The Replacement Test for Inventory

You're sitting on inventory that moves too slow. You know it. Your IPI score reminds you. Your storage fees punish you every month.

But here's the weird part: you could restock half of it tomorrow. It's available right now at your supplier. Your competitors have it. It shows up in your sourcing tools weekly.

So why are you treating it like a rare find?

Most sellers optimize every listing for maximum profit per unit. And that makes perfect sense for items you can't replace—discontinued products, clearance finds, limited runs. Squeeze every dollar from those.

But restockable inventory plays by different rules. A slightly lower margin that sells in 20 days instead of 90 days? You just turned the same $20 investment into 3x more annual profit. You're still highly profitable. You're just profitable faster and more often.

Here's a simple framework that tells you exactly when velocity matters more than margin—and when to do the opposite. The difference comes down to one question: Can you replace this inventory?

The Two Types of Inventory (And Why It Matters)

Before you set any price, ask yourself: "Can I replace this inventory easily?"

Your answer puts every item into one of two categories:

Replenishable inventory = Still available from your suppliers, competitors have it in stock, shows up regularly in your sourcing scans

Finite inventory = Discontinued items, clearance finds, limited production runs

Each category needs a different strategy because the opportunity cost is completely different.

The Math Behind Replenishable Inventory

Let's say you buy an item for $20. Here's what happens with two different approaches:

Seller A: Prices at $40, sells in 90 days

• Profit per turn: $20
• Annual turns: 4
• Annual profit: $81

Seller B: Prices at $35, sells in 20 days

• Profit per turn: $15
• Annual turns: 18
• Annual profit: $274

Same $20 investment. Seller B makes $5 less per unit but earns 3.4x more annually because they immediately redeploy that capital into more inventory. Every 20 days, they take that $35 and buy the next round.

Plus, Seller B gets:

• Better IPI scores (Amazon rewards sell-through rate)
• Lower storage fees (no long-term storage charges eating profit)
• Capital freed up to jump on new opportunities
• Less risk if market prices drop

The key: This only works because Seller B can restock. They're not sacrificing the opportunity—they're accelerating it.

When Finite Inventory Plays Different

Some products deserve patience:

• Can't source more within 2 weeks
• Competitors running low on stock
• Item discontinued or end-of-season

Now you're maximizing profit-per-unit because there is no turn 2. Once it sells, that opportunity is gone forever.

Example: You find a discontinued holiday toy in August for $12. It's currently selling for $35, but you know Q4 demand will push it to $60+. Hold it. Wait for competitors to sell out. Maximize every dollar because you can't go back for more.

The Mistake Most Sellers Make

Treating a restockable kitchen gadget from Walmart like a vintage collectible. Holding for an extra $3 per unit when you could sell it today, restock tomorrow, and generate 3x more profit over the year.

The fix: Know which category you're in before you set a price.

The Replacement Test

Now that you understand the two categories, here's how to make pricing decisions in real-time.

Important: This isn't about slashing prices to chase sales volume. It's about understanding that on replenishable inventory, a small strategic price adjustment can dramatically increase velocity—which multiplies your total profit because you can immediately restock.

Run every item through these three questions:

1. "Can I source 10+ units within 2 weeks?"

This is your primary filter.

YES = You're in velocity mode. A modest price adjustment that doubles or triples your sell-through rate makes you significantly more money over time.

NO = You're in margin mode. Protect every dollar because this opportunity won't come back.

The "10+ units" threshold matters because you need enough volume to make restocking worthwhile. If you can only grab 2-3 units sporadically, treat it more like finite inventory.

2. "What's my opportunity cost?"

If this item sells today, what could you do with that capital tomorrow?

For replenishables, the answer is: buy more of the same item. Your money keeps working, creating a multiplication effect on your annual returns.

For finite inventory, the answer is: find a completely different opportunity. Once this sells, you're starting from scratch.

This changes how you evaluate pricing. A replenishable item earning $15 per unit that turns 18 times beats a $20-per-unit margin that only turns 4 times. You're not sacrificing profit—you're multiplying it through redeployment.

3. "When do storage fees kill my margin advantage?"

After 6 months in FBA, you're paying $0.75-$2.40+ per unit in long-term storage fees (depending on size).

Do the math: Is holding out for an extra $5 per unit worth it if storage fees eat $3 of that over the next 4 months?

For replenishables, the answer is almost always no. Sell it, restock it, and you'll make more total profit through velocity.

Seeing It In Action

Replenishable scenario:

• Kitchen gadget available at Walmart
• Your cost: $15, current price: $32
• Competition drops to $28
• Replacement test: You can source 50 units tomorrow
• Decision: Match at $28, sell in 15 days, restock and repeat

You're still making $13 profit per unit—that's an 87% ROI. But by adjusting your price by just $4, you're now turning that inventory 24 times per year instead of 8 times. Small price change. Massive profit increase.

Finite scenario:

• Discontinued holiday decor
• Your cost: $8, current price: $30
• Competition drops to $25
• Replacement test: Can't source any more
• Decision: Hold at $30, wait for competitors to sell out

Once your 20 units are gone, this product is done. That $5 difference per unit actually matters here because there's no turn 2.

The key difference: Replenishable inventory lets you balance margin and velocity for maximum annual profit. Finite inventory only gets one shot.

A Different Way to Look at Your Inventory

Here's what changes when you start thinking through the replacement lens:

You stop treating all inventory the same. That kitchen gadget you can restock tomorrow isn't the same as a discontinued toy you found on clearance. They deserve different strategies.

You start calculating annual returns, not just per-unit ROI. A 75% ROI that turns 18 times beats a 100% ROI that turns 4 times. Same investment. Wildly different outcomes.

You see pricing decisions differently. On replenishable items, a small price adjustment that doubles your velocity isn't "losing margin"—it's multiplying your total profit through redeployment.

You recognize when supply conditions shift. An item that was easily replenishable three months ago might be drying up. That's your signal to switch strategies and protect margin.

The sellers making the most money aren't necessarily the ones with the highest ROI per unit. They're the ones who understand which inventory deserves patience and which deserves speed.

Most of your inventory is probably replenishable. But are you pricing it that way?