Minimum Inventory Levels

If you read my book about being a successful Amazon seller you know I don’t let any profit go wasted. I created tools specifically to address keeping lean Amazon inventory levels that ensure I never ran out of inventory but also did not pay extra inventory fees.

Amazon didn’t like that. Those fees are revenue and Amazon doesn’t care about your profit,they care about their revenue streams and they just maximized their profit at the small sellers expense.

To avoid their huge “low inventory” fees you you are now required to keep mimimum inventory levels. In theory, I would not have a problem with that. Ensuring Amazon has enough of your product on hand to sell it when the customer wants it is a goal that benefits both you and Amazon.

But instead of taking a more gentle approach and encouraging you to better manage your Amazon inventory and trusting you understand your business better than they do, Amazon grabbed the biggest stick they could find and started beating vendors with huge fees for having less Amazon inventory than they demand.

And those demands make no sense.

The mimimum Amazon inventory for my product is varing between 4 and 6 weeks of standing inventory at any given time. And they are not taking seasonality into account when setting these minimums.

They are saying if you sell less than 20 units in 7 days they won’t charge you low inventory but that is just crazy.

Most of us don’t have our sales fall off a cliff and go to zero.

My product sales will vary -42% to +81% depending on the holidays that fall into a month. But Christmas is my worst month. So their “mimimum” levels have me holding thousands of dollars in inventory in their warehouse with zero chance I’ll sell it — sometimes for several months until they wake up to the fact my seasonality is not like most of the products out there. 

I’ll pay Amazon inventory fees every month for that inactive inventory.

If I don’t pay those extra Amazon inventory fees, I’ll pay for violating Amazon minimum inventory expecations and incur additional selling fees for what I do sell (and that will vary by product and can be anywhere from 70 cents a unit up to $5). 

That will absolutely murder a seller’s margin and there are several people in the forums that said it put them out of business after many years as a seller. 

If you are new, it can mean they crush your dreams of being a seller and leave you with nothing but debts for your effort.

The Future Of Selling On Amazon

This is an interesting approach for Amazon.

They are obviously making money as their last quarterly earnings report stated. In fact, they made MORE money than expected. But they didn’t make it the traditional way.

Instead of making money when their USA vendors make money selling to USA buyers, they made it instead of their small USA vendors making money.

Amazon’s profits came from higher than expected web services (i.e. renting virtual space to other businesses) and though higher advertising charges to vendors — but they changed who they favored as vendors. 

When Amazon first started selling I publically said their model was brilliant.

Instead of spending their own money to buy and house inventory, get small businesses to buy inventory and store it in their warehouse and Amazon would act like that inventory was theirs but pay the small business a portion of the profit when it sells. 

Amazon made money without holding inventory costs. Small businesses made money by leverating the Amazon audience and not having to have their own fulfillment mechanisms. Win-Win.

But somewhere along the way Amazon decided to reinvent themself. 

Now I think reinvention is good. You are either moving forward or falling behind. 

But chasing fads or scams never leads to anything good.

Amazon has decided to chase the Chinese fads and counterfitters.

Tenu and Shein are fads. Like Wish and Alibaba before them they offer crappy merchandise or inferior product copies that too often open your financial details to dubious players. This is not a long term business model. It’s a way to make quick buck in a Chinese economy that facing severe headwinds of their own.

Now Amazon is literally favoring Chinese vendors. This is not my opinion. It’s a fact that Amazon itself announced that they were building their new system to benefit these Chinese sellers. 

in 2024 Amazon now has more Chinese sellers than USA sellers. One source is estimating that upwards of 60% of the current sellers on Amazon are China based.

The internal Seller Central forums also confirm this as USA based vendors admit defeat trying to compete against bulk China sellers that are knocking off thier products or even stealing their listings. 

That’s not to say USA sellers stopped selling. They just stopped selling on Amazon. Just like Amazon, the USA sellers are reinventing themselves and taking their sales to other platforms leaving Amazon to sell their inferior goods to their customers.

I personally believe this strategy will bite them in the end. I hear the complaints from non-sellers all the time:

• “I can never find what I want on Amazon anymore”
• “When I search it gives me something I was not even looking for”
• “The quality on Amazon has gone down”
• “There are too many scammers on Amazon now”
• “Amazon is all counterfit products now”

This is not a long-term sound business model, it’s a model built on quick profits and lack of concern for the customer experience.

But Jeff Bezos said it himself in 2018: “If you look at large companies, their lifespans tend to be 30-plus years, not 100-plus years,” he said, emphasizing that many large companies do not last beyond several decades.

It’s worth noting that Amazon’s current age is 29 years and 10 months. 

This doesn’t mean you shouldn’t be a Amazon seller. Use it as a platform to get your feet wet and learn about being an entrepreneur but do it in a way where you are not having to compete against Chinese manufacturers that will beat you on price every time.

There are still opportunities to make money on Amazon selling your own products. I’m still doing well with that approach. In fact, my sales are up 290% vs last year and up 260% over last month. And if you follow the system set out in my book, you can do it too. 

But don’t think this platform is going to be a singular source of income into your future. As Jeff Bezos said, modern companies just are not built that way.