Guide to the Inventory Performance Index on Amazon

Opportunity awaits! If you’ve been considering launching an online store, 2023 could be the ideal year to make it happen. Get to know the key steps and essential considerations to deliver an exceptional experience for your customers.

Read up on how to start an online store in 2023 with our step-by-step guide.
22nd Jun, 2023

What is the Inventory Performance Index?

If you sell with a Professional plan and have been actively using Fulfilment by Amazon (FBA), you’ll see Amazon’s inventory performance index or IPI in your Seller Central dashboard.

The IPI score indicates how well you’re managing your FBA inventory, and can help you identify where there’s room for improvement.

IPI score factors

Here are some key aspects to contemplate as you find products to sell.

1. Researching categories

Which categories will you be selling in? You might choose to be a dependable seller of beauty products or health supplements, provide the leading brands in power tools, or offer amazing furniture pieces. Consider which areas you know well and enjoy interacting with, as this passion can help you deliver an amazing customer experience.

2. Choosing a profitable niche

Selling within a particular niche helps customers recognise exactly what your business is all about, and empowers you to focus your time, energy and budget effectively. To find a profitable niche, it can help to define a specific problem that you intend to solve through your product selection, or to appeal to a specific audience who you understand well.

3. Defining your USP

A unique selling proposition or USP focuses on the differentiating factor that sets your business apart from other sellers. For example, you might put more research into your products, use more advanced technology or have products with great durability. Defining your USP is a strong early step as it can help with everything from marketing to expansion.

4. Sourcing your products

Will you be manufacturing your products yourself, or working with wholesalers? If you plan to source from suppliers, will they be able to deliver the product reliably? It’s important to take your product supply chain into account when it comes to your business logistics, delivery times and profit margins.

Creating a business plan and budget

A robust business plan sets out the many elements that are necessary for a successful online store.

5. Outlining the daily details

This is all about answering questions such as:
● What will your business look like in the day-to-day?
● Who are your customers? What appeals to them and how do they shop online?
● How will you be staffing your business, and how do you plan to fulfil orders?
● What are other sellers offering in the same space, and how does your USP set your products apart?

6. Setting business goals and objectives

Here’s where you’ll set out both the short term and long term objectives for your online store. Formalise what will need to be done prior to launch, and how you’ll plan to grow your business. Where do you want your business to be in six months – one year – five years?

7. Planning for startup costs

You’re likely to already have some idea of how much you can invest to make sales. In your business plan be sure to factor all of your likely expenses across product sourcing, inventory management, marketing, quality control, fulfilment and customer service. Set out your profit margins accordingly to plan for healthy business returns.

Choosing where you’ll sell

Choosing where you’ll sell can be just as important as what you sell. Here’s how to find what works for your business.

8. Evaluating the possibilities

You can sell on your own website, via a store like Amazon, or both. While weighing up the possibilities, think about where your customers shop online. Which names do they trust? How can you provide them with the best possible shopping experience?

Selling via a trusted store
Selling on Amazon could help you save time and optimise sales through sophisticated inventory management, growth tools and fulfilment options. There’s also a wide range of learning resources and seller forums available if you need support.

Hosting your own domain
Running your own website allows you to maintain full control over your brand and experience, plus you could take advantage of Multi-Channel Fulfilment (MCF) to have your orders delivered easily.

9. Selecting the best option

Of course, the right choice will come down to your individual business plan and strategy. If you’re new to selling online, Amazon has loads of built-in features and resources to help you along the way.

10. Choosing your selling plan

Amazon offers two different plans for sellers. An Individual plan is ideal if you’re testing the waters and plan to only sell a handful of items as you get started. The Professional plan can be ideal if you’re after the full-featured selling experience and want more ways to maximise your visibility and sales. You can change or cancel your plan at any time.

Designing your storefront

How will you show shoppers all the best features of your products and brand? If you’re registering your brand, you can build your own custom storefront and product detail pages at no extra cost.

11. User-friendly web design

You won’t need to know your HTML from your CSS when it comes to website design, because building an online storefront is an intuitive process with Amazon. Simply choose your preferred template, and drag and drop tiles to create your bespoke brand presence.

12. Product detail pages

Your product detail pages are where your products can get the spotlight they deserve. Be sure to include detailed descriptions, high quality photos and your brand story so your customers can feel confident about making a purchase.

13. Creating a mobile-friendly store

Great news – with Amazon, mobile responsiveness is all taken care of. Mobile shoppers will experience your professional storefront and shopping experience optimised for their mobile device.

Launching a brand?

Amazon Launchpad is an exclusive program that showcases innovative products to help emerging brands get discovered. If you’re eligible, our team can help you with expertise and other types of support as you build and scale your brand.

Setting up inventory management

The next step prior to launching your products will be ensuring you can manage your inventory.

14. Inventory management options

Effective Inventory management can be a balancing act, as there can sometimes be a fine line between having too much stock and not having enough to sell. Amazon’s Inventory Performance Index (IPI) is a handy feature that indicates how well you’re managing your inventory on a scale from 0 to 1000.

It’s simple to add, adjust and manage your inventory within your Seller Central account.

Developing a digital marketing strategy

A tailored digital marketing strategy can help pave the way to selling success. Here are some of the ways you can drive traffic and conversions for your listings.

15. Advertising and promotions

Amazon Advertising offers a number of ways to reach shoppers who are looking for the kind of product you sell, have bought similar products or might enjoy connecting with your brand. You can choose to promote your brand or your products – learn more about advertising with Amazon and test out what will work best for your business.

16. Using keywords for search engine optimisation (SEO)

You may be able to improve the quality and quantity of traffic to your listings simply by ensuring you use clear, descriptive keywords in your product descriptions. These keywords can help people find and buy what they’re looking for easily, so make sure you’re listing your products accurately including materials and differentiating features.

17. Social media marketing

Social media channels can be a great way to engage with existing and potential customers. Your social media marketing strategy might include a mix of paid and organic reach, or one of the two depending on what’s right for your store. By connecting with customers where they love to spend their time, you could build up a loyal following by posting product demonstrations, promotions to gain early adopters and all of your latest news.

18. Collaborations with content creators

A product recommendation from a trusted influencer can have far-reaching effects, turning a product into the new must-have or must-try item. If you plan to reach out to content creators for a sponsored collaboration, take some time to find the right fit. A recommendation is always more compelling from someone who genuinely enjoys and uses the product.

Launching your store

You’ve put your plans into place and are ready to share your products with the world. As the time comes to launch your store, consider these vital steps.

19. Fulfilling orders

Order fulfilment describes the process of picking, packing, labelling and shipping orders to customers. You can choose to have Amazon fulfil your orders with Fulfilment by Amazon (FBA), choose Fulfilment by Seller to fulfil orders yourself, or use a mix of both options.

20. Shipping your products

Quality shipping is key when it comes to ensuring your customers receive their orders without delay. If you’re fulfilling orders yourself, you can consider using Amazon Easy Ship to provide fast, reliable and 100% trackable delivery for your customers.

Excelling at customer service

From answering questions before a sale, to following up after one, every interaction matters when it comes to providing a positive customer experience. Here’s how you can ace your customer service.

21. Communicating with customers

The way you respond to customer queries and issues can have a profound effect on whether customers are likely to recommend your online store. Approach all customer communications with curiosity, honesty and positivity. What problem are they trying to solve, and how can you help to solve that problem?

22. Analysing customer feedback

Your customer reviews are a reflection of what it’s been like to shop with you, and lots of potential customers use reviews to shape their expectations. Pay attention to what your customers are saying, both good and bad, as these insights can help you optimise your product range, marketing and service over time.

23. Retaining customers

Return customers can be great for business, and they can even become passionate advocates for your brand. Consider how you can retain and reward those who shop with you regularly!

The best time to launch an online store?

It could be right now! If you’re ready to take the next step in 2023, explore our resources for beginners and sign up for your seller account. You could be making your first sale before you know it.
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