5 Ways a Good Inventory System Makes Your Ecommerce Store

For those who sell on an ecommerce platform, inventory is the main hurdle to tackle for success. With online shopping showing no signs of slowing down (Cyber Monday brought in a record-breaking $6.59 billion in sales this year), there are certain inventory practices that should be mastered for a thriving ecommerce store.

Inventory tracking and management for ecommerce via SalesPad

Having a solid inventory system in any sales situation will mean better margins and less losses -- this is no different when it comes to ecommerce. Here are five ways a that smart inventory management helps your ecommerce store soar.

1. Helps you avoid overspending

While one of the worst things that can happen to your business is running out of inventory, overspending and overstocking is not the solution.

While it may seem counter-intuitive, small businesses should carry much less inventory to keep their carrying cost low, according to Jeremy Boogaart, VP of Operations and Business Development at SalesPad.

"Normally, small businesses are not yet well-capitalized and usually don't have the systems in place to really carry inventory well. Typically, you'll see them overbuy to compensate for poor supply chain management, poor vendor management, or poor visibility and reorder points," Boogaart said.

However, better inventory tracking and management can keep a business' costs much lower. A good inventory system can be as simple or as complex as the business requires. Some examples include:

  • A paper process of printing pick tickets from orders on your ecommerce site for employees to follow.
  • Utilizing carts and picking bins to allocate and organize inventory.
  • Using a barcoding solution to match order numbers to inventory.
  • Using inventory management software that integrates with your ecommerce solution.

2. Helps you avoid running out of inventory

"Selling out of an item is one of the most expensive things that you can do, because it costs you a sale," Boogaart says.

A good inventory system can help you avoid running out or selling out of product in your ecommerce store. For example, if your business has other sales channels aside from ecommerce, you can treat your ecommerce store like another warehouse location, segmenting your inventory between ecommerce and traditional retail (or whatever your sales channels are).

"If you're only selling through ecommerce and retail, you absolutely want to split up your inventory and keep them separate," Jacob Pegg, Director of Product Development at SalesPad, says. "Retail sales are very unpredictable. You don't want to lump in the items sitting on your retail store shelves with your ecommerce store, and then all of a sudden there's a run in your retail store and all your items are gone -- leaving you with no inventory for your ecommerce store."

In addition to segmenting inventory, a good inventory system will also help you determine what your turnover is and forecast future sales, helping you keep inventory in stock at the appropriate levels.

3. Helps you avoid marketplace penalties

If you sell on an online marketplace like eBay, Amazon, or Newegg, you must meet certain requirements. For example, Amazon requires that sellers ship books, music, video, and DVD products within two business days of receiving the order from Amazon. If you can't meet that turnaround time, your metrics as a seller will be negatively affected -- you might even risk having your account shut down.

Shipping will be delayed if items can't be located quickly. Boogaart says that a common mistake businesses make as they grow is not switching over to bin labeling soon enough. Using bin tracking and having a digital record of an item's location will allow anyone to pick up an item and get it ready for shipping.

"If an order goes through and you don't know where the item is, or you're unaware that you don't have it in stock, you'll waste time checking shelves and basically doing a physical inventory trying to find a single part or item," Boogaart says.

Jeremy Place, a managing partner at Diversity IT, says his company struggled at first to manage its inventory for ecommerce success. Diversity is a traditional IT reseller and does a lot of asset recovery, picking up old or decommissioned assets from organizations and either selling or disposing of them. The company sells on eBay and Newegg.

Place says that, at first, his company was managing inventory in spreadsheets, which resulted in inaccuracies. His company utilizes SalesPad Cloud for QuickBooks and Shopify, and now tracks more and more inventory in those software programs -- creating an accurate picture of inventory.

Again, a good inventory system can be as simple or as complex as the business requires. It's up to each individual business to determine what kind of system their size and complexity warrants.

4. Keeps customers happy and coming back

"With the advent of Amazon and Prime Shipping, everybody expects you to be able to ship it same day and get it in two days," Boogaart says. "Any delay you have in shipping, whether because you don't have stock or you don't understand what you have or you don't know where it is located, is expensive because you're not meeting customer expectations."

Shipping late or losing a sale because you're out of stock can greatly impact your impression on customers. One negative experience may keep a customer from ever buying from you again -- even worse, it might lead them to write a negative review.

Whether you're selling through a merchant service or hosting your own site (either with a hosting option, like Shopify, or a site built from scratch with Magento), customer satisfaction is possibly the most important determining factor for success in today's commerce world. Companies must be customer-centric in order to stay competitive.

Tracking quantities is a must if you want to satisfy ecommerce customers -- it's a basic first step. However, fully managing inventory and cost will take you to another level. Simply put, the stronger your inventory system is, the stronger your ecommerce store will be.

5. Keeps you efficient

As Place found, having an efficient and quick system for shipping and confirming orders directly affects your ecommerce performance. Avoiding common inventory mistakes meant removing human error from Diversity's processes. Manually inputting orders can spell too much duplication, Place said. Rather, when an order comes in from an ecommerce site, the order is created by syncing with Diversity's inventory management software -- instead of human input.

"This speeds up the processing of the order and cuts down on mistakes," Place says.

Not only does a well-defined inventory system prevent wrong shipments or running out of stock, but it frees up time for team members by allowing orders to be processed more quickly and getting shipments out the door faster.

"Ultimately, ecommerce is no different from any other order channel. Your ultimate goal in having a strong inventory management system is to always have the item in stock and be able to ship it out as accurately and as quickly as possible," Boogaart advises.

7 signs it's time to upgrade your inventory management software.

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