Amazon Insights from Kate’s Corner: Inventory Encumbrance

If there is one thing that anyone who works with or sells on Amazon knows, it’s that the landscape is vast and ever changing. Amazon is constantly creating new ways to put their customer first and to enhance the customer experience of finding and buying goods online. The same is true on the technical backend for technology providers like Boomerang Commerce.

Amazon regularly changes how it calculates, sends, and displays data – always keeping us on our toes and forward looking. Which, while sometimes frustrating, is ultimately a great thing. As humans, we hope to be always learning and evolving, and as technology providers we strive for the same.

Here at Boomerang Commerce, we take a page out of Amazon’s book by being completely customer obsessed, constantly searching for ways we can help our customers optimize and improve their business with Amazon. What can we automate? What data can we analyze? What actions can we surface to your team based on priority for impacting your business the most? This is what drives our days. And some of our nights.

It is this customer obsession that recently led us to learn something new about how Amazon does business. Amazon calls it inventory encumbrance. If you’ve never heard of this, don’t worry! We hadn’t either and neither had our customers. Before getting into what encumbrance is, let’s add some context around what led to this discovery.

As all Amazon sellers know, items being out of stock or unavailable not only impact your sales, but also your seller rank and organic search performance. Impacting one lever can cause a cascading domino effect to your Amazon flywheel. So we work with our customers to avoid both of these situations as much as possible via CommerceIQ for Amazon. Amazon usually does not alert brands when it has flagged an item as unavailable (e.g. by pulling the Andon Cord) or if an item goes out of stock — brands are left to discover these issues on their own. What’s even more baffling for brands is when Amazon pulls their offering for an item when they still appear to have units on hand. That is the scenario that led to learning about encumbrance: Amazon has units on hand, but either isn’t selling the item or has marked it as currently unavailable.

So, What Gives, Amazon

Here is what we heard back from Amazon after auto-opening support tickets to inquire about these cases:

“Upon checking our records I can see that the given ASIN is active in our records without any errors.

However, I would like to inform you that the total units of inventory which we have in our fulfillment center for the ASIN XXXXXXXX has gone into encumbrance.

Meaning, the customers have put this item into their carts due to which these units have been marked as unsellable. There is more demand for this product than items available in our fulfillment centers.

As there is encumbrance, the inventory will show as 0 units. As there is no inventory, the Buy Box is missing and, in order to give the customer experience, we will give opportunity to 3P ASINs to sell the products on the site.

Once the new PO’s are placed to you for your item and when we receive the items, the inventory will update and the Buy Box will appear to your product or if the customers moved your products from the cart the inventory will get updated.”

So that’s how that works.

Our new Phrase of the Week: Inventory Encumbrance — when shoppers on Amazon have placed items in their shopping cart without completing their purchase and the number of shoppers that have done this exceeds Amazon’s current units on hand.

Why would shoppers do this, you ask? Indecisiveness, perhaps. One brand customer hypothesized that Amazon will provide incentives via discounts to shoppers who leave things in their carts without checking out. But it’s unlikely that enough shoppers are exploring tricks like this to make it a regular issue. Encumbrance, as we’ve recently learned, is a fairly common occurrence. Shoppers could be building a bigger cart before they check out, or adding things to their cart to watch instead of using their wishlist. Whatever the reason, it’s much more common than any of us realized.

So, What Can Brands do With This Information?

Our brand customers, armed with supporting data and analysis from CommerceIQ, have found success using these details to automatically inform Amazon support or their Vendor Manager of the increased demand for the product. In many of these cases, Amazon has responded with a promise to place lifts into their forecast to get inventory levels into a more healthy position.

Hopefully this information will empower other brands selling on Amazon to seek out items in their catalog experiencing encumbrance, so that they can work with Amazon to increase orders to match the demand. We’ll be sure to update this blog entry with new information and solutions as we continue to learn more about encumbrance from Amazon and how best to address it.

Looking for ways to automate your business, including addressing issues like encumbrance as soon as they arise? Check out CommerceIQ and join many of the world’s top brands in automating their way to Amazon success.