Inventory Performance Index, more commonly known as IPI, is a score determined by Amazon to evaluate inventory performance of sellers. The range of score is between 0 and 100. The objective of this score is to ensure that Amazon's warehouses aren't under or overstocked and are being used to store products that sell quickly. This allows Amazon to maximize its revenue per cubic feet.
Calculating your IPI
This is something that you can't calculate on your own and Amazon has been elusive to comment on that. According to Amazon, the formula or algorithm that calculates IPI is proprietary and can't be made public. However, all is not lost as we know the factors that affect your business's IPI. These include the following:
It indicates that you're holding more stock than you should and your profitability is getting diluted because of storage fee and holding expenses. What's worse? You're making Amazon to hold inventory that will not move for quite a while limiting their ability to optimize the usability of the square footage.
This is the ideal level of stock you should have to minimize lost sales while moving the product quickly out of the warehouse. Amazon observes the time your products spend in stock in the period of last month while giving weight to products that have sold well in the last 60 days. Maintaining high in-stock inventory is better for your profitability as well as Amazon's.
It is a measure of the inventory that's present in Amazon's warehouse but you can't move it due to an unresolved listing issue. This may happen when you are not complying with Amazon's listing guidelines or facing trouble with your listing tool. This results in excessive FBA storage fee as you can't sell the product.
Why Low IPI Score is bad for Your Sales
If you fail to maintain your IPI score above the value of 400, Amazon imposes a hefty fine of $10 per cubic feet along with limiting your ability to store more stock in its warehouses. Given your IPI score, the penalties can be quite severe and may rack up a huge fine in terms of loss of sales and storage fees. This is why, it's imperative that you manage your IPI score and stay on top of it.
Amazon evaluates your IPI score each quarter as well as 6 weeks before the end of each quarter. You will be slapped with a penalty if you aren't above the par score at least in one instance. For example, if by mid-November you've a good score of 450 but by the end of next quarter, i.e. December 31, your score falls below 400; you won't be penalized. Basically, you get one chance to iron out your inventory issues.
If you are not managing your IPI, it means that you may get penalized by Amazon which will limit your ability to have additional inventory on hand and that in turn will result in loss of sales during the holiday period. A critical miss for any business!
How to Improve Your Poor IPI Score?
If you've a poor IPI score, it's not a time to panic. It's when you need to come up with a solid strategy to improve the score before the next cutoff date. Here are few ways to do it.
Remove the Inventory
If there's excess or stranded inventory in your stock that's damaging your IPI score, the first way is to simply get rid of it. You will have to move it to somewhere else, however, that will cost you money in terms of logistics as well as storage. This method may also result in limiting your ability to resend new inventory to Amazon warehouse for a next few weeks regardless of your IPI score.
Fix Your Listing Issues
Another factor that contributes towards having stranded inventory is your listing issues. Try to fix them as soon as possible and contact Amazon to restore your listing so you can start selling your product again. If you're not sure how to fix the listing issue, either hire a consultant or remove the product from Amazon warehouse. Sitting on it is going to worsen your situation as IPI fines along with storage fee swell up.
Liquidate Inventory with PPC Marketing
This may sound like an obvious solution but it isn't. If you have excess stock on hand or there’s stranded inventory, it’s not easy to sell it. However, if you can design a clever marketing campaign and find out a few data points identifying audiences that may be interested in your product, it can solve your issue. Selling sitting stock is the best way to deal with IPI score issues.
How to Liquidate Inventory through PPC?
Hire a digital marketing agency or use an automation software like PPC WINNER to review your situation and design a highly tailored and targeted PPC campaign for the products that aren’t selling through. Here are a few ways you can be successful in moving out a considerable chunk of your sitting stock:
- Increase your PPC budget and spend it on multiple keywords and phrases to improve the conversion rate.
- Improve your listings by including keywords your competitors are using to sell a similar product or keywords that your product is organically ranked on the 1st page .
- Improve and optimize the content of your listings so the visitors coming through your PPC channel are more likely to be converted.
- Add a discount or some sort of promotional add-on to incentive the visitor to make a purchase.
- If you’re not offering free shipping, try bundling in the fee in your price. This will slice your margin but can help you move the product out of the warehouse.
- Try out different keywords and narrow down the ones that are bringing in more impressions and conversions.
- Bundle in similar products and create a new SKU to sell it at a discounted price. Run a separate PPC campaign for it advertising the additional value.
How to Manage IPI Effectively on Day to Day
As discussed in the article, the IPI score is dependent on many things and the most important of them is your sell through rate. The quicker you move the product, the better your score would be. Not only that, it will help you minimize the cost of storage and holding increasing your margins.
However, this is easier said than done. The most effective way to improve your sell through rate is through a PPC Software like PPC Winner which automates everything and provides instant results. PPC Winner will do the entire advertising on your behalf; from managing your ad budget and conducting keyword research to optimizing campaigns on daily basis and using artificial intelligence to automate the process further. It’ll turn your store into a selling machine.
Fast sales through PPC will lead to quick turnaround time that will help you to have a great IPI score and make your place in Amazon’s good books.