eCommerce businesses need to have so many things to survive in the competitive space. The biggest factors include - a website that functions well and looks pretty, good shipping policy, and proper inventory management. 

The last factor is where most eCommerce retailers make the biggest mistakes. Why? Because there’s no inventory management process in place. 

With a proper inventory management process in place, retailers can grow their business at a steady pace. An inventory management system allows business owners to streamline the warehousing process and help make smarter financial decisions. 

When eCommerce businesses employ inventory management solutions, everything ends up working smoothly. 

Explaining eCommerce Inventory Management

Smartly managing inventory is the most important factor for any eCommerce business. A good inventory management solution works to improve both the frontend and the backend operations of your eCommerce store. 

It ensures that products are always in stock, so you don’t lose customers due to incorrect information. 

eCommerce inventory management at its core is about tracking the location of goods, amount of goods available, pricing, and the stock of entire inventory for your business. 

For online stores, inventory management solutions help in tracking inventory for multiple channels, managing inventory, and more. 

Importance of eCommerce Inventory Management

Before finding the right eCommerce inventory management solution, you need to understand the value it brings to your eCommerce store. If your inventory management process isn’t good, it’s going to impact every part of your business. 

Above all, the benefits of inventory management solution is that it offers complete visibility into inventory counts across all locations. It also allows you to track when the inventory leaves your warehouse and when it reaches the customer.

Users can also see how many products are available on your website, how many under-stocked, and how many are out of stock. Having a complete overview of your inventory allows you to better forecast inventory purchases and prepare for potential shortages.

With a reliable inventory management system, your customers can have a better buying experiences. Customers won’t have to leave your website because something is out of stock. 

Common eCommerce Inventory Management Strategies

eCommerce businesses come in all shapes and sizes. So, there cannot be a single eCommerce inventory management technique. Let’s go over some of the most common eCommerce inventory management strategies that businesses can employ.

#1. ABC analysis

eCommerce businesses can categorize inventory in 3 areas using the ABC analysis method. Each category is based on how profitable a SKU is.

Let’s break it down:

• Category 1 is made up of high-value products but are low in quantity.
• Category 2 is made up of products that are moderate in both value and quantity.
• Category 3 is made up of products that are low in value and high in quantity.

Whenever you break down inventory into these categories, it makes it easier for your business to sell multiple product lines. Why does that help? Because diverse product lines allow customized restocking processes. 

Businesses that implement the ABC analysis strategy have more control over each product’s restocking. 

#2. Just-in-time inventory

If your eCommerce business doesn’t require you to keep a lot of inventory on hand, then you should take advantage of the just-in-time strategy. This strategy is for businesses who need to restock only when they’re purchased by customers. The volume of inventory required is equal to the number of filled orders.

This type of inventory management strategy works best for businesses that sell seasonal merchandise. These businesses order enough products to get them through the season. As the season is about to wind down, businesses don’t order more as they can clear the shelves without the fear of losing money.

How many products you have to order, when you have to order again, and other things are part of the type of business you’re running.

#3. Dropshipping

Dropshipping has become one of the most popular and convenient ways to manage inventory. While it is convenient, it’s not a straightforward inventory management process as business owners don’t touch the product at all.

In dropshipping, when a customer places an order, the business gets it from the manufacturer and sends it directly to the customer. In dropshipping, a business owner doesn’t get to touch the product at all.

While dropshipping may sound easy, the primary drawback is that the business has no control over the customer experience. 

As manufacturers are the one who's going to do all the work after a customer orders, the manufacturer gets to choose how they pack and deliver the goods. If a customer receives a broken or incorrect product, your business is to blame. 

#4. First in, first out

The first in, first out strategy is the most used technique in the eCommerce space. Especially for those who are selling goods with expiration dates.

First in, first out as the name suggests, means that the products that arrive in the warehouse first are the first ones that have to be fulfilled.

But the strategy just isn’t for selling perishable goods, any eCommerce business can implement this strategy. Before implementation, be sure to study the price patterns of your goods and materials carefully. If the price fluctuates often, it can lead to inflated profits due to the difference between the cost of goods received and the costs of goods sold. 

#5. Safety stock

Safety stock is another sought after inventory management strategy that businesses use. This is an ideal strategy for retailers who hold extra inventory in case demand increases suddenly. 

Compared to the JIT method, safety stock helps you cover unexpected expenses and demand fluctuations to meet growing customer demands. 

Retailers use safety stock to plan ahead for times when customer demand could increase exponentially. So when you store extra stock, you’ll be able to overcome the challenges that arrive unexpectedly. 

Conclusion

Managing inventory properly is one of the biggest challenges for eCommerce businesses. Implementing the inventory management strategies we’ve discussed above to create better visibility into your existing stock and where it’s located.