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How Does Ecommerce Inventory Management Save Money?

For ecommerce businesses, inventory and cash flow go hand in hand. That means you need a solid inventory management strategy to reap these benefits.

As ecommerce continually gains a larger share of total retail sales, businesses miss numerous opportunities the longer they wait to shift online. But as any online retailer, brand, wholesaler, or warehouse supervisor could tell you, managing an ecommerce business is a complex task.

Another nugget of wisdom you’d hear from anyone in the industry? One of the most important aspects online business owners need to focus on is ecommerce inventory management. An effective inventory management system is the core of a healthy online retail business. But what makes it so important?

Let’s revisit why this function is so imperative and how a successful inventory management strategy benefits every kind of ecommerce business.

Why Ecommerce Inventory Management Is Important

Inventory is the backbone of any ecommerce enterprise. It dictates crucial elements of your business, including cash flow, operations, and marketing strategy. Therefore, managing inventory is one of your first must-do tasks when learning how to start an online store—and when growing it.

That’s why most retailers and brands turn to technology like an inventory management system, which is designed to make processes like organizing and tracking items more efficient and accurate. Considering that most people do their shopping online, ecommerce businesses must know the real-time status of their inventory to maintain a structured fulfillment process. This allows companies to forecast and develop a sustainable, data-driven plan and ensure they can keep up with fluctuating demand and market conditions. 

That being said, let’s take a look at a few benefits that an ecommerce business can get with a good inventory management strategy.

1. Never Overstock or Oversell

Two of the most harmful cases you can avoid with proper inventory management? Overstocking and overselling. Without accurate inventory data, you simply cannot maintain stable business operations and will fall prey to one offense or the other.

For starters, companies that neglect their inventory management duties tend to make inaccurate restocking decisions. They might run low on inventory during high-demand seasons and miss numerous sales opportunities, not to mention the impact on the overall customer experience. Failing to fulfill demand is incredibly harmful to your brand reputation. Around 21% of customers switch to another store when a product is out of stock—and this number increases when stockouts become a repeated occurrence on an ecommerce site.

On the other hand, too much inventory can result in a pileup of unsold products, known as dead stock, due to low demand and expiration issues. This overstocking is a huge blow to your bottom line because it significantly increases storage costs, especially if you’re paying for a warehouse. In fact, industry experts say this is the number one mistake brands and retailers make when it comes to all things inventory. 

Implementing proper inventory management techniques lets companies have better control of their stock. Try inventory forecasting before reordering items to maintain accurate stock data and avoid losing sales and customers—without keeping too much on hand. Another way to avoid overstocking and overselling is by “hacking” the supply chain. Consider working with multiple parties to source products, for example. Look for the closest production facilities and adjust the delivery cycle based on your historical sales data.

2. Provide a Better Customer Experience

Customer satisfaction plays a significant role in every business’s success, and ecommerce is no different. In this field, business owners need to ensure customers have the best online shopping experience to gain their loyalty and raise sales potential.

According to Altfeld, businesses have significantly higher chances (a whopping 60-70%) of selling a product to an existing customer than to someone new. However, this can be quite difficult for ecommerce businesses with poor inventory management systems. For example, overselling means “Out of Stock” messages will litter your website, and that disappointment creates a poor customer experience—one that will drive them straight to your competition. 

Fulfillment-related issues, which are directly related to inventory, can also significantly harm customer retention. Roughly 69% of consumers are less likely to visit an online store again if an order gets fulfilled as little as two days late. Hubspot also pointed out that 50% of US consumers have left a brand they were loyal to for a competitor that better met their needs.

All of these issues can be prevented by implementing the right inventory management method for your particular business model. Proper inventory tracking allows an ecommerce business to display actual inventory statuses on its website and avoid letting customers down.

Accurate information about your product can help build a sense of alignment and trust with customers, leading to higher chances of conversions. 

3. Maximize Sales Across Channels

While multichannel selling can give you the advantage of a wider market reach, it complicates the inventory management process. This is where centralized inventory control software comes in handy by removing the need to reserve inventory in multiple channels. Without a centralized management system, it’s difficult to display an accurate stock count for each sales channel. Even worse? If you manually list a portion of your inventory on each channel but have more demand on one platform than another, customers will quickly see that dreaded “Out of Stock” message.

There are numerous inventory management software options available on the market that come with various features and pricing plans to cater to different companies’ needs and preferences. Thousands of ecommerce businesses utilize Webgility, which automatically keeps your accounting and inventory data up-to-date by integrating with QuickBooks and dozens of ecommerce channels. Try it free to see how the solution saves you time. 

4. Easily Oversee Multiple Inventory Locations

As an ecommerce business grows, it may need to distribute inventory to multiple locations to quickly meet customer demand in more market locations. However, overseeing multiple warehouses can be a challenge in itself.

Therefore, ecommerce business owners need to set a clear and comprehensive management system to maintain a smooth and integrated fulfillment process. Workforces located in these different branches must also follow the same workflow and regularly report inventory levels in their respective warehouses/inventory locations.

Using inventory software and an automated system is also necessary for large-scale supply chain management. Multichannel inventory management solutions give organizations better visibility into their total inventory to see the products they have, the condition of the items, and where they’re located.

Inventory management also lets companies understand market conditions and preferences in different locations by analyzing factors like inventory turnover and purchase trends. This information can help you develop better marketing strategies and predict future sales.

Business owners can also integrate their inventory management system with local suppliers to stay updated on product prices and availability. This makes the ordering process more efficient and ensures suppliers have the products available when you need them. Last but not least, an integrated inventory management tool like cloud-based software can sync data from multiple warehouses, so all your information is streamlined and stored in QuickBooks in case of technology glitches at any of your inventory locations.

Reap the Rewards of Inventory Management

Online retail businesses can manage inventory more efficiently and gain numerous benefits with the right system and tools. Business owners should also implement appropriate inventory management techniques to save money and create more sales opportunities. Even though this might seem like a complicated process, there are numerous ways to make your inventory management workflows more efficient. 

Good luck!


By Jessica Paulson, SDK Marketing

The Webgility Team

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