things where they're not going to say well if you had lowered your price like this other guy did you should you know you
would have sold more so we're going to let you have more space so it's the other types of selling on amazon that
make it so that amazon doesn't want to give you the benefit of the doubt of how much you would have sold with with uh if
there wasn't a stock out of sales and you see now you put it like that that makes total sense
that makes total sense um one of the questions then that we've been asked is um how would how should we
structure our business to make sure we are covered with all of this so if you are
i guess let me put let's do let's do a couple of different scenarios uh when i
was uh on the ambulances years ago we love scenarios you know you you get put in a scenario and you i want to see how
you respond so scenario number one um i am just starting out i've got my
i've got my brand new vitamin company which i think is awesome i'm going to sell these on amazon
how would you what kind of advice what kind of structure would i think about for a new
guy starting out so new people starting out um they have
the ability to send in up to a thousand units so they just start their their account brand new they if they just
wanted that one product they could send all thousand units in there if they wanted to they might get you know
storage fees if they're not able to move it so it might make sense to um you could either send it and probably
the cheapest thing would be to send it and if you truly believe that you can move enough inventory uh which we always
started out with a thousand units so we would send it in drive sales get that product selling but
be paying very very close attention because if that stock that sells out in three months and is extremely successful
you you need to have ordered you know two months ago so it's putting all the
inventory in if some people like to launch selling multiple different products at the same time i think you need to you know start with one really
solidify that but again that's interesting so i've got here uh an omega-and i've got here a
multivitamin right so i manufacture both but actually i should just start with my hero product which is this one get this
established and then bring this one into the party is that what i just heard yes because you're wanting to learn how
to sell on amazon so you don't want to repeat your mistakes across
a large catalog you want to make all the mistakes that you make and find the
formula for doing well you know what what are the images that work what are the was the copywriting that works what
ads work finding all of that and not spreading yourself too thin but figuring
out the best way that works for you to get to a successful selling product and then rinse and
repeat okay that's interesting so scenario number one that's that's what i'm doing
scenario number two um is i'm a slightly bigger company than one guy right um and
i've got a successful online business i have
i'm just using my props here chelsea excuse me i've got multiple products now which i and i sell these online and i ship them
all around the world but i don't actually sell on amazon okay what does that person
do yeah um i would say this the same thing probably find someone who knows how to
run amazon because amazon is different than anywhere else and we see a lot of big brands who say oh we'll just
put it on amazon and it'll start selling and usually it will start selling if it's a
recognized brand but it will start selling because people are typing in the brand
name and so i've seen people who they oh it's selling really well because everyone's searching my brand yeah but
you're not getting any new customers you're just getting your old customers to buy on a different platform and giving money away to amazon while you're
at it so that's not the best approach the best approach is okay let's see find someone who knows what they're
doing and then gradually roll out your your line based on what's going to be
the most effective in the market we say look at what we have available to sell and let's do research to see you know
based on competition and keywords and you know opportunity within kind of the
niche keywords longer tail keywords as we call them what
what do we think can be the most successful or do the best for us first and create a plan to figure out a roll
out on that and then start launching um launching that rollout making sure that
whoever you have in charge of amazon does really know what what they're doing and again if you're moving into a brand
new account on amazon even if you're a bigger company you still have only a thousand units so
you need to then build up that sales velocity it'd be better for you to send in the
one from an inventory perspective it'd be better to send the one product if you think it's going to take off and build
up the sales quickly so that you can uh increase that
restock limit and then once that restock limit is in is starting to grow the amount of
inventory and starting to grow then you can add another product um and so forth
so there's a sort of a crossover here isn't there the the the startup guy you're learning it yourself uh me with
all my products here i'm actually bringing somebody in is that something i should outsource to an uh to somebody or
is that someone i'm looking to hire full time i mean it it depends i mean if you
if you wanted to learn amazon you know you could learn amazon you don't necessarily have to outsource it just
depends on your company's structure you should follow and study the right people and
not rely on we'll just put up a listing because that's what happens you just put up a listing and it's going to work and
it works to some degree and and sometimes it doesn't in terms of whether you hire you know
you outsource or you hire someone inside can you afford to hire someone inside um
to and can you get him to do work full time or whatever it is you're going to hire him for is it cheaper to
outsource it and to pay someone who has a company was other people that he's working with is it cheaper to go
with the with that method so it just depends on on what your budget is i guess and um well i guess maybe another
way to phrase that question was if i was going to hire somebody is there enough work for a full-time role um if if i was
going to do that i imagine there is especially if i wanted to do amazon say in the states amazon in the uk amazon in
germany amazon you know australia yeah i mean i think so we when we
started our business there was definitely enough work because you're gonna have to pay attention to the inventory to the ads to the you know
getting the um listing set up and created there's always tweaks that can be done so there's always stuff to do
and then answering the customer service emails there's a lot it is a full business you know business in a box i
guess that's fascinating absolutely fascinating it um
it really intrigues me um that the whole story of amazon and how it's all
evolving and how it's all sort of working if you were to put your
um your futurist hat on or look into your crystal ball or an angel comes with a picture of what
it's going to look like in five years time what do you what do you see
yeah for ecom what honestly what i see is we need to learn the other side of the
business we've been marketers for a long time and it's finally catching up to a
lot of entrepreneurs that not knowing the other side of the business and by other side i mean
the supply chain the inventory the logistics the uh
cash flow portion that side of the business that we have wanted to kind of like cover our eyes and pretend didn't exist
and we were just lucky to be profitable because it was such a golden age for
amazon for ecom we are now seeing how not understanding those things is extremely costly and
so i think that in the next five years people are going to become a lot smarter
i personally am focusing on educating people on recovering profit within their supply chain we had um
you know everyone's going through a third party warehouse and so you have all these additional fees you have i did
a whole uh reworking of the cartons for a product of mine
the my freight forwarder who was shipping said it doesn't matter what what weight it is
i'm going to charge you units minimum or kilograms per unit per carton
and we were selling at kilograms so we were gonna be losing uh six thousand six thousand dollars a
month on just one product simply because it was underweight so they've been
starting charge weight fees and then we re-boxed it and we had instead of units we had units
per carton and you have something called carton carton
handling fees three dollars and sixty cents for per carton so now that we have units per
carton we're saving money on every single unit save six six hundred dollars a month
with the weight fees and the carton unit optimization it was like eighty two thousand dollars in savings
this is there's thousands tens of thousands even hundreds of thousands of dollars to be regained throughout curtin
optimization palette optimization container optimization container mapping which means that you put okay this
product goes here this product goes here and the they load it in an optimized fashion and then that
map is received at your warehouse and your warehouse owner can can open up the
back of the truck and or the back of the container and unload it in order some of
these guys they get containers where the products are all over the place and they have to basically sort them
and it takes hours to sort out what is what but when they have this map they pull everything out uh my
my uh my third party warehouse was able to in some cases they
they cut down their labor to two hours unloading a full carton or container
yeah just these types of things that you know the charges that are adding up and people are making mistakes and costing
themselves so much money just because they don't know that side of the business it's not getting easier for us on this
side of the business it's getting more competitive there's more restrictions on amazon we need to get better at this
side of the business the the margin pressure that we have experienced lately
has been due to sorry due to the fact that we we haven't been ready for this
and now it's time to recover that so i see within the next five years um
some smart you know some smart conversations about this really understanding these types of things and
smart tools like you know one of the things that we're focusing on is kind of in that area as well yeah and i mean
we've not really touched on your uh software or what it does just for those that are listening and anything actually
um or operate in this space just what's the quick sort of elevator pitch on on what
you guys do sure yeah um so the software essentially it took there's
this whole idea that a software is smarter than than a an
algorithm is smarter than a person but if you don't know what goes into that formula you're not going to trust it and
so you had all these softwares that were saying you know trust us here's your magic number just trust us
and people couldn't trust the number because they couldn't figure it out so they went back to spreadsheets so we
took the concept of what's working with spreadsheets what's not working with spreadsheets how can we build something that you understand that operates like a
spreadsheet but is more automated and then you can also plug in your marketing plans because the other thing
that these other softwares weren't doing was letting us plug our marketing plans into our inventory plans which
is huge because you know it's the same thing with amazon amazon doesn't know that i'm going to do
an email campaign to my list to push this product you know um so it helps you
to do all that and to plan out an entire year for every single product to keep
track of you know uh what do i have to to order creating the po with a click of
a button you could create a po from each of your suppliers to order your product and then it would
it would be tracked based on your lead time to so that you know which stage am i at when
can i expect to ship that product when can i expect it to arrive at my warehouse am i gonna have to slow down
my my advertising because it's running low i have five days five days stock out
can i do something marketing wise to say maybe lower my ad spend to avoid that stock
out you know those types of things that just give you a an overhead view and a very granular
view at the same time of all of the inventory and where it's going and and
what you need to know act to actionably um handle you know from the inventory
perspective and the marketing perspective awesome awesome uh chelsea listen uh i just want
to say thank you i appreciate your time i appreciate your wisdom i definitely learned a lot today
and a great way i think to close out this season on the podcast so thank you for being uh a guest on today's show
if people want to reach out to you they're listening to the show or watching maybe via youtube or facebook how do they reach hold it how do they
reach out to you how do they get hold of you what's the best way to do that yeah just sewstock.com forward slash
connect all of my socials are on there my email you can check out the software i do webinars so everything is there
awesome so stocked dot com forward slash connect is that right yeah awesome and of course we will put a
link to chelsea and that website in the show notes as well so if you're a regular and you get the show notes we'll add the links and you can check those
out as well uh but uh chelsea from me to you thank you so much for being with us genuinely
really appreciate it really appreciate your value uh and what you brought to the show so thanks uh thanks for being
with us awesome thanks for having me wasn't chelsea great oh
i feel like i i always feel like this um whenever you've got a great guest on there's there's so many questions like
you've you want to ask i've got pages of questions and you're just like i've only got a certain amount of time so uh if
you're like me and you've got any more questions i dare say chase will uh more than happily help you try and find the
answer so do reach out to her um and as i said all of the links to chelsea all
of the show notes transcript all of that sort of stuff you can access for free at ecommercepodcast.net forward slash
and you'll be able to get all of that information no problem at all as i said at the start of the show this
is the last episode of season seven can you believe it it just feels like yesterday this whole thing started and
we are just about to start out season eight at the beginning of
there are some changes coming which i'm stoked about because every season we try and make this uh whole thing uh a better
you know you try and improve it and roll it out and so we've got some new stuff coming in season eight so if you're not a regular to the show make sure you are
subscribed to us so that when we launch season you will be the first to know all of this content is delivered to you
free of charge and wherever you get your podcast from you should find us there uh so just subscribe to the podcast or
follow us on facebook or on youtube so that when we go live and we put this stuff out there you can also join in the
conversation why not have a go see what happens as they say uh but yeah that's it from me thank you so much for being
with us during season seven i look forward to seeing you again in season eight uh in the meantime i hope your
black friday goes super well uh if you're selling online uh i hope your christmas sales go super well and that
maybe just maybe during the festive season you get time to relax so you come back keen and eager to rock
and roll in the new year which is when we'll be back i should chat to you then in the meantime i'm gonna go away
and we're gonna get our head down and ready for black friday and sort that whole thing out so
remember me and your prayers that's all i'm asking anyway that's it for now uh bless you have a
great time uh like i say over the holiday season and we'll see you in bye for now
you've been listening to the ecommerce podcast with matt edmondson join us next time for more interviews
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