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5 Pain Points of Inventory Management for E-Commerce

Posted: May 02, 2019 by Ly Phan

5 Pain Points of Inventory Management for E-Commerce

The pain points of inventory management for e-commerce seems to have grown with the industry. The sector is growing fast and has proven to be one of the most dynamic and exciting industries to be involved in. However, it’s equally true that online sales account for a tiny proportion of total retail purchases. According to the US Department of Commerce, e-commerce accounted for 12.1% of retail sales by the final quarter of 2018.

The proportion of online sales to total retail sales represents both stunning growth and opportunity in inventory management for e-commerce

The data shows that e-commerce is very much on the upward trend. Despite the competition, the opportunity to become a successful online store owner remains as attainable as ever.

As with any industry, there are several challenges that store owners must face. A prime source of these challenges is inventory management.

 

Inventory Management for E-Commerce

Ensuring proper inventory controls is essential for a successful e-commerce business. With the global nature of online retail, there’s more emphasis than ever on tracking items at every stage of the process. High return rates, maintaining stock levels, and fulfillment are just some of the challenges store owners face.

Whether you are a store owner with a warehouse or an e-commerce fulfillment center, it’s essential to understand the pain points when it comes to inventory. In this blog post, we will identify the key challenges and what you can do to address them.

1. Fluctuating Demand

As with any retail business, fluctuating customer demand poses a challenge in terms of managing stock levels. For example, as an apparel store, you would experience seasonal trends, and you need to plan the inventory around the seasons. However, some trends may be less predictable, and you could end up having too much stock, leading to unnecessary expense or too little, which results in lost opportunity.

What you should do: Plan ahead as much as you can to ensure you have an optimal supply to match demand. A stationary store, for instance, would look out for the start of a school year and ensure it has plenty of stock in place, ready to go.

For trickier areas like fashion or groceries, then it pays to have an intelligent inventory management system in place, where it can process the data and help to foresee demand.

2. Returns (Reverse Logistics)

One of the unwelcome trends e-commerce businesses have experienced is a high rate of product returns. According to Invesp CRO, at least 30% of products bought online are returned. In comparison, the return rate for brick and mortar stores is 8.89%,

Given the high percentage, it can be a challenge to organize the returned products and ensure they do not get mixed up in the system.

What you should do: Have a designated area in your warehouse for returned products, and your team should identify which products can be resold or broken down into smaller components. Alternatively, you could outsource the work to a third-party. The key is to have a plan to deal with inevitable product returns.

The aim is to minimize any potential losses. As a renowned industry expert, Dr. Ryder Snell says, “the management of reverse logistics is crucial for survival.”

3. Stock Control

In a fine balancing act, one of the biggest tasks for e-commerce businesses is to have just the right amount of stock. This is particularly pronounced with perishables such as grocery or anything that has a short shelf-life. According to Retail Dive, 83% of survey respondents said that overstock was a problem in their organization.

When storage is at a premium, it’s critical for e-commerce stores to get this balance right. As the well-known Pareto Principle points out, 80% of your profit will come from 20% of your products. The other 80% will simply cost you money. This underlines the importance of maintaining healthy stock levels.

What you should do: Be decisive in selecting the products to focus on and ditch those that are not selling. Consider the storage space you can afford and limit the amount of time your stock spends in your warehouse. Use an e-commerce order management system to help identify trends and select the right products. After all, the longer your stock is sitting there, the higher the costs.

4. Real-Time Visibility

One of the advantages of having a good grip on stock levels is you would then be able to share product availability with customers. One study by UPS found that 58% of online shoppers said it was important to see the availability of the product before making a purchase. This is something e-commerce giant, Amazon, excel at:

Amazon demonstrates one of the benefits of inventory management for e-commerce

 

As you can see, Amazon makes it clear this chair is “In Stock” in the purchase area, offering an additional layer of reassurance to shoppers.

What you should do: Follow Amazon’s lead and have the ability to share inventory levels in real time. This will lead to higher conversions and increased profits. Look into technological solutions that can integrate your WMS with the e-commerce store to facilitate this.

5. Multi-Channel Shopping

Many e-commerce businesses have more than one outlet for selling their products. For example, you may be selling on Amazon and Shopify platforms, as well as having a brick and mortar store. There’s also the added factor of shoppers who buy online and elect to pick up those items in store. Without any proper inventory controls in place, you could find yourself losing track of key products and experiencing stock shortages.

What you should do: Ensure that you can see your inventory levels in one place, by utilizing a single platform where you can create an easy to follow dashboard with all the information you need, in real time. There are solutions that can assist you with this.

 

Conclusion: Be Organized

Whether you run an e-commerce store or a fulfillment center, it’s essential to be organized. The inventory is your business - it’s the reason your customers come to you. Therefore, the first step is to put a structure in place so you can track, distribute, and sell your stock. An e-commerce WMS could provide that step forward.

Once you have the structure, you will be able to identify what you need to implement your strategy. An increasing number of e-commerce stores are automating their inventory management processes which save time, costs and improves accuracy.

From a customer’s perspective, there are few greater disappointments than discovering the product they were looking for is either out of stock or misplaced. Such experiences have a knock-on effect on your brand and make it less likely that customer would ever return.

You also need to be prepared for various customer behavior. High return rates and multi-channel shopping pose significant challenges in terms of inventory management. Consider following the suggestions stated above.

The future of e-commerce (and mobile commerce) is bright and secure. It remains to be a lucrative opportunity for business people who are prepared to lay the foundations and build their store around well-organized inventory management for e-commerce, which in turn leads to a smooth shopping experience.

 

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