An FBA Seller’s Guide To Understanding Amazon IPI Score
Posted on 29 November 2021
Whether you were a straight-A student in high school or had more of an alphabet soup when it came to grades, most of us probably assumed we’d be leaving our report cards back in our school days.
Not so in the Amazon marketplace. Enter the IPI.
The intricacies of Amazon’s IPI score system may catapult us back into high school-era performance anxiety. In this guide, we’ll soothe away those concerns by taking a closer look at IPI. We’ll cover how to sharp-shoot your IPI performance, avoid any penalties to your score, and help you cement your business’ standing in the eyes of both Amazon and your customers.
IPI stands for Inventory Performance Index. It’s a metric Amazon introduced to avoid burdening their capacity. In a nutshell, your Amazon IPI score is a critical indicator of the vitality of your business, gauging your ability to meet the demands of your customers while using your storage space in Amazon warehouses as efficiently as possible.
What Is An IPI Score?
As mentioned, a Seller IPI is kind of your inventory management report card. It’s an evaluation of how well you’re using Amazon’s storage space.
Amazon seller IPIs are ranked between 0 and 1000. Scores exceeding 500 get a big thumbs up from Amazon, while scores below 450 enter the “hazard zone,” where sellers are pressured to step-up their performance.1 As of 2021, any scores at 350 or below put a seller on unsteady footing, at risk for a series of direct and incidental consequences, including:
- Fines on any excess inventory at $10 per cubic feet,
- Sanctions on their ability to house and send more inventory to Amazon facilities,
- And forfeiting visibility and, ultimately, losing out on sales in the Amazon marketplace.
Amazon tends to be fickle with its score cut-offs and has been known to move the bar periodically. As a seller, it’s in your interest to stay up-to-date on their changing policies (we recommend checking-in on them every month or so), as well as keeping an eye on your individual score.
The Anatomy Of IPI
As a business owner, understanding how Amazon ranks IPI will help you walk the tightrope between supply and demand for your product.
Unfortunately, Amazon has been somewhat cagey about disclosing the formula they use to come up with your IPI score. They do, however, stress that the following three factors are major variables in predicting performance in an FBA warehouse:
Sell-through rate – The sell-through rate is essentially how well you can make timely and consistent shipments into the Amazon warehouse. The FBA sell-through rate is the number of units sold and shipped over the past 90 days. This number is then divided by the number of units stored at Amazon’s fulfillment centers during that time. Fortunately, Amazon equips sellers with a nifty sorting tool to identify which products aren’t budging so they can either remove them or market their way to getting them off the shelves to avoid potential storage limits and overage fees.
Inventory management – The better you manage your inventory levels, the higher your score will be. Why? Because when inventory doesn’t go anywhere for 90 days or more, it becomes a liability to FBA sellers. Plus, after one year in a fulfillment center, sellers start to amass major long-term storage fees. Amazon has several ways to help sellers move products while cutting their losses, like posting overstock or out-of-season items on the Amazon Outlet, where they’ll be promoted at a discount.
Stranded inventory – When a product physically takes up space in an Amazon warehouse but is not properly listed on the site, it’s known as stranded inventory. Since this is costly to Amazon, they’ll always let you know you have floating stock with an email—usually giving you a grace period of 30 days to reconcile the oversight. If you don’t fix stranded inventory, expect to get slammed with some hefty overstock fees and a dinged IPI.
Whether you’re just starting out as an Amazon FBA seller or are looking to streamline your steadily growing business, you know that Amazon sets the standard for modern e-commerce—and the standards can be both high and inflexible.
Tipping too far in either IPI direction has both monetary and reputational consequences, which is why it’s essential to get situated with the most streamlined possible shipping protocol to trim the fat, manage your inventory levels, and ensure well-balanced stock for your Amazon business.
Another option is looking for ways to sell in new markets, such as expanding globally or into different countries with the help of an Importer Of Record (or IOR) like Zee. Zee helps simplify the import process by acting as your IOR and knowledge base of all things import-related. We can help you mitigate logistical and compliance problems in international shipping and ultimately improve the odds of a better IPI score.
How To Check Your Amazon IPI Score
Your Amazon Inventory Performance Index is listed front and center on your Inventory Dashboard in Seller Central. On your dashboard, you’ll also see a four-part breakdown of where your inventory stands in four domains:2
- Excess inventory,
- Stranded inventory,
- And in-stock inventory.
You won’t get a concrete score for these four variables, but Amazon does provide an illustration that uses a scale bar graded between red, yellow, and green to indicate your inventory health and performance (as expected, green is good; red is the danger zone).
We recommend checking on your IPI score once a week to keep tabs on your progress and, in the long term, pick up on any trends that can help you leverage a new IPI strategy to cut costs and improve your standing.
Learn more ways to improve your IPI score with eComEngine’s Amazon IPI checklist. eComEngine’s RestockPro helps you manage and automatically restock inventory levels so that you never have to worry about a bad Amazon IPI score again.
How To Improve Your Amazon IPI Score: 3 Tips
Amazon both creates conditions for entrepreneurs to make money off their goods at an unprecedented scale, and it’s a highly competitive, dog-eat-dog marketplace, which may have you wondering, “Is Amazon FBA worth it?”. As such, getting—and keeping—your Amazon FBA inventory performance index is vital to achieving a visible and thriving business presence.
While Amazon’s specific equation for formulating your IPI score remains as closely guarded as the secret ingredients in Colonel Sander’s famous chicken, there are a few targeted ways to step your game up in the domains they identify.
Here are our three best tips for refining your score as an Amazon seller, while giving yourself the best chance of leveling up your overall performance, savings, and earnings in the process.
#1: Work On Your Sell-through Rate
To brush up your sell-through standing, we recommend:
Making package deals – Pairing up sibling products is a smart way to incentivize Amazon browsers to buy products that just aren’t budging. This tactic can also help you gain a host of new customers, which means they’re more likely to return for more of what you’re selling, boosting future sales and evening out your sell-through rate.
Holding a sale – When in doubt, offer a discount. It isn’t ideal for maximizing your returns on your extant stock. Still, it will at minimum give you a nudge in the right direction so you can flush your inventory, avoid overage fees, and make room for new stock that has a track record of better popularity with your customers.
Host seasonal promotions – With every season comes a new opportunity to incentivize purchases. Whether the holidays, sale periods like Black Friday and Cyber Monday, or even just changes in the weather, planning seasonal sales in advance is a dynamic way to stay competitive and steady your sell-through throughout the year.
Your priority for leveling up your IPI score is to improve your sell-through rate. If you aren’t ready to remove your listings for overstock just yet, tempting your customers with any of these three incentives can be an effective way of pushing the limit and turning the tides without completely relinquishing your investment.
#2: Resolve Stranded Inventory
Both your business and Amazon lose out when you have sellable products that aren’t up for grabs on its website. That’s why stranded inventory can seriously tank your IPI.
As an FBA seller, be sure to get in the habit of checking your inventory performance dashboard regularly to scan for any minor listing inaccuracies that could result in stranded products. In the same vein, you’ll need to keep an eye out for unfulfillable inventory that could result in lost sales—products that have a corresponding listing on Amazon’s marketplace but cannot be shipped to the customer due to:
- Defective quality,
- Damaged quality,
- Or product expiration.
Most unfulfillable inventory results from poor packaging or shipping practices and can be avoided preemptively by working with a shipping partner. In cases where stuck shipment occurs overseas due to unforeseen difficulties, you may need to work with an experienced IOR (like Zee) to ensure a smooth journey from your headquarters to the FBA warehouse.
#3: Work With An IOR
Improving your sell-through rate isn’t just a matter of how much your customers love your products—it also depends on your ability to deliver those products swiftly and reliably. This can be especially difficult when shipping internationally, as you’ll often run into problems getting products into countries before a buyer is identified. Hence the need for an IOR.
To bolster your sell-through rate and level your IPI score, you’ll want to work with an IOR to:
- Attain compliance standards in international markets,
- Meet import standards in each unique country,
- Navigate obstacles with customs clearance or product regulation,
- Save you a chunk of change on unforeseen costs during order fulfillment,
- And take care of any taxes (including VAT), duties, and fees along the way.
By partnering with an IOR, you’ll be confident in your products’ safe and efficient movement from your business to the customer’s doorstep (and the myriad pit-stops along the way).
Up Your IPI Score With Zee
It’s often been said that the secret to a good life is all about balance—but for FBA businesses navigating the tricky waters of modern e-commerce, the truth is that balance is non-negotiable.
However, there are only so many areas of expertise you can have as a business owner—and the intricacies of best, Amazon-approved shipping practices shouldn’t be one of them. By partnering with Zee, you’ll get a complete package deal: a complete suite of IOR services that encompass the whole shipping process, from doorstep to doorstep, across the globe.
When your physical product can’t make it to your customer in one piece, your IPI and your Amazon business suffer. Rather than bear the brunt of the consequences, partner with Zee to off-load the grunt work and focus on what you do best—taking care of business.
- Bloomberg. Amazon Is Its Own Biggest Mailman Delivering 3.5 Billion Orders. https://www.bloomberg.com/news/articles/2019-12-19/amazon-is-its-own-biggest-mailman-delivering-3-5-billion-orders
- Seller Central. Inventory Performance. https://sellercentral.amazon.com/gp/help/external/202174810