This is a fantastic question I get asked all the time by my Amazon FBA buddies. As with most things, the amount of stock you should initially order is not clear-cut. (If it was, this would be a much shorter article!)
It’s based on 3 factors I’ve put together along with a bit of my ‘trial-and-error’ wisdom.
Factor 1: How much money do you have to spend?
Your budget is a big factor in how much stock you buy. If you’ve got cash to throw around, then, by all means, splash out and buy a reasonable amount of stock (I’ll talk about what I consider ‘reasonable’ later).
BUT if you are like me when I was starting my FBA business, i.e. stony broke, then just buy what you can afford. If that means 10 items, then so be it. It’s enough to find out whether you’ve got a good product on your hands and to get the ball rolling.
Factor 2: What’s the product?
How much stock you should buy can also depend on the cost and the size of the item. Let’s compare two products, office chairs and frying pans. The office chairs cost you $50 each and the frying pans $5. If your budget is $500, that’s only 10 chairs but 100 frying pans.
Another thing to consider is the size of your item. With FBA, you pay for the space you need to store your items in an Amazon Fulfilment Centre. These fees are based on the daily average volume in cubic metres. So, those 10 office chairs might cost you more in storage fees than 100 frying pans.
Factor 3: How much risk do you want to take?
Some people are naturally more risk-taking than others. Risk-takers might be inclined to buy a lot of stock initially because they’ve got a hunch it’s going to sell big and they don’t want to run out of stock. That’s fair enough… but it’s not for me.
I’m not a risk-taker. I have to be bloody sure my product is going to sell before I invest a lot of my money!
Imagine you’ve got a product that’s selling like hotcakes, but you only have 100 in stock. Sure you’re going to run out, but you can always order more stock and you know it’s going to sell. Compare that to having 1,000 items that are just gathering dust and not selling at all. In the second scenario, you’re way more invested in the success of that product. I’d much rather be in the first scenario.
So, my nugget of wisdom for you today is…
It’s better to under-order and be out-of-stock than over-order and be left with boxes of unsold stock.
I like to order a modest amount of stock, usually less than $200, to test the waters. It’s usually enough to tell me if I have a winner or a loser on my hands and where I can go from there. If it starts selling well, I can go ahead and order more. If I realise it’s not selling, I can get out without losing too much time or money, and move on to the next promising product.
I don’t worry about running out of stock. The most important thing to me is that I’ve found an item that’s selling. That’s it.
I hope this has helped someone out there. If you have any more questions about Amazon FBA, please check out my other articles.