June 7, 2021

Does Your Advertising Account For Inventory Levels?

By Tana Cofer / Advertising, Amazon, Predict

Advertising and inventory are the yin and yang of an ecommerce business: you need inventory in order to advertise, and you need advertising in order to sell your inventory. Both are necessary for the success of your business, and both work together to help you kill it on the sales front.

While advertising can be extremely good for business, there is an unpleasant side effect that increased advertising can cause which isn’t so good for business, especially not on Amazon: inventory stockouts.

How stockouts harm your business on Amazon

Stockouts can generally lead to disappointed loyal customers and the loss of potential customers across your sales channels. On Amazon, however, stockouts don’t just disappoint customers: they make your listings practically disappear.

Here’s how it happens. When your brand starts pouring more money into advertising a product on Amazon, you generate more traffic on that product’s listing. If you’ve got good conversion rates, increased traffic through advertising means you’re going to sell out faster.

Without a safety net or proper planning, that stockout will create two major problems for your business:

1. Wasted ad dollars: your product could go out of stock at any time, and every minute advertising is not paused on that product could be a minute of ad dollars wasted, which adds up quickly. Advertising inventory that is low in stock can be problematic as your advertising might be what drives the sales to push the product out of stock, wasting ad spend that could have been used elsewhere and causing an item to go out of stock, lose it’s rank, and force customers to buy other brands.

2. Lowered rankings in organic search results: Amazon has no awareness of when or if a product will be restocked, so once an item sells out and traffic and sales drop off of the listing, marketplace algorithms will push that product listing lower in the search results, making your product all but invisible to customers, even when it comes back into stock.

“The ramifications of running out of stock are pretty heavy,” said Mitch Park, Director of Product Management at Pattern. “Customers can’t find you, and so you don’t sell anything, but the trickle down effect is you start losing out on your organic rank. Your best seller ranking goes down because your sales drop because customers can’t find you.”

Lost sales are twofold, added Tony Morales, Director of Advertising at Pattern. Not only do you lose sales for every day your item is not available to be purchased, “but also when it comes back online, it may have been selling, say, 100 units a day, but because its ranking is lower and it’s on a different part of the page, maybe now it’s only selling 20 units a day when it comes back in stock. Even though you’re back in stock, you’re essentially still losing out on 80 units a day.”

“The best thing we can do,” Morales said, “is just make sure we never go out of stock to begin with.”

Pattern’s solution: Predict

Manually tracking your inventory shortages and pausing your ad spend so you don’t waste money is both inefficient and exhausting, especially when you have a hundred plus products to keep track of and limited manpower.

The best solution to prevent your advertising from turning into a money pit and protect your brand from stockout penalties on Amazon is through Pattern’s one-of-a-kind, expansive ecommerce tool Predict and its newest feature, In Stock Protection (ISP), available to Pattern brand partners now.

What is In Stock Protection?

Launched in November 2020, the In Stock Protection (ISP) feature on Predict is specially designed to automate the ad spend process for you so that you can save money, keep your products in stock, and protect your ranking on Amazon without breaking a sweat.

Through the ISP feature, Predict provides your brand with daily updated data on how many units you have on hand, how many you’re currently selling per day, and when your anticipated restock date is. Using that information as a baseline, Predict will automatically pause advertising on Amazon for products that are running low on inventory, divert ad dollars to other products, and re-enable ads once additional inventory is available.

“Everybody wants to advertise to sell more units, but if you don’t have enough items in stock, essentially what you’re doing with your ads is you’re accelerating your time to be out of stock,” Morales said. “What we’re doing here is we’re essentially preventing that from happening, saving the money we spent on ads, and hopefully prolonging the time that that item can be in stock from natural sell through until the next order comes in so that they have more units such that they don’t run out and don’t lose their ranking.”

In addition to giving you detailed data about your inventory, Predict provides personalized reports that give your brand insights on how many ad dollars you were able to repurpose by pausing ads on low stock products and how many organic sales (meaning sales that you would have missed out on had your product gone out of stock) were protected.

How does Predict's In Stock Protection determine whether a product’s ads should be paused?

Predict will pause advertising for products that meet one of the following criteria:

  • The likelihood of that product’s on-hand inventory meeting weekly demand is 50% or less.
  • The likelihood of the product’s on-hand inventory plus units in transit from the warehouse meeting demand for the next two weeks is 50% or less.

“If you’re not likely to meet weekly demand, we’re going to pause ads to protect spend. If you’re not likely to meet demand for two weeks, including inventory that’s coming, you’ll be paused for that, too,” Park said.

Let’s say you sell an expensive jewelry item and you only have one left in stock, but you typically sell five a week. In this scenario you also aren’t expecting a restock within the next two weeks. If you keep advertising, those five people who normally find you via ads aren’t going to all be able to purchase that jewelry from your brand that week. To protect your organic sales and make your last unit as profitable as it can be, Predict will automatically pause advertising on it and divert it elsewhere until your next shipment of jewelry arrives and is processed.

“This is all done without the user or an employee having to worry about it or keep track of what’s going on, which is a big benefit,” Morales said.

What about when you don’t want ads paused?

Maybe you don’t want Predict optimizations to run on a certain product because it’s a holiday special and you need to sell out of it. ISP can easily be overridden to allow for stockout exceptions.

Where can you access Predict's In Stock Protection?

ISP runs across all global Amazon marketplaces, streamlining international inventory and advertising processes as well as domestic. Currently, Predict and the ISP feature are only available to Pattern brand partners.

Success stories of Predict's In Stock Protection

Since the In Stock Protection update launched in November, Pattern has been able to repurpose over $1.03M USD in global ad spend and protect more than $2.41 million USD in organic sales for brand partners.

“Across the board for all of our brands, we have made adjustments 12,000+ times. That’s more than any person is going to be able to do,” Park said.

One of Pattern’s brand partners in the health supplement space has found major success with the ISP feature, repurposing $147k in ad spend and protecting $275k in organic sales in just the past six month. This brand was able to repurpose $10k in ad spend for their liquid vitamin D3 product alone through the implementation of these optimizations.

Part of what makes Predict—and a Pattern partnership at large—so valuable for brands is that Pattern manages both the inventory side of your business and the advertising side of your business, making the sales process far more efficient.

“No other ad tech has as much insight into that whole pipeline as we do,” Morales said.

More on Predict

Advertising and inventory optimization isn’t the only thing Predict can do. This comprehensive ecommerce tool helps Pattern’s brand partners manage every facet of their business. Predict can show brands if they’re winning the Buy Box, which competitors in the marketplace are selling their products, where price erosion is happening, how they can improve their customer experience, and much more.

To learn more about Predict or learn more about a partnership with Pattern, schedule a demo today!

More Resources
Accelerate Your International Presence—China
Top Health Supplement Brands 2021
Amazon MPS Benchmark: Top Men's Watch Brands 2021
Marketplace Internationalization Checklist