The Hidden Cost of Poor Inventory Management on Amazon (and How to Fix It)

For Amazon sellers, success often feels like a balancing act. Between supply chain hurdles, fluctuating demand, and Amazon’s strict rules around fulfillment, one mistake in inventory management can cost far more than just a few missed sales.

In fact, mismanaging your inventory doesn’t just affect revenue—it can tank your product rankings, eat away at your margins, and lock up cash that could be fueling growth.

So how can sellers get control of inventory on Amazon without burning out or relying on guesswork? Let’s break down the challenges, hidden costs, and solutions.

Why Inventory Management Matters More on Amazon

Unlike a standalone ecommerce site, Amazon’s marketplace runs on algorithms designed to prioritize customer experience. That means two things:

1. In-stock products win. If your listing bounces in and out of availability, Amazon pushes you down the rankings—or buries you entirely.
   
   
2. Fast delivery is non-negotiable. To support one- and two-day shipping, Amazon rewards sellers who keep adequate stock ready to be dispersed across fulfillment centers.
   
   

That makes inventory more than just a back-office function. On Amazon, it’s directly tied to discoverability, sales velocity, and long-term profitability.

Common Inventory Pitfalls for Amazon Sellers

In our recent podcast, Craig Barnell, Director of Customer Behavior and Insight at Inventory Optimizer, has seen the same problems again and again in his decade of selling and consulting:

• Guesswork in ordering. Sellers often struggle with knowing how much to order, and when. Lead times, supplier minimums, and seasonality complicate the process.
  
  
• Seasonal blind spots. Amazon’s default restock tools rely heavily on trailing 90-day sales—useless for seasonal products like winter accessories or holiday gift sets.
  
  
• Stockouts and ranking drops. Running out of a top-selling SKU for more than a week can push a listing from page one to page five—sometimes permanently.
  
  
• Excess inventory and frozen capital. Overordering ties up cash in slow-moving stock, racks up storage fees, and prevents sellers from investing in advertising or new products.
  
  

These issues aren’t small annoyances—they’re make-or-break for sellers competing in crowded categories.

The High Price of Stockouts

It’s tempting to think of stockouts as “just lost sales.” But on Amazon, the damage goes deeper.

Barnell explains that parent-child listings are especially vulnerable. Take pillowcases, for example: if your best-selling size and color go out of stock for more than 8 days, the entire parent listing starts to lose visibility.

“We’ve seen a top-five organic listing in silk pillowcases fall to the fifth page after just a short stockout. It can take months—or never recover at all.” – Craig Barnell

That’s because Amazon prioritizes reliability. Sellers who can’t stay stocked don’t deliver the seamless experience Amazon wants for its customers.

The Other Side of the Coin: Overstocking

Overordering may feel safer, but it creates its own problems:

• Amazon FBA storage fees kick in at 90, 180, and 365 days, quickly eating into margins.
  
  
• Cash flow bottlenecks tie up dollars in slow-moving products instead of funding ads or profitable SKUs.
  
  
• Accounting challenges arise because unsold inventory can’t be written off—you only expense it once sold.
  
  

One of Barnell’s clients had 350 SKUs, but only four products accounted for 95% of revenue. Yet she was sitting on more than $100,000 of stagnant inventory. That frozen capital could have been reinvested into ads, faster-moving products, or growth initiatives.

Smarter Forecasting with AI

Manual spreadsheets or Amazon’s default tools just don’t cut it. To compete, sellers need forecasting models that account for:

• Seasonality: Comparing this year’s holiday sales to last year’s, not just the past 90 days.
  
  
• Trends: Identifying products that are accelerating or slowing down in velocity.
  
  
• Lead times: Factoring in supplier schedules, shipping delays, and restock windows.
  
  
• Cash flow: Prioritizing orders for profitable SKUs while avoiding overcommitting to slow movers.
  
  

That’s where tools like Inventory Optimizer come in. Barnell shared how his team uses AI-driven models to reforecast every SKU daily, incorporating purchase orders in transit, warehouse stock, and sales velocity.

The result? Fisher’s Finery—his own brand—maintains 93% in-stock performance across 4,000 SKUs while tying up less capital in inventory than ever before.

Linking Inventory to Marketing

Inventory management doesn’t live in a silo. It affects—and is affected by—every other business decision, including marketing.

• Running ads without stock? Wasted spend.
  
  
• Launching campaigns without enough supply? Customers click but can’t buy.
  
  
• Overstocking a slow mover? You may need to discount heavily, cutting into margins.
  
  

Smarter forecasting allows brands to align their inventory plans with ad calendars, product launches, and seasonal pushes. That means fewer wasted ad dollars and better ROI across the board.

Strategies for Amazon Sellers

If you’re selling on Amazon (or managing accounts for clients), here are key takeaways:

1. Never rely solely on Amazon’s restock tool. Build forecasts that factor in seasonality and trends.
   
   
2. Prioritize your top SKUs. Don’t let bestsellers stock out, even if it means raising prices to slow demand temporarily.
   
   
3. Watch your cash flow. Avoid tying up dollars in slow movers that don’t impact your bottom line.
   
   
4. Use storage strategically. Balance between Amazon FBA and your own warehouse to cut costs.
   
   

Align marketing and inventory. Don’t run ads on products you can’t keep in stock.

The Bottom Line

On Amazon, inventory isn’t just an operational detail—it’s the backbone of profitability and visibility. Stockouts crush rankings. Overstocking drains cash flow. And poor forecasting can sabotage even the best marketing campaigns.

Tools like Inventory Optimizer show the power of smarter forecasting, and forecasting is an important piece of the puzzle. At ConnexEcommerce.com, we take it further by automating the entire flow of data—orders, inventory, and accounting—so Amazon sellers can prevent costly stockouts without locking up capital in excess stock. By integrating forecasting with automation, Connex helps you protect your rankings, keep cash flowing, and scale with confidence.

Ready to stop guessing and start growing? Click here to speak to an expert at Connex today and see how data automation can transform your Amazon business.