Why Inventory Management Is Key for eCommerce Businesses

Brahm Buck

A professional and productive inventory management strategy is the core of any successful eCommerce platform. Many retail businesses fail because they have no clear system for managing their inventory effectively and efficiently. From organizing products efficiently to keeping stocks ready around the clock, inventory management plays an important role. Well-organized […]

A professional and productive inventory management strategy is the core of any successful eCommerce platform. Many retail businesses fail because they have no clear system for managing their inventory effectively and efficiently.

From organizing products efficiently to keeping stocks ready around the clock, inventory management plays an important role. Well-organized inventory management can not only help you in getting an edge over your competitors but also stay organized in your stock management.

A report by the Bureau of Statistics confirms that the number of operating and functional warehouses has increased drastically from 2013-2017 by a whopping 10.4%. Businesses that implemented comprehensive inventory management report that 95.4% of their orders are delivered to customers. The report also shows a decrease of 7.5% in the frequency of out-of-stock situations.

eCommerce businesses that do not have a proper inventory management system are losing customers, money, and reputation due to customers’ order cancellations and poor experience.

If you’re wondering how much time and attention you should dedicate to your eCommerce store’s inventory management, you are at the right place.

This article highlights the main reasons why you should focus on inventory management as much as you focus on other areas of your eCommerce business.

What Does eCommerce Inventory Management Involve?

Every eCommerce inventory management process is intertwined with other processes. Keeping the records, measuring the total items in stock, locating the items, managing the price, and presenting available products; all play a role in determining how well your business is doing.

An inventory management process is designed to help you organize your stock and systemically track the items for an organization. This provides a more accurate way of keeping track of all stock, improves operational efficiency, and supports company growth

Your products can be hosted in your personal warehouse offered by a third-party 3PL partner (Logistics Fulfilment Center), or a completely separate warehouse managed via dropshipping.

Inventory management enables you to know the real time status of all the products, whether they are in stock, overstocked, out of stock, and understocked. The complete process of inventory management depends on the purchase planning of a business organization.

In any kind of warehouse, intuitive and in-depth control over the complete inventory gives admins a summary of revenue generated from every single category and the current status of availability of products.

This even allows businesses to make much more informed and progressive decisions with respect to other strategies including marketing and sales.

Here are some reasons why inventory management is a must to succeed in eCommerce. We also extend to explain how you can efficiently use your inventory management to satisfy your customers’ needs.

Let’s begin!

1. Boost Customer Experience

Customer experience is not just about product presentation. Having the right products in stock at the right time is a huge contributor to a positive customer experience. The websites that allow users to get insights into the availability of different products leave a better impression on the customer.

Many eCommerce businesses use innovative ways to make sure they keep their customers hooked even when a product is not in stock. One such example is providing a “notify me” option to users when a product they’re looking for is out of stock.

This not only builds trust but also keeps your audience hooked to your store until the item is back in stock.

With efficient inventory management, you can keep your website up to date with your backend inventory status in real-time. You can add or remove product details when they are available or unavailable, respectively.

Having a mismanaged and wrong set of data displayed on a website about the stock could lead to customer disappointment.

The key to success here is delivering an insightful and effortless experience to the customer with respect to the items in stock. An accurate and simplified display of data about inventory allows your business to develop a sense of alignment and trust among the customers.

It minimizes unexpected stockouts resulting in improved sales and customer experience.

This is especially important if you’re selling your products via different channels like Amazon, Etsy, and your website at the same time. Make sure you update information in real time and boost your customer experience with efficient inventory management.

2. Never Overstock or Run Out of Stock

As simple as it may sound, ensuring that enough products are in stock is vital, yet many businesses fail on this point and are unprepared to deliver. It is a critical part of inventory management to ensure that there are enough products to supply all orders.

Data suggests that if you are able to avoid overstocks and out-of-stock situations, you save inventory management costs by 10%.

Lack of stock due to improper inventory management can have a long-lasting effect on businesses. Missing sales, refunds, and customer service issues with unsatisfied clients will eventually make you lose customers.

One client lost is a lifetime loss of potential revenue.

On the flip side, too many products in stock can be damaging for a business. Products can become outdated after a while making them impossible to sell. It means that the original investment is lost, and also the potential profit is at stake.

If you have space limitations and pay to keep your stock in a location, over-stocked products cost you even more. Products can deteriorate after a specific time, making them a total waste of money and space.

When products are unavailable, online shoppers have different reactions and behaviors:

  • According to Flowspace.com, when faced with a stockout, 25% of consumers will continue shopping but won’t purchase a substitute for their desired item at that store.
  • In fact, 43% of consumers will go to another online store to buy the same item.

As you can see from these examples, potential customers are going to shift store, brand, and sometimes buy another type of product.

How to ensure you never run out of products and keep a proper inventory?

  • Prevent inventory discrepancies utilizing an inventory management system
  • Understand consumer demands based on historical data
  • Wok on effective promotion and marketing to ensure sales
  • Take into account seasonality for higher or lower sales

3. Get Insights into Your Business’s Growth Easily

Including inventory management plans in your business model canvas can help you manage your organization’s growth more efficiently, especially if you are a start-up.

A well managed inventory is a sign of a well run business. If you want to sustain the growth of your business, it’s important that you efficiently manage your inventory and strategically plan for it.

With an efficient inventory management process in place, you can analyze trends, measure the results of your business efforts, and make timely decisions that impact your overall profit margins.

The complexity of inventory management increases when large businesses opt for multiple warehouses scattered across different parts of the world. Imagine having to coordinate amongst different product categories across various warehouses without efficient inventory management in place.

With the help of inventory management tools that smoothen up the process for you, you get real time alerts so you can make timely decisions. What’s more? You can look into inventory insights for a specific duration to get insights into your overall business growth.

Inventory management systems provide you deep insights and visibility into all of your warehouses in real time, making it simple for business organizations to keep records and data of their stocks and plan for future procurement.

4. Get Returning Customers and Better Reorder Capabilities

The biggest asset of any eCommerce store is the number of return customers. A returning customer means your products and services are satisfying and fulfill customer needs.

Having proper inventory management means that you will never lose a client over lack of stock, long delivery times, and refunds. An excellent customer experience will make your brand memorable, and the customer will re-order.

Owing to the ever increasing customer acquisition costs, it is economical and easier to hold an existing customer than to attract new customers. But it requires a powerful strategy that keeps your current customers interested in your products and eventually buy more.

Efficient inventory management will boost reordering. Overall, you want to make the reorder process as simple as possible.

How to make reordering easy for customers and attract new sales?

Set up one-click reorder

Set up an order history page in the customer account. Then add a button, easily visible and catchy, next to each item they have ordered, incentivizing them to click it for a quick reorder.

Integrate a subscription buying option to your store

Set up your site to add subscription buttons to past orders and new orders, leaving the possibility for a customer to decide how frequently they want a new shipment. In this way, everything is automated, and customers do not need to remember to place an order.

Send a “time to reorder” e-mail reminder

Send an e-mail reminding the customer to buy again, offering a discount or other incentive. Apply email marketing best practices to boost click-through rates and conversions.

5. Getting Prepared for the Unexpected

Predicting the future is impossible and we all know that. What’s important here is that managing the inventory could help business organizations to prepare themselves for any unexpected product chain or supply chain issues.

Some of the most common issues related to inventory management are:

  • Delay in the delivery of the product from the manufacturer
  • Sell out of a particular product unexpectedly
  • Running out of physical storage space in an inventory
  • Cash flow issues

You can create a contingency and proficient plan for all inventory management problems that might occur in your business process.

6. Prepare Yourself for Seasonal Sales and High Demands

Running an eCommerce store is a lot about understanding your customers’ demands and the current trends.

This is where seasonality matters. Taking advantage of all festive seasons and leveraging the practice of shopping on these festivals is very important for all eCommerce businesses. Every year, eCommerce platforms experience a sudden boom during seasonal sales, especially winter sales and Black Friday sales.

Managing inventories between these festive seasons is very important. The last thing you would want is inventory data error and going out of stock during a sale.

Bottom Line

A well-planned inventory management is important because it helps in keeping track of the items in a store. A typical way that an efficient inventory system works is by tracking sales and ordering new products when stock runs low.

Educate yourself and your team about inventory management attributes. Making the right decisions at the right time can work wonders!

Merging all your products under one roof can save your time and establish seamless management throughout your business tunnel.

If you are not familiar with inventory parameters, you can employ reliable inventory management software to make the process easy. This software can come in handy especially when you’re starting an online business. From accounting to customer satisfaction, inventory management can be customized with respect to your project or business.

Well-planned inventory management can help grow your business and improve customer service.


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