9 Ways To Ace eCommerce Inventory Management in 2021
December 8th, 2020
By: Chad Lio
Chad Lio is the Marketing Director for SellersFunding and an eCommerce Marketer. He’s generated millions of dollars of revenue working with top eCommerce and DTC brands within the supplements and education space.
What is eCommerce Inventory Management and how can it help you grow?
69% of consumers are less likely to use an online store again if an order gets fulfilled as little as two days late.
As an eCommerce business, you don’t have sales or customers without inventory.
And you won’t be able to grow your business without an effective inventory management strategy that delivers useful inventory control.
After all, if you consistently run out of stock or have dead stock, you’re not going to grow.
Instead, you’ll lose momentum, give your competitors the upper hand, and put your company at risk.
You don’t have to worry about any of this though if you have a solid inventory management strategy in place.
So where to begin?
As 2021 quickly approaches, more business are now zeroing in on their eCommerce strategy. With new ways to sell, tools, and strategies to grow, it’s important you have an inventory plan in play for next year’s growth.
Here are 9 ways to turn more inventory, increase your margins, and grow your business:
1. Optimize Product Price (from Both Sides)
What do you mean “from both sides”?
As an seller, you have two product prices to think about:
How you’re going to price your products on your store, and how much you’re going to pay to source them.
For your selling price, you want to make sure you’re not pricing too low sure, this is tempting because it means high volume sales, but your inventory will likely sell out before you’re able to replenish it.
Conversely, if you set too high a price, your inventory won’t sell at all.
To figure out the right selling price for your product, research past pricing and sales history and what your direct competitors are currently pricing their products at.
If you’re a marketplace seller, you’ll want to invest in a scanning app that breaks down past pricing history.
For your buying price, you’ll need to a) negotiate with your suppliers, or b) shop around for the best offer.
Ultimately, you want to pay the lowest price to maximize your margins and check on this a few times a year to make sure you’re being as profitable as possible.
2. Set and Monitor Minimum Stocking Level
You never want your inventory levels to reach 0 otherwise, you’ll have to deal with a stockout and all its repercussions or basically turn away qualified traffic and precious ad spend to your website.
Instead, look at the sales history and sales velocity through your channels to determine how much stock, at a minimum, you should have on hand at a given time.
Then set inventory alerts either through your marketplace vendor settings, your default online sales platform (like Shopify) or an automated inventory management software so you will know when to order more.
When you enable this, you can create a minimum stocking level for your inventory, so you can reorder stock when your below the minimum level.
For example, if your minimum stock levels are 30 and you reached 28 or 29 pieces on hand, you’d need to stock more because you’d be below your minimum stock levels.
How do you calculate your minimum stock levels?
(Average Daily Unit Sales X Days It Takes for New Inventory to Arrive) + Safety Stock
Pro Tip: Keep a Safety Stock Handy
Safety stock is similar to the minimum stock level, but it’s an additional quantity set aside to reduce the risk of stock outs if there are delays, thus being a emergency plan for your inventory management.
You can either negotiate this with your fulfillment center or implement this in your own distribution process that implements with your Shopify or eCommerce business technology platform.
3. Communicate with Your Suppliers
Keeping an open line of communication with your suppliers is key for successful inventory management.
Regardless of your business model retail arbitrage, wholesale, drop shipping, private label, etc. you’ll need to manage the supply chain. This means understanding how long it takes to source inventory, what production cycles and shipping times look like, etc.
Get to Know Your Sales Velocity, Lead Time, and Emergency Situations
You should know when their busiest times of year are and how lead times are affected just as they should know when you’ll have larger and/or more frequent orders.
This is the amount of time it takes from placing an order with your supplier to when your product is live on your store.
What is the worst case scenario in terms of days?
Negotiate emergency situations : As long as you’re on the same page and keep an open line of communication, there shouldn’t be any surprises when you need to order more inventory.
4. Invest in an Automated Inventory Management Software
There are several inventory management software and programs that help sellers closely monitor their stock levels and prevent both stock outs and an inventory surplus.
Many will even calculate important inventory-related metrics for you including your minimum viable stock level and your reorder point and send you alerts so you don’t have to check yourself every single day.
What is the best inventory management software?
There are several different types of inventory management software that can help you become more more profitable and create automated inventory management processes.
Below are a few popular eCommerce software that provide inventory management in real time.
These inventory software integrate with all of the most popular eCommerce marketplaces and platforms such as Amazon, Shopify, WooCommerce, BigCommerce, Magento, Walmart, eBay, etc.
While there are multiple inventory management solutions out there, these are by far the most popular, and usually promote offers for implementing them in your systems and company.
QuickBooks: QuickBooks is the premier online accounting software that easily connects with your storefront to create a real time update of stock. This allows you to control inventory management and not over or under supply and increase your ecommerce profitability.
Fulfilled By Amazon (FBA): If you’re selling on Amazon, FBA is the deferred method to not only store your product in one of their warehouses, but also ship within 2 days via Amazon Prime (the blue checkmark).
ShipBob: Acting as a fulfillment center, ShipBob connects directly to Amazon, Shopify, BigCommerce, WooCommerce and mostly all other platforms to streamline shipping for your customers and improve your inventory management without having to deal with most aches and pains of traditional logistics.
ShipMonk: Similar to ShipBob, Shipmonk implements an inventory tracking software along with warehouse management, so you’re able to focus on building your business without having manually manage your supply chain.
Shipstation: If you manage your own manufacturing and/or logistics, Shipstation is great for inventory control. Orders will be immediately updated within the supply chain platform in real time, and your manufacturing and logistics team can communicate with your eCommerce platform when orders are shipped and provide tracking numbers and updates.
If you would like to research other platforms, a very popular software review platform like G2, will be of use to understand the details of your online sales and requirements necessary for all aspects of logistics and manufacturing like: warehouse management, barcode generator software, and label printing solutions.
5. Maximize Cash Flow
Having consistent access to cash is critical for your storefront’s growth especially when it comes to inventory management.
After all, you could have a surprise surge in sales and need to place an unexpected inventory order ASAP.
Or, maybe your supplier decides to run a last-minute limited-time offer that is too good to pass up, only you don’t have the funds to take advantage.
Simply put, if you have a readily available source of funds, you can buy and turn more inventory more quickly.
With any type of business, cashflow can be tight.
It certainly doesn’t help that you have to wait at least two weeks for your marketplace payouts, but fortunately, there’s a solution:
SellersFunding Daily gives sellers access to 90% of their receivables of your previous day sales for a 2% flat fee on gross sales.
So, if you make a sale on Monday, you’ll get cash as soon as Tuesday cash that you can reinvest in buying more inventory, allowing you to sell faster and increase profitability.
6. Diversify Your Sales Channel…and Forecast!
One of the most important goals for revenue is to be able to have multiple sales channels, so you can lower your risk of not just depending on one stream of customer demand.
Investing in multiple, profitable traffic sources allows your business to diversify if for some reason your main source of sales drastically decreases.
If you’re a marketplace seller, you may want to invest in an actual eCommerce platform and website to help drive sales, collect higher margins, and remarket to your customers.
If you’re an DTC website, you want to invest in (multiple) marketplace storefronts to capitalize on higher conversion rates driven by their ability to create customer demand.
7. Selling Globally Requires Maximum Focus
When selling globally, it’s even more important to have your inventory management on point, as you may need to source multiple orders and fulfillment from multiple countries.
In addition, you most certainly will need to pay your global suppliers and manufactures as quickly as possible, and the only way to do that is with the SellersFunding Digital Wallet.
8. Insurance is always a great safety net
A lot of unexpected bad things can happen and, for a lot of them, you can get an insurance. So do your assessment and check how much and the different ways you can get insurance through all aspects of your business
9. Consider an Funding Solution
When sales start to increase, you’ll need a good amount of working capital to actually be able to keep up with the growth.
With working capital you can stock up on more inventory for upcoming sales and holidays, increase your advertising campaigns to acquire new customers or diversify your sales channels, and launch new products to increase your Average Order Value without having to fire sale any of your current inventory.
SellersFunding Working Capital Solutions are some of the most flexible funding solutions in the market to help sellers grow faster and more efficiently.