Product-based businesses have many unique challenges and hurdles to overcome, whether they run a brick-and-mortar retail location or operate entirely online. eCommerce companies have additional struggles when it comes to inventory management, which is often handled at a remote location. Inventory management is at the core of product-based operations. It impacts how fast customers receive orders, how much space you need, how much staff you need, and it can eliminate unnecessary waste. As your business grows, always remember just how important eCommerce inventory management is. Keep reading for tips and best practices for eCommerce inventory management.
What is eCommerce inventory management?
eCommerce inventory management is a method of maintaining inventory that includes the sourcing, storing, shipping and tracking of an online retail company’s product inventory. No matter how an eCommerce business chooses to maintain their inventory, they must consider a variety of factors such as which products to keep in stock, how much product to order, and how often to order more inventory. While these are broad points to consider, you should also consider smaller details such as which products you sell the most of. Can you make these products easier to access? Inventory management is all about making inventory and fulfillment as efficient as possible.
How does an eCommerce business maintain their inventory?
There are a number of ways that an eCommerce business can fund, stock, and maintain their inventory.
eCommerce businesses often use third-party order fulfillment, logistics, or dropshipping companies rather than maintaining their own warehouse and shipping department (which can be expensive).
These methods can save money, eliminate the need for additional staffing, and improve shipping speed and efficiency. However, without the proper inventory management system, businesses can still make costly mistakes when it comes to ordering and maintaining their products in stock.
Biggest challenges related to eCommerce inventory management
There are a few key challenges that eCommerce companies must watch out for when attempting to effectively manage their inventory. Here are a few of the biggest challenges related to inventory management.
- Overstocking: Overstocking is a common issue for many eCommerce businesses, especially in the beginning stages of growth. It can be tempting to purchase more inventory than you actually have a demand for, particularly when you are still learning what your customers want and need. However, overstocking can hurt your company’s cash flow, profit margins, and bottom line. Overstocking can also happen as a result of poor inventory management.
- Overselling: On the flipside, overselling occurs when you have more incoming orders for a product than you have inventory. Few companies want to have to tell customers that one of their best-selling products is “out of stock” or have to pull the plug on a potential money-maker due to a lack of inventory or poor inventory management.
- Lack of visibility within multiple warehouses: Inventory visibility is the ability to view and track your inventory levels in real time. Your customers rely on this information to purchase products based on availability. Without a clear way to monitor inventory, you risk overselling products, which subjects your customers to late shipments and decreases customer satisfaction. Inventory visibility also helps you have access to accurate information about your products in order to identify your best-selling products, calculate customer demand, and identify opportunities to improve your profits. Inventory visibility can especially be a challenge for eCommerce companies who often have to monitor inventory remotely across multiple locations.
- Lack of data and insights: Having the right analytics allows business owners to make informed decisions when it comes to keeping up with customer demand and preventing excess inventory. Without this information, many business owners are simply taking a shot in the dark when it comes to ordering and maintaining their inventory levels.
Tips for managing your eCommerce inventory
In order to have a successful eCommerce business, consider the following tips for keeping up with your company’s inventory in the most efficient way.
- Forecast future inventory demands: One of the best ways for businesses to calculate future inventory demand is to make projections based on past sales. New and emerging businesses must also take into consideration basic product demand. By accurately projecting demand you can attempt to stock just the right amount of inventory to avoid over or under stocking.
- Understand basic product demand: The ability to identify your target customer and most demanded products are essential to successfully managing your eCommerce inventory. Changes in both market conditions and current trends can also have an affect on your need to purchase more inventory. No matter what type of products you sell, the old adage rings true: Everything is about supply and demand.
- Prioritize products using ABC analysis: ABC analysis classifies and prioritizes your inventory using 3 categories: (A) high-value products with low sales volume, (B) moderate-value products with moderate sales volume, and (C) low-value products with a high sales volume. Taking the time to use this system will both boost efficiency and save you money. For example, using ABC analysis can help companies understand which products need to be ordered the most often, and which big-ticket items you should avoid overstocking.
- Prepare for seasonality: Most businesses experience some fluctuations in demand due to changing seasons. Whether you have a clothing business or carry certain products that increase in demand during the holidays, it’s always important to prepare for seasonal fluctuations. Failure to consider consumer demand for your products can lead to overstocking or overselling.
- Automate your inventory management: Automating inventory management is one of the best ways to improve efficiency. While there may be investment involved in automating systems, in the long run it will save you money in terms of mistakes, missed sales, and labor. Without an automated way to monitor and manage your inventory, it’s going to be difficult to scale and grow. Inventory management software can eliminate many of the pain points mentioned above such as overstocking and overselling, lack of inventory visibility, and lack of product insights. Looking for an automation tool? Checkout eComEngine’s ReStockPro.
What is the best strategy for managing your eCommerce inventory?
Most importantly, just have a strategy. Approaching inventory management with no strategy is a recipe for disaster. It may work for a short period, but it will be a dead end for scaling your business.
Whether you use a 3PL (third-party logistics) provider, a dropshipping company, or an order fulfillment warehouse, your product-based company will benefit greatly from maintaining your inventory based on data and insights. Doing so will help you increase your customer satisfaction, sales volume, and profits.
As you work to build an inventory management system for your product-based company, it’s important that your strategy is entirely data-driven. By implementing insights into your eCommerce inventory management system, you will be able to eliminate costly issues such as overstocking, overselling, failure to account for season fluctuations, and more. Instead, you will be able to use consumer analytics to forecast future product demand, maintain accurate inventory levels, and save your company money.
How Kickfurther can help
Funding inventory while trying to grow your business can deplete cash flow quickly. As a business owner, you may be shy to reach out for help or unsure about where to get help. Without giving up ownership or paying high interest rates, there is a solution for affordable inventory funding.
Kickfurther is the world’s first online inventory funding platform that enables companies to access funds that they are unable to acquire through traditional sources. For companies that sell physical products or non-perishable consumables and have revenue between $150k to $15mm over the last 12 months, Kickfurther can help. We connect brands to a community of backers who help fund inventory on consignment and give brands flexibility to pay that back as they receive cash from sales.
With cash for inventory and an effective inventory management system, you’ll be on the path to achieving an efficient and profitable business.
Closing thoughts
Optimizing your inventory management systems (including cash for inventory) can go a long way towards building a successful product-based business. eCommerce companies need an inventory management process that is quick, efficient, and reliable. In addition to implementing data-driven solutions, forecasting product demand, and preparing for seasonal fluctuations, businesses also need enough inventory.
Kickfurther can help startups and small businesses fund millions of dollars of inventory at costs up to 30% lower than the competition. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours.
Interested in getting funded on Kickfurther? Create a free business account, complete the online application, review deals, and get funded in as little as minutes!
