What Is Your IPI Score - and Why It Matters!

What Is Your IPI Score - and Why It Matters!

Starting any growing any business can be a daunting task. Selling on Amazon is no different. With that said, it’s worth the journey!

We hope you enjoy this weeks issue of the Internet Mastery Global Newsletter.

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What Is IPI? Amazon’s Inventory Placement Index

Amazon Inventory Performance Index (IPI) is a number between 0-1000. This number measures FBA inventory health. Amazon IPI captures low inventory and excess inventory levels of your FBA SKUs. Amazon’s IPI can benefit both you and Amazon. Amazon’s inventory performance index score combines the preceding three months of sales, inventory levels, and expenses into a unique rolling metric updated each week.

Why is an IPI important for FBA Sellers?

An IPI is essential for Amazon FBA merchants. It measures overall inventory management. IPI includes how well you balance inventory levels and sales. Sellers must fix listing problems that make inventory unavailable for purchase and keep popular products in stock.

The Inventory Performance Index (IPI) measures:

• Inventory management over time.

• The overall balance of inventory levels and sales.

• Ability to fix listing problems to prevent inventory from being unavailable for purchase.

• Ability to keep popular merchandise in stock.

Four significant factors that influence your Amazon IPI:

• Excess inventory percentage – reducing excess inventory can help increase profitability.

• FBA sell-through rates – increase helps move stock off the shelves.

• Stranded inventory percentage – fixing listings guarantees inventory in FBA warehouses is buyable.

• FBA in-stock inventory – keep popular items in stock.

What is a good score to maintain? 

An average Amazon IPI can range anywhere from 400-1000. Conversely, a score under 350 can limit FBA storage and cause overage fees. Ensure to maintain the inventory performance index above the minimum threshold, particularly at the quarter’s end or six weeks prior. Keep at least a month to two months’ worth of stock. Similarly, fix any stranded inventory you may have. 

• The minimal IPI score is 350

• Scores above 550 indicate good performance

• Lastly, scores above 650 are upper performers.

What is Amazon IPI based on, and what does it affect? 

Your Inventory Performance Index score reflects how well you maintain healthy inventory levels and how you fix listing problems to drive sales. Amazon calculates your IPI score each quarter and six weeks before the end of the quarter. 

Your score does NOT affect: 

• ASIN limits

• New products do not hurt your score.

• You can not instantly improve scores by having large amounts of inventory.

• Marking items as non-replenishable does not affect Amazon IPI. 

How to Improve Your Amazon IPI? 

• Increase your sell-through rate:

• The number of products you sell with stock on hand.

• Avoid overstocking.

• Improve the in-stock quality for popular items.

• Fix all stranded inventory. 

• Manage excess inventory.

• Monitor your shipment status daily.

• Additionally, create shipments in advance if you think you will fall below 400 

Low Inventory Performance Index Consequences 

If you have a low IPI score, Amazon can restrict inventory storage and assign higher storage fees. Restrictions on your account will also affect your ability to create inbound shipments. 

There are two score check weeks that Amazon announces. This is where they evaluate and determine storage volume limits. Consequently, ensure you reach the required IPI threshold during either of those weeks. Thus, you will be cleared from storage volume limits for the following week’s check. 

Inventory Performance Index scores are available for sellers with a professional plan and inventory at a fulfillment center.

This account sold $50,000 in January 2024 and paid $16.77 in fees or 0% of FBA Sales Revenue. How much did you pay in FBA storage fees last month?

You can see your Inventory Performance if you CLICK HERE!

Everything You Need to Know About Amazon’s New Fee Structure.

Note: This article is in follow up to last weeks communications about amazon new fees.

Amazon says the added fulfillment charges will average $0.15 per unit sold once they take effect next year.

Amazon is set to implement several significant changes to its fee structure for sellers on Seller Central, which will impact various aspects of selling on the platform. 

In this post I will share a summary of the major changes, a timeline for rollout, and also work through some specific cases in order to demonstrate the changes.  

You’ll see that there are a few cases where Sellers will see their fees go down, but in the majority of cases, they will be increasing. These changes will start rolling out starting on March 1st 2024, so it’s important that you (as an Amazon Seller) get ahead of the changes and understand how it may impact their bottom line. 

Amazon will make seven major adjustments to its FBA fee structure in 2024

1. Inbound Placement Service Fee

This is the big change that Sellers will have to wrap their heads around. This new fee is introduced to cover the cost of transporting shipments from an initial receiving center to multiple fulfillment centers across the country. This is not the same as the cost of shipping to Amazon but rather Amazon's internal logistics cost. Sellers will have options to pay reduced or no fees depending on the logistics choices they make, but this fee can be significant, averaging $0.27 per unit for standard-sized products and $1.58 per unit for large bulky-sized products. The fee is effective starting March 1, 2024, and will be charged 45 days after products are received.

Why is Amazon introducing this fee? The fee reflects a shift in Amazon's fulfillment network to a more distributed, regional model with 8 interconnected networks. This means sellers now have to align with Amazon's desired inventory distribution plans instead of sending to just one or a few fulfillment centers.

But the challenge is that there is complexity and lack of control for sellers around the options to reduce fees based on sending inventory to single vs multiple locations. Sellers will only be charged the inbound placement fees 45 days after products are received at Amazon’s initial receiving center, making it hard to know exactly how much this fee will impact a seller for any given shipment. Sellers will have to proactively model total landed costs to make the best financial decisions.

2. FBA Fulfillment Fees Will Reduce

Amazon will lower the Fulfillment by Amazon (FBA) fulfillment fee rates on average, decreasing by $0.20 per unit for standard-sized products and $0.61 per unit for large bulky-sized products. This change is expected to start on April 15, 2024.

Its rare to see an FBA fee reduction, and I guess it is intended to mitigate some of the new costs Sellers will see with the new Inbound Placement Service fee. But there is still a shortfall that Sellers will need to account for. 

3. Adjustments to Size Tiers

Size tiers for products are also changing. The small standard-size tier will now have measurement intervals of every 2 ounces, and the large standard-size tier will be measured at intervals of 4 ounces up to 20 lb. The existing small, medium, large, and special oversize tiers will be replaced by new large bulky and extra-large size tiers, starting February 5, 2024.

4. Low-Level Inventory Fee

A low-level inventory fee will be introduced, which will apply if sellers consistently carry low levels of inventory relative to their unit sales. This is aimed at standard size products and is intended to ensure that Amazon maintains a sufficient supply of inventory for fast customer delivery. Brands will need to monitor inventory levels on an item-by-item basis, with the days of cover required by Amazon being four weeks. There are some exceptions to this fee, including for new professional sellers and new-to-FBA products for specified time frames.

There’s another exception, which is for Sellers enrolled in the “Amazon Warehousing and Distribution” program, and those with products auto-replenished by Amazon. My personal opinion here: there seems to be an incentive to start using Amazon logistics programs to get discounts and avoid some of the fees. However, many sellers have experienced frustrating mistakes at the hands of Amazon’s logistics programs in the past, so they are unlikely to commit to using such programs until they are proven to work well. 

5. Monthly Inventory Storage Fee Changes

Amazon is set to reduce the off-peak monthly inventory storage fees (January-September) by $0.09 per cubic foot for standard-size products, effective April 1, 2024.

6. Ships in Product Packaging (SIPP) Program

This program, previously known as Ships in Own Container (SIOC), will be expanded, providing a fulfillment fee discount for products that can be shipped in their existing packaging. Discounts range from $0.04 to $1.32, and the program will be open to all FBA sellers starting February 5, 2024.

7. Apparel Referral Fee Reduction

This is one of the rare cases where a seller may end up paying less in fees. Amazon will reduce referral fees for apparel products. For items priced under $15, referral fees will be decreased from 17% to 5%. For products priced between $15 and $20, referral fees will go from 17% to 10%. These changes will start on January 15, 2024.

Finally, while not specifically a change to fees, Amazon will  add a few perks to the FBA New Selection program, mainly around a slightly increased number of units that qualify for rebates and extended window for storage. 

In summary, while there are reductions in areas such as FBA fulfillment fees and referral fees for specific items, the introduction of the inbound placement service fee, low-level inventory fee, and the overhaul of size tiers and monthly storage fees is likely to result in a net increase in costs for most sellers. It will be critical for brands to perform a detailed analysis of these changes to understand their impact and adjust their selling strategies accordingly.

Example: Retail Arbitrage Seller with an average order size of $20 in Standard Size:

- Product specifics: $20 item, standard size

- Yearly sales on Amazon: $5 million

- Impact of inbound placement fee: Assuming the seller sells 5,000 units (a year) that are charged an inbound placement fee of around $0.25 each, this translates to $1250 in fees per year in extra fees for the seller.

- Impact of reduction in FBA fees: (mitigated) ~ $750 less

- Net impact: ~ $500 more

Rollout timeline for new Amazon fees in 2024

The upcoming changes to Amazon's fee structure for sellers on Seller Central are scheduled to roll out on multiple dates throughout 2024. Here's a timeline of when the key changes are due to go into effect:

February 5, 2024:

Changes to size tiers will begin. Small standard-size tier measurements will be adjusted to intervals of 2 ounces, and the large standard-size tier will be measured in 4 ounces intervals up to 20 lb. This transition will result in the replacement of the existing small, medium, large, and special oversize tiers with new large bulky and extra-large size tiers.

On the same date, the Ships in Product Packaging (SIPP) program, formerly known as Ships in Own Container (SIOC), will be open to all FBA sellers. This program offers sellers a fulfillment fee discount when shipping products in their original packaging, ranging from $0.04 to $1.32.

March 1, 2024:

The new inbound placement service fee will take effect. This fee covers the cost of transporting seller's shipments from the initial receiving center to multiple Amazon fulfillment centers. The average fees will be $0.27 per unit for standard-sized products and $1.58 per unit for large bulky-sized products. Sellers will start being charged the inbound placement fees 45 days after products are received at Amazon’s initial receiving center.  

April 1, 2024:

The implementation of the low-level inventory fee begins. Sellers maintaining low levels of inventory relative to their unit sales for standard-sized products will face this new fee designed to ensure Amazon has an adequate supply for quick customer delivery. Exceptions to this fee include new professional sellers for the first 365 days after the initial inventory-received date, new-to-FBA products for the first 180 days, and products auto-replenished by Amazon Warehousing and Distribution.

On the same date, Amazon will reduce off-peak monthly inventory storage fees for standard-size products by $0.09 per cubic foot.

April 15, 2024:

Fulfillment by Amazon (FBA) fulfillment fee rates will decrease on average. The fees for standard-sized products will reduce by $0.20 per unit, and for large bulky-sized products by $0.61 per unit.

Additionally, for apparel products priced below $20, Amazon will start offering reduced referral fees on January 15, 2024. For items priced under $15, fees will decrease from 17% to 5%, and for products priced between $15 and $20, fees will decrease from 17% to 10%.

June 1, 2024:

The returns processing fee will penalize products with  high return rates.  Products in all categories, excluding apparel and shoes, will see a fee levied if their products  have the highest return rates relative to other products in their category. 

Congratulations!

We are super proud of the Internet Mastery Community - now surpassing more than $172,777,868.40 in sales on Amazon.

Check it out for your self here: https://app.internetmasterycommunity.com

Story of the week!

This one is really good!

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community to back me in building out this business? For many years, I have heard occasional Internet Mastery students talk about being on their own in this journey; even withholding their business from friends and family members. But the truth is, if we don’t have like-minded support, we have limited ability to recharge our batteries and often set ourselves up for burn out.

Having access to the Internet Mastery Community offers so much more than support.Think about what you have access to when you work with and collaborate with others:

● Support and Encouragement: Being part of this community of like-minded individuals provides emotional support and encouragement, especially during challenging times. We can share our experiences, offer advice, and provide motivation, which can be invaluable for all of us, but especially our newest Amazon entrepreneurs, as we navigate the ups and downs of business ownership.

● Knowledge Sharing and Learning: A like-minded community offers opportunities for knowledge sharing and continuous learning. As entrepreneurs, we can exchange insights, strategies, and best practices, helping each other solve problems, avoid common pitfalls, and capitalize on new opportunities. This collective wisdom can accelerate both business AND personal growth.

● Accountability and Motivation: Being part of this community helps hold us all accountable for our goals and commitments. Regular interactions and engagement encourages us to stay focused, disciplined, and motivated. The sense of accountability within our supportive community helps us overcome procrastination and maintain momentum toward success. This is especially true if we consider that we all started on a level plain.

● Networking and Collaboration: Building relationships within a like-minded community opens doors to networking and collaboration opportunities. We, as entrepreneurs, can connect with members and coaches & mentors, awho share similar interests and values. Collaborative thinking can lead to new business ideas and expanded market development.

● Validation and Feedback: Seeking validation and feedback from peers within this like-minded community can help us refine our ideas and strategies. Constructive criticism and diverse perspectives from fellow members can highlight blind spots, identify areas for improvement, and validate the viability of our business concepts. This feedback loop fosters innovation and resilience.

● Access to Resources and Opportunities: Our community often provides access to valuable resources, such as Amazon industry insights, market trends and technological + educational resources. As an engaged member, we can leverage these resources to stay informed, make informed decisions, and capitalize on emerging trends.

● Sense of Belonging and Identity: Belonging to our like-minded community fosters a sense of belonging and identity among our group. It creates a shared sense of purpose, camaraderie, and belongingness, which can boost morale, mental well- being, and overall satisfaction with the entrepreneurial journey.

In conclusion, the value of our like-minded community when building an Amazon business extends so far beyond networking and support—it encompasses knowledge sharing, collaboration, validation, accountability, access to resources, and a sense of belonging.

By actively participating in and contributing with us here via our Facebook community, by attending our virtual Facebook Live training sessions and events, and even more so, when you have the opportunity to join us for a live event, such as the Internet Mastery Live in Las Vegas, you have the opportunity to accelerate your growth, expand your network, and thrive in your entrepreneurial endeavors! We hope to see you in person soon to take your connection to a whole new level!

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Stay tuned - each week we’ll uncover strategies and updates to help you grow and scale your ecommerce business!

Knowing No Boundaries,

Internet Mastery Newsletter Team!

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