For most sellers, the holiday shopping season is the busiest, more critical time of the year.

On Amazon, things can get “crazy” for sellers, even if they have been through a holiday shopping season or two before on Amazon. In this chapter, we will discuss the steps you should be taking to prepare for the holiday shopping season on Amazon.

For many new sellers to Amazon, the magnitude of sales and potential customer inquiries in late November and December is hard to comprehend until you’ve been through it once yourself.

We also examine what daily tasks are needed to stay on top of your business through November, December and into January. We look at how to plan inventory levels so as to avoid selling out well before customers stop buying.

We also discuss how to ensure that your business doesn’t suffer unnecessary stock-outs immediately after December 25th.

Please note that if your product’s high seasonality is during a time other than November-December, the same issues apply, and should be adjusted to 1-2 months before that high season begins.

Let’s define Opportunity Cost: in the context of the holiday shopping season, opportunity cost represents revenue and profits that you didn’t generate because you ran out of inventory or had inventory mis-priced at a time that it could have sold at a higher or lower price.

So the five important areas that require preparation on the two to three month period leading up to the holiday rush are:

Listings

While you still have time in September and October, we recommend that you check to make sure that the data on your listings are all in good shape. It’s also not a bad idea to check the data every week through the November and December period, just to make sure none of your listings have been artificially hurt by recently changed data that confuses customers or reduces the product’s search performance.

In Seller Central, go to INVENTORY INVENTORY REPORTS LISTINGS QUALITY AND SUPPRESSED LISTINGS REPORT

You will see if there are any errors or data omissions on your feeds. Remember not all “errors” are a big deal – but you may see that there is no product description or images – those sorts of issues should be addressed, as they greatly help customers make a better decision about a product (and improve customer conversion).

Inventory reports

If you want to see all of the fields on your listings, you can contact Seller Support and ask them to turn on the “Category Listings Report” which is a special report you have to ask to have turned on…

That report is available for only 7 days at a time in the Inventory Reports pull-down menu. Using this report, you can check all of your submitted data, and also see if any important categories of data are wrong or missing.

Inventory

Your ability to win the buybox is driven in part by the level of negative feedback and return rate you experience.

Well before the holiday shopping season, you can make the data-driven decision as to whether to continue carrying these specific ASINs, or whether to hold back from selling these during your busiest and most important time of the year when you don’t want any item to result in your account being suspended or your buybox eligibility being hurt.

We suggest identifying any specific SKUs that account for a disproportionate share of either the negative feedback or returns – that way, if too many problems are coming from a few products. To check on these dimensions:

Take your customer feedback data from the past six months, and organize it by ASIN to see which of your ASINs are most likely to have many incidences of negative feedback.

Similarly, look at your customer returns data in the “REPORTS”, “FULFILLMENT”, “CUSTOMER CONCESSIONS”, “RETURNS” section to see which of your products have experienced extensive returns over the past six months.

Demand Modelling

While we are not aiming to provide a comprehensive statistical lesson on how to model future demand, here are a few issues to consider:

If you look at your monthly sales across the year, it’s quite likely that your November sales will be 1.5x-2x higher than January to October monthly sales, while your December sales will be 2x-2.5x higher than January to October monthly sales.

And if you sell in the Toy category, that December number can increase to well over 5x the January to October monthly sales numbers.

Many categories experience a mini-blip in sales in the two week period immediately after December 25, as people buy themselves items that they didn’t get as gifts.

Let’s talk about stock-outs and excess inventory issues now:

Sellers model their inventory levels in all sorts of ways, but it’s important to have some sense of what inventory you currently have, as well as what you likely should have for the holiday shopping season.

We cover some rules of thumb in a moment, but looking at the actual inventory reports regularly is really useful.

Maybe it’s time to send more inventory into FBA, or time to re-order inventory that you fulfill yourself… but either way, you need to be looking at inventory levels at least every 1-2 days during the holiday shopping season.

If you’re in a position that you can afford to buy some extra inventory, keep in mind that there are lots of items you’ll likely sell in January and February too, so why not buy enough inventory to keep you going through end of February… and if you sell through it faster than expected in December, you’re much more likely to have enough inventory on hand to avoid too many stock-outs right before December 25.

While you don’t have to send all of that extra inventory into FBA right away, you’ll at least have the inventory available to send to FBA should demand for your products in December be higher than expected.

If you are using FBA, go to INVENTORY MANAGE FBA INVENTORY tab, and “Set Replenishment Alerts” to be notified when falling below certain quantities in FBA.

This is a rarely used tool that can help save you a lot of time, scrolling through your whole FBA inventory.

Realistically, you should have most of your holiday supply ordered before mid-October, and readied for own warehouses by the third week of November, and for FBA facilities by the end of the second week of November.

Keep in mind that FBA facilities can VERY busy by mid-November, and it make take 5-7 days for your products to be received and ready for sale, so you want to be sure your items have been received and are sellable before Thanksgiving.

And with the ever-creeping Black Friday sales starting earlier and earlier in the week, it’s a good idea to be ready for increased demand at the start of the Thanksgiving holiday week.

I also want to make you aware that Amazon has had holiday periods in the past where the FBA facilities actually are full and cannot accept any more FBA inventory… at that point, it becomes a first-come, first-serve situation.

My advice to you here is it’s better to get your products into an FBA facility a couple weeks earlier, paying for the extra storage time, than not be able to get the products into FBA and find yourself either having to fulfill orders yourself or simply not able to make that inventory available for sale because you are completely reliant on FBA for fulfillment of orders.

Have you ever measured the opportunity costs that you’ve incurred from being out of stock the 7-10 days before Christmas? I’ve had many sellers declare to me that their holiday season was very strong and better than expected, yet when I ask them when they ran out of stock of most products, they tell me that by 7-10 days before Christmas, most of the items were sold out…

When I tell them that they actually lost out of huge volumes of sales, most sellers are surprised to hear that, but then realize they left a lot of money on the table by not buying enough to take them all the way through the holiday shopping season.

Through the December month, you must track all of your inventory daily to check for inventory levels, and sell-through rates.

Are there changes in demand that you should know about, either to do a quick re-buy or to consider clearing out slow-moving inventory that you don’t want to be left with after end of year?

Keep in mind that by mid-December, you’ve got an excellent window of opportunity to clear through old inventory by cutting the price just as customer demand for most anything is at a peak for the year.

One often overlooked aspects of the holiday season is what to do to be ready for January – lots of sellers end up with stock-outs right before or after December 25, resulting in lost sales after Christmas, even though demand falls in early January.

Don’t forget to get yourself enough inventory to carry through at least mid-January, when most suppliers come up for air again after the holiday season.

Avoid poor planning and plan to have product available in January, even if it’s not delivered to you until mid or late December.

FBA

Even if you are fulfilling most of your orders yourself, it’s worth considering sending some inventory of each fast-moving SKU to FBA in order to take advantage of the extra 2-3 days of guaranteed pre-December 25 shopping that Amazon offers FBA sellers.

Depending on how days of the week fall on a particular year, Amazon communicates to customers that FBA products purchased up to 2-3 days before Dec 25 will arrive in time for Dec 25.

If products are fulfilled by sellers, Amazon doesn’t allow the same messaging, so sellers of self-fulfilled products typically lose out substantially to FBA offers during the few days just before December 25, a time when significant purchasing is still done.

When we get down to the last 3-5 days of shopping, customers basically buy only items that will get to them by December 25.

So make sure you have some strategy for using FBA during the holiday shopping season, even if it’s for only the few days before December 25.

Regardless of how much FBA you’ve used during January –October period, consider putting some of your inventory for all key SKUs into FBA in November and December so you can keep up with order fulfillment without having to hire temporary warehouse staff of your own…

Amazon has this capacity and staffing under better control than any sellers, so using FBA during November-December will help you avoid capacity headaches in your own warehouse.

Pricing

Since many shoppers are buying gifts for others and not themselves, you should consider pricing your unpopular inventory competitively to appeal to them.

As mentioned earlier, consider reducing your prices on slow-moving inventory after December 12-15th to clear it out so you aren’t left holding it after Christmas, when demand for both popular AND unpopular items falls significantly.

Amazon has rules about price-gauging, and those rules kick into high-gear during the holiday shopping season – if you price products more than 10%-15% above the stated list price, Amazon likely won’t let you capitalize on your Featured Merchant status for those items, even if you are selling the item through FBA.

And sales conversion drops significantly for offers that aren’t showing up in the Buybox (90%+ of all sales go to Buybox winner, and your product won’t ever show in up Buybox if never featured).

Charging more than list price during times of high demand really is a tradeoff between higher margins and lower visibility of your products…

Depending on what competitors are doing on the same items, you will have to figure out which approach makes more sense for you.

Returns

There are two different types of product returns to highlight here:

As a small miscalculation in demand could cause you to be stuck with a lot of inventory after Christmas, it’s important to have had discussions well in advance with suppliers to find out what they will take back as returns after Christmas.

If you have a generous return policy with your suppliers, it’s worth stocking up a little more for the holiday shopping season.

And if you don’t have a generous return policy (or any return policy), definitely look at liquidating items that are moving slower than expected, starting by December 12-15, so you aren’t left with so much product that it would take you many months to sell through it during the non-holiday shopping season.

What plans do you have in place to handle the increased number of customer returns in January? With so many more orders in November and December, you should expect many more returns in January. You’ll need to be ready with staffing to process returns and a process to send returned products back to your supplier.

And because customers don’t always return products in new condition with original packaging, instructions and warranty materials, you need to develop a process for re-selling returned items that may have to be sold in used condition on Amazon or on some other channel.