Are you looking to stop losing money on your ecommerce store?
We all know the dream. Perfect inventory. No stockouts and no old products taking up shelf space. Customers always get exactly what they want.
In reality?
Well…
Here’s the problem:
The vast majority of ecommerce stores are losing money through inefficient inventory management. Poor inventory management causes businesses to lose up to 11% of their annual revenue because of stockouts and overstocking.
That’s a big chunk of cash. A huge hole in the revenue bucket.
Fortunately…
You don’t need to be a supply chain management guru to turn things around. Hiring the right ecommerce services and adopting an inventory management strategy means your ecommerce store can quickly change this.
So…
Here’s what we’ll be looking at in this article:
- The Cost of Poor Inventory Management
- Why Ecommerce Stores Need to Improve Inventory Management
- Inventory Management Best Practices
- Ecommerce Software Solutions
The Cost of Poor Inventory Management
The thing that haunts most ecommerce store owners…
The sound of silence. Empty shelves.
Customers visit an online store with the intention of buying. They find something they like and add it to their cart. They hit submit only to be met with a disappointing “out of stock” message.
What’s a customer to do?
Buy from a competitor.
That’s right.
69% of online shoppers will abandon their purchase and go directly to a competitor when their chosen item is out of stock.
Think about that for a moment.
If your stock levels aren’t where they should be, customers aren’t just not buying your products. They’re buying your competitors’ products. Each stockout represents a sale that will never be realized.
Hang on though, it’s not all about stockouts.
What about overstocking?
Excess inventory is just as damaging. Products that aren’t selling sit in warehouses, tying up cash that could be doing more useful things. Storage costs rack up and slow-moving items become stagnant, dragging down margins.
There’s a fine line to walk between having too much and too little.
Why Ecommerce Stores Need to Improve Inventory Management
Inventory management is the foundation of successful ecommerce.
If you have a solid inventory management system in place, you know what your customers want before they know themselves.
How can you know that?
That’s where ecommerce services come in. Platforms that can provide comprehensive, multi-channel inventory management like Magento support by Envisage Digital provide the backbone to power ecommerce inventory management across multiple sales channels and warehouse locations.
Here’s what better inventory control delivers:
By using professional ecommerce services, modern online stores can monitor their stock levels in real-time. This means they can identify what’s selling fast and what they need to reorder before running out.
Cashflow is also massively improved. Stock that’s not tied up in warehouses stops stagnating and gets to work earning more money for the business.
Customer experience also improves. Satisfied customers come back for more. They recommend you to others and post positive reviews online.
This is the only way to build a long-term, sustainable online business.
Inventory Management Best Practices
The key to effective inventory management? Using time-tested strategies.
Demands forecasting: It’s all important
Successful stores don’t just gamble at what they’re going to need in the future. They study historical sales data, and seasonal fluctuations, and keep a close eye on market changes.
This allows ecommerce stores to fine-tune their inventory levels to be as accurate as possible. Demand forecasting allows you to manage your busiest seasons while avoiding overstocking during quieter periods.
Smart demand forecasting uses algorithms that can detect trends and patterns that the human eye can easily miss.
Track stock levels in real time
Old-school manual stock checks are a thing of the past.
The latest real-time stock tracking systems update in real-time. This eliminates overselling and human error and gives visibility into stock positions at a glance.
Multi-channel sellers need this capability more than ever. Operating on multiple sales channels without real-time data synchronization is simply asking for trouble.
Have a safety net in place
Best-selling products need a safety buffer in the form of safety stock.
Safety stock acts as a buffer against sudden surges in demand or unexpected supply chain disruptions. This ensures the store is still covered when it’s at the most critical stage in the buying process – when sales momentum is building up.
Finding the balance with safety stock is the art. Too little and it’s useless. Too much and you’re wasting money.
Nurture supplier relationships
You never forget the value of a good relationship with reliable suppliers.
Shorter lead times for emergency reorders. Flexibility from suppliers when demand is high. Improved payment terms that release capital for investment elsewhere.
Having an alternate supplier is also worth considering. It adds a layer of security if your primary supplier hits a problem.
Software Solutions for Ecommerce Inventory Management
Modern inventory management is tech-heavy.
Software inventory management
Inventory management software automates time-consuming manual processes. It tracks stock levels, generates purchase orders, and can offer in-depth analytics on how your inventory is performing.
Cloud-based software is especially useful. You can access inventory data from any location. It’s also easy to scale as your business grows.
Integration with ecommerce platforms
Having a separate inventory management system is more work than it’s worth.
The real magic happens when you have an inventory management system that integrates with your ecommerce platform, payment processing, and shipping solutions.
Connectivity between these systems allows data to flow automatically between platforms without the need for data re-entry. This slashes manual errors and speeds up order fulfillment.
AI and machine learning
Forward-thinking ecommerce stores are beginning to experiment with AI.
AI is a game-changer. Artificial intelligence can analyze massive data sets and make accurate future demand predictions. Machine learning algorithms then continue to refine the accuracy of these predictions over time.
Barcode and RFID scanning
RFID (Radio Frequency Identification) and barcode scanning have changed physical inventory tracking and counting forever.
Barcode scanning makes it quick and easy to accurately identify products for receiving, storage, and shipping. RFID takes this even further with wireless, non-line of sight scanning.
What this means for your ecommerce inventory management is massive reductions in human counting errors and time savings across the board.
Getting Started With Improved Inventory Management
Perfecting inventory management won’t happen overnight. But starting is easy.
Begin by conducting an inventory management process audit. Identify the biggest problem areas. Are stockouts a recurring problem in certain areas? Are certain products tied up more capital through overstocking than they should be?
Prioritize the issues that matter
Always use the 80/20 rule in this regard. 20% of your inventory control problems are likely to account for 80% of your headaches. Focus your efforts on these first and the biggest gains will be yours.
Train staff properly in inventory processes. The most high-tech system in the world is only going to frustrate you if no one knows how to use it.
Set specific KPIs (Key Performance Indicators) and track them rigorously. Inventory turnover ratio, stockout frequency, and carrying costs are all common examples of inventory KPIs. If you measure it, you can improve it.
Final Thoughts
Effective inventory management is the difference between an online store that struggles and one that thrives.
The stores that take inventory management seriously are the ones that experience better cash flow, happier customers, and better profit margins. The less time you have to spend firefighting issues, the more time you can focus on business growth.
The choice is yours.
The best time to start optimizing your inventory management is now. Whether it’s by hiring professional ecommerce services, using modern software solutions, or just making small tweaks to internal processes, the dividends will be seen very quickly in the form of both lower costs and increased sales.
Perfect inventory management might be a dream. Getting really, really good at it? Absolutely possible for every ecommerce store that’s willing to put in the effort.
