Ecommerce inventory management: A guide to best practices
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If you run an online retail store, you’ll already have some grasp of our subject focus: eCommerce inventory management.
Unfortunately, there is a galaxy between uploading products to your store and putting them in the right places and what we’re discussing today.
We’ll be focusing on managing your eCommerce inventory the efficient way. That involves pushing products to the right customer at the right moment, and all that comes with it.
We’ll be honest: it gets complicated. But there are some basic practices that you can implement right away.
We’ll take a look at the following:
- The definition of effective eCommerce inventory management
- The pillars of managing your inventory
- How to move stock at the right time
- Ways of spotting opportunities to move more stock
- How software can help with eCommerce inventory management
- 5 tricks to implement today
The definition of eCommerce inventory management
In simple terms, eCommerce inventory management is the practice of organizing, managing, and moving the stock on your website.
One side requires the distribution of signals between your frontend and backend to give you and your customers accurate information about stock levels, item location, and pricing. It’s a key part of your supply chain and one that you’re wholly responsible for.
Today, we’ll focus on the second side, which is your ability to take those signals and use them to move the right stock at the right time.
The pillars of managing your eCommerce inventory
When our team analyzes a retailer’s inventory management capabilities, we tend to focus on a few key areas.
These consist of the pillars that you should refer back to when making improvements:
1. Putting eyes on all areas of your site
Certain areas of your site will get lots of traffic, while others are a little more hidden. This could be down to visitors heading to areas you specialize in, or the subjects of your paid ad campaigns.
Every retailer has best sellers and low sellers. For example, if I’m a fashion brand known for boots, the task is often to sell more accessories, like laces or polish. Closing the sales gap between the two will raise your average order value (AOV).
2. Pushing profitable areas
You have high-margin items that generate lots of profit and low-margin ones that don’t.
It’s important to highlight profitable SKUs, but you also need to consider how you sell these to your customers. For instance, does a higher-margin product deliver a bigger saving for the customer? If so, demonstrate why it’s the best choice.
3. Navigating stock levels
How effective are you at selling end-of-line items? Equally, how do you make a splash about products that are usually high in stock?
4. Maximizing the potential of customers
Some customers have items in their shopping cart but could be encouraged to add more.
Managing your inventory the right way can lead to a much higher AOV.
Are you focusing on the right areas?
What’s interesting about these pillars is that each carry a relatively equal level of importance.
You can’t become a profitable business without applying attention to selling high-margin products.
Your warehouses and suppliers will suffer if you sell too much of one product but not enough of another.
You’re missing out on a huge growth opportunity if you don’t have dedicated plays for getting customers to purchase more items.
These pillars hold up a perfectly level ceiling. When you get better at each concurrently, the ceiling gets higher. Now let’s park the analogies and get onto the best practices.
How to move stock at the right time
Moving stock based on your priorities is a fine science. In most cases, data and instructions from a warehouse are passed over to someone in charge of eCommerce operations.
Setting up the technology to feed accurate information and guidance from the warehouse to the trading, merchandising, or eCommerce team is relatively easy. Acting on those signals is the tricky part.
Let’s say you’re a fashion brand with summer items in stock. When you’re at the start of the season, you’re immediately under pressure to maximize their potential. When you’re at the end of it, you’re under pressure to move the stock before it’s too late.
This situation reared its head in 2022 as lower consumer spending left retailers like Target, Gap, and Kohl’s reporting issues with moving excess stock built up in their warehouses.
From our experience of working across numerous retail verticals, there are a couple of basic tricks that tend to work.
Category or collection-based offers
It’s not rocket science. If you can group your SKUs into categories or collections, you should.
Womenswear brands targeting younger demographics tend to do this with ‘festival’ collections when summer comes around. Keeping ‘trending’ products in one place helps customers find what’s usually on their mind.
Daily deals
Daily deals should be used where possible to move items that are high in stock.
Setting up an offer for a single item is easy - the challenge is finding a good place to run it.
Some retailers use their homepage to promote their daily deal. Although it can make a strong impression, changing the content on your homepage every 24 hours can prove time-consuming.
An alternative is to launch this within an Offers Wallet that stays with the customer. The content within the tool can be switched out easily, making it simple to run different promotions every day.
Ways of spotting opportunities to move more stock
When trying to sell more stock, being proactive can go a long way.
We advocate the use of technology to find customers with a high likelihood of adding more items to their cart. You can base this assumption on many signals, from cart contents to their on-site behavior. From here, you need tools that recommend products when the chance arises.
Cross-selling
Product recommendation engines are excellent for moving excess stock and getting customers to buy sets of items.
A common eCommerce inventory challenge among fashion retailers is having low stocks of tops but high stocks of bottoms. This was the case for fashion brand Splits59, which managed to increase AOV by +13% by pushing outfits through RevLifter’s native overlays.
Read the full story to see how the brand also increased CVR by +133% with several cart abandonment plays.
Weather/location-based targeting
Research finds seasonal fluctuations to be one of the top inventory management challenges among B2C businesses. To solve it, you should try moving customers into purchasing mindsets before they get there.
One of our favorite campaigns from recent years involved an automotive specialist that wanted to sell more summer products.
By linking native overlays to a real-time Accuweather integration, the brand was able to push air conditioning refills to customers in areas where the temperature was set to rise.
The promotion engaged customers in areas where a five-day forecast showed temperatures hitting above 30 degrees Celius. The result? A +260% increase in air con revenue vs the previous summer.
How software can aid eCommerce inventory management
Managing your eCommerce inventory is a challenge best tackled with technology at every stage of the process.
First, you’ll want to use an eCommerce inventory management software to create a link between your warehouse and trading teams. The best tools provide real-time visibility over your inventory and its performance. Some will even automate certain workflows, purchase orders, and warehouse operations
For buying the right amount of stock, an eCommerce inventory planner or eCommerce inventory forecasting tool is vital. These factor in everything from sales to seasons and your marketing campaigns to advise on what to buy and when.
Both of these technologies can help your business prepare for all conditions. Nevertheless, they won’t help you turn their signals into actions.
The missing piece in your eCommerce inventory management process is the final one. You need a tool that pushes and pulls SKUs based on what’s happening in your warehouse.
At RevLifter, it’s an Intelligent Offer Platform that provides options for promoting certain items or categories based on your priorities.
Whatever you choose, there are certain qualities to look out for:
Easy to use
Promoting your stock is a dynamic practice. You need to react quickly to changing conditions, sometimes on a daily basis. A simple set of controls makes things much easier and more efficient.
If you can automate what to push based on rules linked to your SKUs, even better.
Impactful promotions
How do you sell more stressed inventory, or maximize sales of ‘trending’ items? By boosting your conversion rate (of course).
Choose a technology with formats that your customers will actually engage with and tools that have been designed with a quality experience in mind. The very best will highlight new offers, recommendations, and other messages without being disruptive.
Granular rules
Sell more products by finding the right customers for them. These days, it’s possible to create specific segments containing audiences with a high likelihood of being upsold or cross-sold.
Think of this. You have to drive sales of ‘Product X’, which maybe goes with ‘Product Y’ and is an upgrade on ‘Product Z’. The right technology can identify which customers need which offer, based on your priorities.
5 tricks to implement today
It takes time to get your eCommerce inventory management system in a good place. We’d recommend covering these five points before anything else:
1. Start small
Implementing basic plays like daily deals is a great start. Once you have these in place, you can swiftly move on to more advanced ways of highlighting certain products when needed.
2. Use the weather and location data to drive demand for seasonal promotions
Some products or services lend themselves to certain seasons. Location and weather-based targeting enables you to spot the right audiences, especially in markets like the US where temperatures range from state to state.
3. Use technology to link your warehouse with your site
There are so many different tools for helping you get the right cues from your warehouse. Find something that gives you data you can actually use.
4. Use labels to your advantage
If a product is selling fast, tell your customers. If a product is at the end of a line and close to selling out, tell your customers. If a product is in high supply and needs a push, maybe don’t tell your customers, but highlight it instead.
Wherever you’re pushing a product, think about adding extra information and labels to build demand.
Get the final piece in the puzzle
Every eCommerce site needs a solution to respond to its priorities.
The final piece can take lots of forms, but we’re big fans of sticky tools like Offer Wallets. Simple reason: they stay with the customer without being as invasive as an overlay. Plus, it’s easy to switch out the content on a daily basis.
