The Importance of Inventory-Minded Marketing for Scaling Business
Dr. Amazon Podcast with Chelsea Cohen
Have you ever struggled with cash flow issues in your Amazon business? Or have you had an out-of-stock that literally “smashed” all your achievements? The way out is dealing with inventory management! Let’s listen to the tips of Chelsea Cohen, an Amazon inventory marketing expert, 7-figure Amazon seller, and co-founder of SoStocked.
About the speaker
Chelsea Cohen is an Amazon inventory management expert and the Co-Founder of SoStocked.com, which is an Amazon inventory management software. Chelsea is also a 7-figure Amazon seller, speaker & consultant. Her regular clients include 7 & 8-figure sellers.
- 00:40 Hey, everybody, and welcome to another episode of the Dr. Amazon Podcast. Today, we are going to give you really cool and useful content. We will speak about the inventory minded marketing. If you have struggled with the cash flow in your Amazon business, that is a must listened episode for you. So let’s get started.
- 01:02 First of all, I want to thank you for being here and listening. And I want to thank our guest that joined us today. It is Chelsea Cohen, Amazon inventory management expert and Co-Founder of SoStocked, an Amazon inventory management software. Chelsea, welcome to the Dr. Amazon podcast.
- 01:24 Thank you so much for having me.
- 01:26 Of course, that is a pleasure for us. We know about you and we know about your story as a 7-figure Amazon seller. And we know that you have created a software. It’s like a typical story, when the Amazon sellers feel this situation, when they could make some impact about that and help other Amazon sellers to solve the problems. And that is great. But do you remember the day when you have launched your first product on Amazon?
- 02:01 Yeah, it was in 2014 and we had taken a training course to be able to learn how to do this. And we were going to the event. There was an event for everyone who had taken this training course. And when we got to we wanted to make our first sale before we got to the event and our inventory was not going to get there on time. So at this time, one of the things that you we were being coached to do, this is in 2014, was to make your listing alive as a field by merchant. Then you could go out and we would take our sample and show it to people and then have them write reviews on it. Of course, that’s not allowed at all anymore, but that’s what we did. So our listing has life as an FBM listing. And so we were going to this event and we thought, OK, we’re not going to be able to make our first sale because our inventory is not going to arrive. And we actually made our first two sales before our inventory even arrived and right before we got to the event. So our goal, which we thought wasn’t going to be possible, actually became possible from the little FPM loophole that we were using.
- 03:13 That is really cool. I guess if we have such events right now that will be perfect to get started. You know, it’s like a great motivation. But yeah, I guess all the tools that we had on the 2014 right now is not like really working. And I guess today we will cover the main one, as the inventory management. Because we have faced a lot of things now. And I would be glad to come back into and go deeper, what is the competent inventory management in your understanding?
- 03:49 So inventory management is just properly making sure that you have enough inventory to sell and that you’re not overstocking or under stocking your inventory. And so that can become more and more complex. The more SKUs you launch, the more products you have, the more marketplaces you’re in. And then that compounds when Amazon kind of throws some policies into play that make you have to then send less inventory, then you optimally would like to send, which is one of the things that that came about. But essentially, inventory management is the proper tracking of your inventory to make sure that you are utilizing your inventory and your cash flow properly.
- 04:35 But we know that a lot of Amazon sellers could face this problem, like in the beginning, for example, or when they just get their first sales. I mean, they could bump in the market and to get more and more sales and then everything will stop if they will just not have a plan or management, regarding the inventory management. Yes, some stuff and forecasts. So what is the timeline for us to make some of these forecasts regarding the inventory and how to do it correctly?
- 05:11 Yeah, so it depends on how long your lead time is. Right. How long it takes for your inventory to actually, from the point that you tell your supplier that you need it to the point that it actually becomes live on Amazon. So the longer the lead time, the more and advanced you have to look. Right. So a lot of people their lead time is 60 days, 90 days, even one hundred and twenty days. You have to plan far into the future in that’s the case. Sellers source locally and maybe two weeks is their lead time, it becomes a little bit easier because you’re more flexible in what you can do. You can make changes to the market, the market. As the market changes, you can make changes to your order more quickly and easily. But with those longer lead times, you really need to be looking months in advance.
- 05:57 So in this planning, you should also include all your marketing activities, the things that you would like to do. I mean, not only like the Amazon results, is it correct?
- 06:08 Yeah, that’s extremely important. The a lot of these tools that have come out are very good at looking at past data to predict the future, which is what we’re used to doing. But the problem with that is it’s actually an incomplete picture because past data does not have your future plans. So there’s a little bit of there’s the science of, you know, looking at past data and trying to forecast the future. And then there’s the art of what are you going to be doing in terms of your marketing? What are you going to do with your sponsored ads? What are you going to do with influencers? Are you having an email campaign go out to your list? All of those things need to be factored in. And as marketers, we’re very, very much focused on marketing. And I think that the Amazon in Seller industry is growing up. And the next step is that inventory, because we’ve been so focused on marketing, we haven’t really then we’re starting to see the effects of not properly planning our marketing to reflect into our inventory plans. So that’s really a big portion of what inventory planning is, is to add marketing planning into that equation. We call that “inventory minded marketing”.
- 07:23 Well, let’s speak about that after the next question. I would like to know, in a case of maybe hacks, for inventory management, for example, we have a lot of clients and now we just do the management for the 7, 8-figures. We do have them in a case of accelerating their businesses. And one of the main questions here and not like a question, but the concerns and the situations, where we help our clients to understand the inventory planning for the next half of the year, when we will scale their business. Because all the marketing activities will absolutely influence that. And if you’re not ready to increase your cash flow, for example, don`t be ready to increase the daily sales up to 20 percent, for example, or 50 percent, what will just destroy all your results. And so it’s like why we should do that. And in this way, what hacks would you recommend to do if you understand that the inventory will go out of stock?
- 08:29 So to prevent a stock out, you’re saying? So looking at where you can potentially without tanking your ranking, where could you possibly maybe slow down sales. You have to always look at what it’s doing to the ranking as you go along. But if you know that you’re going to be potentially out of stock for, you know, say twenty days. Well, the first thing is, OK, can I get any inventory there sooner? You know, contact your supplier, see if they can rush a portion of the order, because sometimes they can rush the production of part of the order. So that would be the first thing and see how much you could potentially ship, say, via air. It`s expensive, it’s likely more expensive to stock out and then to have to re rank and all of that.
- 09:19 So you would want to look at the possibilities of closing that gap and maybe you could turn that twenty days into ten days and then slow down the sales. There are a couple of ways you could maybe slowly raise your price a little bit and then you can also look at anything that in terms of your sponsored ads or any ads you’re doing and you just kind of cut the fat. Maybe there’s some stuff that’s not performing as well, then you would continue to have a decent profit margin, right. And still kind of slow down sales enough and, you know, make sure that you don’t lose the ranking entirely, but that might be enough to kind of bridge that gap and stay in stock.
- 10:00 Yeah, exactly. I really like these tips. And we know that right now inside Amazon, we do have a lot of marketing activities, as you have mentioned, lightning deals, for example, or seven day deals or coupons, the PPC with all the time that we have now. And you have mentioned and I would like to understand what it is? What is the inventory minded marketing?
- 10:24 Um, yeah. Inventory management and marketing actually has two separate approaches. At the beginning of working with other Amazon sellers on kind of what we call thinking their marketing to their in. We would focus on getting the marketing team to tell the inventory team what they were going to do, right, and that’s like the first step and it seems very obvious, but it’s actually one of the one of the main reasons that people run out of stock. Get some sort of communication going. So I like that you said that, you know, that what you do with your clients is look at what is in their inventory to make sure that they can actually sustain the promotions that you do with them. Because I have talked to other PPC agencies and they don’t vet the inventory and it becomes very expensive to have a great marketing campaign, spend a bunch of money on ads, get the ranking driven up and then go out of stock. And you just spent a bunch of ad money. So Amazon took a bunch of your profit and then that agency took a bunch of your profit. And so it’s not even the cost of stocking out. It’s all the costs that drove you into the stock out is another portion of what you’re losing.
- 11:45 The Amazon like the scaling, the accelerating that we do and the inventory management, the inventory minded marketing, everything about the profit. And if you do not focus on long term profits and just on short term it’s not a good way for you to scale your business and potentially you will lose everything that you have. For example, if we speak into it… we will go deeper into these seven or eight figures, they have bestsellers in category and if you lose all stock or you just do the lightning deals. And we need to do that. You will be at the risk and you could lose all the positions and the thousands in sales per day. And it’s not a great strategy for you to do.
- 12:36 Yeah, exactly. Yeah. So, you know, that’s one of I think, if you were to do one of a couple of things, I would say, you know, if you do one of two things only in your inventory planning, the first one is to have a buffer stock, a cushion… I always, always carry 30 days worth of inventory no matter what. So I always want my inventory to arrive before that 30 days. And then the second one is to connect your marketing, to your plan, to your inventory plan. Those are the two things that I think are the most common. And in causing stock outs.
- 13:12 I would be glad to know more about how to try to focus.. and to combine these different teams that we have? The marketing team and the business development team. Let’s name it in this way. How to do that? How to find the right way for communication and what could be, for example, maybe we have some KPIs about that, some metrics to speak about that, what metrics?
- 13:38 So for marketing, marketing works, you take all of these SKUs and send to inventory. Here’s our plan. We’re planning on these five SKUs are going to be marketed. We’re starting to do some aggressive marketing on the 17th of the month and we want to increase the sales pretty immediately by twenty percent. And then we have a lightning deal that’s happening on this day and we plan to move five hundred units of this particular SKU and then the inventory team takes all of that data, types it into the system and is able to see immediately, OK, that’s great for these. These two SKUs are going to run out of stock. So you can not do the lightning deal until after we come in stock at this date. Back up on the twenty percent, you could do ten percent. But until we get back and stop on this date, then we’ll boost up to twenty percent, and will increase our orders the next time around. And so there’s just by them… the marketing team giving that data to the inventory team well in advance and then checking in on a regular basis. You have a plan that is actually working together.
- 14:48 Yeah, that is great. So you can just divide your marketing activities not only like every time one product, you can divide it on different one. And during the different weeks, you could try to, for example, promote the different products for understanding how everything will work. And it’s not like influence to do it the best way into your inventory management. You could control that.
- 15:13 Exactly. Yeah. And that’s the other side of it, is that marketing needs to give data to inventory. But inventory can also give helpful data to marketing. The top three reports that we like to send to marketing is our The Stock out report, first of all, because if you are able to predict these products potentially good stock out, then marketing could then refine those ads to slow down. But maybe stop being so aggressive, OK, well, this cost is a little bit high on the higher end, let’s just focus on the low ACOS. You can make more money. And then you see you can sometimes see, even though the sales are slowing down, the money that’s going to be deposited in your bank sometimes can be similar. Right, because you’re kind of cleaning up that fat. So there’s that stock out report or stock out risk report will say stock out risk report.
- 16:04 Then there’s a liquidation report. Right. What inventory is sitting there that you want to just get rid of? Well, why don’t you get rid of it sooner rather than collecting fees all the time? Is it possible for marketing to push that a little bit harder and get that cash back, especially in cash flow is a problem. And a similar one is the Overstock report. Right? What do you have, more than 90 days worth of inventory? That’s the marketing team. Instead of just focusing on the hero products, then can push toward cash flow because cash flow is one of the biggest words that comes up when you talk about scaling. But cash flow has a lot to do with marketing and inventory as well as actually a full machine. And that machine needs to work together to be able to properly scale.
- 16:47 I really like that. I really like the report that you have and the strategies that you use for different products. Because I guess it’s really helpful when you do have a big amount of the SKUs and just control, just to understand what exactly will work for you and where you could find additional profit and maybe not just profit, maybe the cash flow. Only this way. And I really like that. And I know that a lot of Amazon sellers, they know only about like three or maybe five rapports inside Amazon or they work or prepare these reports for themselves, only three on five. But when we just start to do the analysis, we do have more than twenty five plus reports inside the just advertising, you know. We don’t cover all the Amazon reports that we have. And in this way I really like that. And really appreciate all these tips. Great. And could you please tell the main maybe three tips for Amazon sellers that we have now. For example, it’s quite common info, I guess it should be, what things, for example, to check or to improve right now on the beginning with your inventory management?
- 18:11 So I would say the top three things. I mentioned, buffer stock, that’s one of the top things. And buffer stock, there’s a a couple of tips with the buffer stock. One is that it’s better to do it in days rather than in units, if you can. Right. Our system does it allows for either days or units, but we recommend days because that’s going to fluctuate with your velocity. Right. So if you are going to be, if you’re in your low season, your buffer stock may need to be, you know, safer for a product. Three hundred for thirty days versus a high season. Maybe it’s nine hundred for thirty days or whatever it is for, let’s say, a slow moving product. The seasons can change and the amount of buffer stock can significantly change based on velocity. Right.
- 19:02 So and then the other reason for having a decent velocity is geo ranking. The concept of geo ranking, where if you’ve got inventory, that if you don’t have enough inventory spread across the entire country, Amazon is going to stop favoring you in specific areas where they can’t maybe meet that two day prime. Because that’s their promise to the seller. They don’t promise the buyer that your product is going to be good. They promise a refund if it’s not and they promise that shipping. Right. So they care more about that shipping than giving you the sale. So they’ll buy. So they’ll maybe give your competitor the bid when… want to on an ad if you don’t have enough inventory. So keeping that extra bit of inventory and not running to lean also helps in terms of your ranking and your ad.
- 19:52 Yeah, great. And what, for example, the analytical tools do you use when you do the inventory management? I mean, do you use only the Amazon data that we have insight or maybe you use all others, for example, the Google Trends. Or if you do some other marketing activities, as your Google analytics maybe. What data do you get to make some analysis?
- 20:14 I mean, well, I mean, we use Sostocked, we wrote our own software.
- 20:19 Finally we got the promotion of this software.
- 20:24 Yeah, that’s one of the things is that there are ways to do certain things inside of spreadsheets. SoStocked like a spreadsheet. So it’s very familiar to people. And that was actually one thing we did is that we built it out and we didn’t want it to be very much like a cookie cutter algorithm, we want it to be customizable, but even the first six months into building it, we actually ripped out the entire thing because it was it was still too much like an algorithm. We had seller’s saying, my spreadsheet works. It just doesn’t work. Like there’s certain things I can’t do and it takes a lot of time. So we said, OK, let’s see what works about a spreadsheet. You know, what works about a spreadsheet. It’s understandable and it’s customizable. And you can do it for every single SKU. You can kind of customize it. But there are certain things you can’t do, right? There’s a lot of things that you can do on a spreadsheet. But getting really granular. When did I stock out? Within the last year. When did I stock out? Well, unless you kept a record of that, it’s hard to find that we can get that from the API, but it’s harder to get that from a report.
- 21:27 So there are a lot of things that you can do with filtering spreadsheets, you know, and then there’s what we’re doing in the system that is a little bit more refined than that. But that’s essentially, you know, you want to have, when we talk about the reporting data, the overstock reports and those types of things, we’re doing that in SoStoked. When it comes to when it comes to trends and things like that, there’s obviously other tools that can be used for, you see, and that type of thing.
- 21:54 I know that you have invited a lot of Amazon sellers to test and to create SoStocked. How it was?
- 22:03 Yeah. So we have a lot of beta users, right? We call it the stage. We’re in advanced beta. So it’s a paid beta program, right? It’s a reduced paid beta. Once we get out of that, we’ll be doing free trial and the tiered structure. But right now we’ve got a lifetime pricing because we’re working directly with the sellers. I’ve talked to hundreds of sellers in the year and a half that we’ve been that we’ve been done a lot of changes. But really, it’s we’re finally adding, my husband as one of the people who helps with onboarding users. But up until this point, it’s been myself and my business partner on the customer service and the onboarding because we want to hear all the feedback, we had siloed off the support. We wouldn’t get that information and we probably would be dead in the water right now because we would have gotten why people, maybe, were so unhappy. But now, since we are, they can literally tell us to our face, get on all of them and they can tell us to or face what’s happening and then we can adjust things for them.
- 23:06 I guess that is the great opportunity to adjust the software in the right way, because we had the same story inside Profit Whales till we did not, like, close the other software for the all Amazon sellers.
- 23:20 Let`s go into your story. And I would like to know more facts about you. Could you please tell me more about your hobbies? What do you do in your free time?
- 23:32 I like cooking a lot, so yeah, cooking and I like cooking. Let’s see what else. I would like to read more than I do. I don’t read as much as I can because I just don’t have the time. But reading and writing has always been a passion of mine. I am a spoken word poet which means that I write poetry and then I’ll get up and perform it. So that’s something that people don’t normally know about me
- 23:59 I guess, on the next podcast, we will start with some poems if it will be OK. OK, and you have covered my next question is the books, for example, or the podcast or maybe TV show that you are reading and what you will recommend to our audience.
- 24:23 Yeah. As far as… books, it’s… my favorite book is the one thing that kind of shatters the Myth of multitasking and that for me it was a big one. It’s the premise is what is the one thing you could do such that by doing it, everything else becomes easier or unnecessary? Yeah, right. And so that was a really impactful, impactful book for me personally. There have been marketing books. I have my own copywriting agency, so I’ve read marketing books, Ryan Dieties books really great. And and Russell Brunson’s books that he puts out are really great.
- 25:06 And then as far as podcasts, I have several, several friends who have podcasts. So, you know, I love listening to the guests that they have on. I like listening to exits. I love listening to the podcast they talk about exits, because I feel like a lot of sellers don’t really think that exiting is relevant to them. But everything that exiting is about is about refining and improving your bottom line. And so I feel like every seller should be listening to exit podcasts, because it’s going to it’s stuff that you should be doing right now. So it’s really funny, the conversation about exits sometimes seems irrelevant to people, but it’s going to make you more money. If you’re owning the business, you’re going to keep more money. So I like those conversations.
- 25:52 There is some kind of… about the mindset that we have in the case of when we do the business and what things we should focus on. And yeah, I really like this kind of recommendation. And if we speak about Amazon or e-commerce, what trends do you see and what transglobal full during the twenty twenty first.
- 26:12 I mean, I do see inventory as a big trend. I see, I see it becoming more holistic as a business, as a trend. Right. Whether that’s looking at your entire supply chain, getting better at sourcing. I think that 2020 really shook us in terms of the stability and the planning that we have to have. And so I can see just in who I am talking to and what we talk about the planning and the saving money on, I think profitability, I think becoming more profitable, figuring out ways to be more profitable, ways to have more cash flow, because everyone’s been talking about scaling for several years. But I don’t think that that conversation has matured. I think it’s going to be starting to mature. And I think a lot of that has to do with, you know, we’ll stocking out as a huge reason why we don’t have the cash flow or our sourcing, not sourcing smart enough, right.
- 27:14 Not getting as much for your dollar as you can in the sourcing conversation and even in the logistics, such as, you know, if you’ve got per carton fees at your warehouse, well, maybe if you put more units per carton, how much is that going to save you? We’ve run it. We ran a thing like an experiment where it was six units. We said, OK, let’s increase to ten units for that entire year. It was an eight thousand dollar savings. Know just those little tiny things for one product, just those little tiny things. I think that we’re starting to move into the space where we’re not just marketing focus. So I think there’s going to be a trend towards becoming a more holistic business.
- 27:54 Yeah, yeah. I really hope that people will first hear all the things and tips that you have mentioned, but do not feel, you know. I guess it really hurts, when you just understand it for yourself and then you will have all the things inside the Dr. Amazon podcast. OK, and the final question for today, who should be the next guest for the Dr. Amazon podcast? What will be your recommendation?
- 28:20 Yeah, I have worked a lot with Yoni Kozminsky. I am not sure if you’re familiar with him. He works a lot with some of the guys who have worked with, with our software. And he actually… We met and connected through LinkedIn. But he started his own podcast. But he talks a lot about exits and scaling and they are very focused on their business MultiplyMe. It’s focused on and refining those SOPs and getting more structured. And I think that’s the other side of the scale in conversation, because one side has to do with money and with logistics and all of that. The other has to do with the efficiency of your team. And so they talk a lot about efficiency of team. And I I love just the conversation in terms of efficiency and maximizing what you already have. And so that’s kind of the other side of that is the team side of efficiency.
- 29:13 Great. And I guess that’s how we will have a chance to ask him to join our next episode. And that is great. Thank you so much, Chelsea. Thank you for today’s story and all the tips that you have mentioned. I guess all the things will be helpful and useful for our audience. Absolutely sure about that. And thank you
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