Just because you are managing an online business, doesn’t mean that you don’t have to worry about inventory. Inventory may not be as enjoyable as planning your marketing and advertising strategies, but it is a necessary step in ensuring that you are making profit. Practical Ecommerce’s Shirley Tan shares some helpful insights on effective inventory management for ecommerce merchants regardless of what you sell online.
According to Tan, some entrepreneurs deal with the inventory issue by drop shipping. Drop shipping is the process by which suppliers deliver the goods directly to the customer. However, Tan further adds that some ecommerce merchants still prefer to have a hand in the delivery process and opt for stocking inventory or a combination of both.
For ecommerce merchants who choose to stock inventory, Tan points out two benefits—being in charge of your own shipping department and having first hand information on which items are in stock. The former allows you to set your own shipping rates and better resolve issues without waiting for the manufacturer’s response. The latter, on the other hand, makes it easier for you to develop promos based on real time inventory levels. However, when stocking inventory in house, there are some issues you need to deal with such as insurance and overhead costs and storage space.
In her article, Tan also shares other inventory management tips ecommerce businesses.
1. Investing in technology. According to Tan, using bar codes will help streamline the inventory process which leads to better forecasting and more efficient planning.
2. Measuring inventory returns
3. Maintaining a healthy relationship with your vendors, which will allow you to negotiate terms and conditions favorable to your online enterprise.
4. Understanding the fact that inventory is essentially money sitting idly. The longer it’s there, the more money is wasted. Thus, this can help you make decisions on excess inventory and how to reduce them.
5. Eliminating “obsolete inventory” through promotions such as gift with purchase.
6. Matching up pricing to avoid shipment hassles and accounting inconsistencies later on.
As a general rule of thumb, Tan recommends organizing your inventory based on which ones are the fast selling goods and which ones are not. Always keep a stock of the fast sellers and based on the market feel, avoid stocking up on items that do not have positive customer response.