No CommentsAround this time last year, I got an email from my top Amazon FBA product manufacturer, Kristin.
She asked me if I wanted to place an order for new products to arrive after Christmas. I told her that I wanted to hold off, to see how the holiday season sales were panning out. She then warned me that if I didn’t do something soon, it might be too late.
Cut to mid-December, 2017.
I’m swimming in orders and raking in the dough from the holiday season. Doing the math (and using Forecast.ly), I realized that I’d probably be out of products by Mid-January. So, I fired off an email to Kristin, asking her to put in a new order for 1000 units.
“Sure,” she says. “But they won’t be delivered until early March because of Chinese New Year.”
Wait. What?!
What is Chinese New Year?
- Chinese New Year falls on February 5, 2019.
- Most overseas manufacturers shut down in observation of the holiday.
- Place your 2019 Q1 orders in early November.
- Store a portion of your [excess] inventory in an Amazon warehouse, and hold the rest off-site.
- Consider expanding into other Amazon markets, using any extra post-holiday inventory.
Most Amazon sellers call it “Chinese New Year”, but really, it’s called the Spring Festival.
From Wikipedia:
The Spring Festival is an important Chinese festival celebrated at the turn of the traditional lunisolar Chinese calendar. It is one of several Lunar New Years in Asia. Celebrations traditionally run from the evening preceding the first day, to the Lantern Festival on the 15th day of the first calendar month. The first day of the New Year falls on the new moon.
When the Chinese New Year happens, nearly all of South Asia (not just China) shuts down and stops working. Literally!
In fact, some Chinese workers can be off for as long as two to three weeks. I’ve also run into trouble when workers that live in the Western part of the country start to migrate in the weeks leading up to the Spring Festival, effectively closing a manufacturer for an entire month.
As an Amazon FBA seller, that means your overseas products won’t get produced during this period.
When is Chinese New Year in 2019?
In 2019, the Chinese New Year starts on Tuesday, February 5th and could last until February 20th.
How long your manufacturer is closed will vary from supplier to supplier. If you are negotiating with them now and it’s near the holiday season, be sure to ask them when they plan to be off for Chinese New Year.
Why you don’t want to run out of your Amazon FBA inventory in Q1.
There are a few different reasons why you don’t want to run out of inventory during Q1. Here are some of the biggest:
- It could take nearly 3 months for you to replenish your Amazon FBA inventory. This is especially true if you sell out of product immediately after the holiday season. Even if you place the order before your manufacturer leaves for the Spring Festival, they won’t start producing it until they return 2-3 weeks later. Furthermore, manufacturers tend to favor larger orders over smaller ones, so your product could see extended lead times of 45-60 days.
- Amazon could shut down your seller account. Recently, Amazon has made a push towards clearing out inactive seller accounts, closing accounts that show zero sales for an extended period of time. If you’re only selling one or two products on Amazon and you run out, your account could be in danger of being closed.
- Your organic rankings could suffer. When you launch a new product on Amazon FBA, you have to spend time and money building your listing. However, if your listing goes dormant for a month or more, you could see all of that work wash away.
- All of the goodwill and new customers you built up during the holiday will be for naught. Word of mouth is still a powerful marketing tool. And all those customers who purchased your product during the holiday rush? They won’t be able to point their friends and family to your listing if it’s out of stock.
Start placing your 2019 Q1 orders before the holiday rush to avoid Chinese New Year troubles.
Of course, as an Amazon FBA seller, it’s hard to predict your holiday sales numbers. If you’ve ordered the appropriate volume of private label products for the holiday season, you probably have a lot of extra inventory on-hand.
And there’s no way of knowing how much of that extra inventory will sell until it actually sells.
To make matters worse, Amazon’s recent changes to its short and long-term storage fees (especially those during the holiday season) can make keeping extra inventory in fulfillment centers costly.
However, you should still place an order now, to cover the potential sales of the first two months of the year. If necessary, and as a possible way to save on Amazon’s storage fees, you could store the excess outside of their warehouses.
As I noted above, running out of inventory in the first quarter of the year can be detrimental to your Amazon business, so it’s best to play it safe.
How much inventory should I order for my Amazon FBA business?
Treat the first quarter of the year like any other non-holiday months.
For example, if you normally sell 300 units per month, you should probably order 600 – 900 units now, to cover January, February, and possibly even March.
By the time your product’s manufacturing/lead time is complete (typically 45-60 days after you place your order), you should know how much of it you should send to Amazon and how much of it you should keep off-site.
You can arrange for your vendor to send a portion directly to Amazon’s fulfillment centers and the remainder to a place where storage fees are lower, or non-existent (personally, I use my garage for this).
In the past, I’ve also had success with my vendor keeping a portion of my inventory at their site. However, this could raise your shipping costs.
How much inventory should I order if I’m a new seller on Amazon?
If you’re a brand new Amazon FBA seller, and this is your first private label product (perhaps you’ve been following our Million Dollar Case Study series?), you should order no more than 2-3 months worth of inventory.
Your Jungle Scout Chrome Extension will give you estimates on the number of units typically sold in a 30-day period. Just make sure that you’re basing those sales off of a normal month’s sales and not the holiday rush.
During the holiday rush, sales can be 4 times (or more!) higher than normal. And in my experience, it’s always better to order less inventory and adjust accordingly than to purchase way too much inventory.
Q1 is a great time to expand into new markets, too.
Finally, if you’re concerned about getting stuck with too much inventory in the first quarter of the new year, another solution for the extra inventory is to have your manufacturer send it to another Amazon marketplace.
Over the last two or three years, Amazon’s made great strides in expanding their reach into the European marketplace. In fact, the EU’s marketplace is second only to the US’ marketplace in size.
Of course, if you don’t prefer the EU, you have other Amazon marketplaces to choose from such as India, Japan, Mexico, Canada, and even Australia.
When selling in new markets though, you may need to adjust the packaging for language and cultural differences. You may need to apply to sell in certain marketplaces too. For example, the EU Amazon marketplace requires you to fill out a VAT form before you can become a seller.
However, the possibility of doubling (or even tripling) your first quarter sales following the lucrative holiday rush is well worth these minor setbacks, in my opinion.
Conclusion
Inventory management and order timing is both an art and a science.
While you definitely don’t want to run out of inventory, you also don’t want to have too much inventory. You just need to be sure you’re aware of events like Chinese New Year, which could impact your lead and shipping times.
For more information on placing orders with vendors, avoiding Chinese New Year difficulties, or even the Amazon FBA private label sales process as a whole, be sure to check out our Jungle Scout University for hundreds of free articles and videos.
