Operation strategy during product decline: reduce marketing expenses and optimize inventory management

After entering the recession period, product sales, review scores, and profits will continue to decline. Some competitors will begin to withdraw from the market, and newly designed products with better functions will begin to appear on the market. At this time, the primary goal is to reduce the proportion of marketing expenses, avoid redundant inventory, and focus more on new products. Reducing the proportion of marketing expenses does not mean that products no longer need advertising, but that more precise advertising is needed to improve conversion rates.

For links that have completely entered the recession period, they often become niche products. The demand for them still exists, but the market is too small. At this time, most customers search and place orders through relatively precise keywords. For advertising placement, you can choose precise matching of manual ads in product promotion. Although the cost of these precise keywords is high, they can maximize the effective exposure of the product and thus promote conversions.

Inventory-to-sales ratio (inventory-to-sales ratio) refers to the ratio of average inventory quantity to sales volume within a certain period of time. It is mainly used to evaluate the overall situation of immediate inventory of products. Its calculation formula is: inventory-to-sales ratio = [( Beginning inventory + ending inventory) / 2] / sales quantity × 100%. It can be seen from the formula that even if there are no new purchases to replenish the existing inventory, when the sales volume in the next period remains unchanged, how many cycles can the store’s current inventory continue to maintain. If the store’s products are special and the sales price range exceeds $50, you can use the inventory amount and sales to compare to get more accurate information.

The inventory-to-sales ratio can be used as an inventory early warning indicator, which can help sellers control product inventory in a timely manner during daily sales and purchases. Taking the clothing category as an example, the inventory-to-sales ratio is generally calculated on a monthly basis, and the reference value is 3.0~4.0. When the inventory-to-sales ratio is higher than the reference standard, it means that the inventory quantity is too low or the inventory structure is not reasonable enough, and out-of-stock situations are prone to occur; when the inventory-to-sales ratio is lower than the reference standard, it means that the inventory quantity is too high, and the product faces the risk of slow sales, or recent operational operations There are deficiencies. Therefore, the inventory-to-sales ratio can also be used to assess the actual sales of a single product.

Compared with the sell-out rate indicator, the inventory-to-sales ratio takes actual sales into account more flexibly. In view of the characteristics of the Amazon platform, when counting the beginning and end of the period, it is also necessary to calculate the total inventory and FBA inventory quantity respectively, so as to obtain two values ​​​​of the product inventory sales ratio and the FBA inventory sales ratio, and use this to carry out more accurate inventory. management to ultimately avoid excess inventory during recessions.

Some links have entered a period of decline because the entire category has reached the off-season, such as sweaters, jackets, outdoor products, etc. For seasonal products, you can temporarily turn off advertising. When the next sales season comes, if the product is upgraded, repositioned and promoted, its life cycle will be restarted and sales will increase accordingly.

For products entering a period of decline, what needs to be paid more attention to is the issue of redundant inventory. Once a product generates a large amount of inventory in the current season, it will seriously tie up funds. Even if the product can continue to be sold in the next sales cycle, Amazon will charge high monthly long-term storage fees for inventory stored for more than 365 days, which will be incurred every month. Although sellers can avoid losses by submitting removal orders or abandonment, as long as the product does not complete the sale, it will cause a significant reduction in profits. In addition to long-term storage fees, there are general storage fees. At this time, two values, inventory sell-out rate and inventory-to-sales ratio, can be introduced for management.

With the help of product life cycle theory, operators can better understand the sales situation of Amazon links, so as to take more targeted and refined operational measures at different nodes. However, this model only considers two factors: sales volume and time. In actual operation, without rich category experience, it is difficult to divide the starting and ending points of the four stages, which is also its limitation. For operations, product life cycle theory provides a set of solutions to problems, but it is not a panacea. Different products and categories often require more flexible operations. This requires operations to break the stereotype and conduct precise operations based on the actual situation of the link.