Apr 20, 2017 4 Min READ

5 E-Commerce Inventory Tactics That Boost Revenue

Nicole Pontius

Nicole Pontius is the marketing communications manager for Camcode, a global manufacturer of asset tracking solutions. At Camcode, Nicole focuses on helping organizations better manage and track valuable assets through automatic identification and data capture practices.

4 Min READ
5 E-Commerce Inventory Tactics That Boost Revenue


Inventory management is not a necessary evil. If you don't see it as an opportunity to improve your ecommerce sales and business, you may be overlooking some inventory tactics that can add to your bottom line. Leveraging sound inventory management processes enables e-commerce retailers tap into powerful tools to boost revenue.

Inventory management is necessary for avoiding problems like backorders, which come with far-reaching impacts, including decreased customer satisfaction, lost brand loyalty, missed opportunities to engage brand ambassadors, and more. The worst-case scenario, particularly for e-commerce retailers with repeat buyers, is that your previously loyal customers will turn to your competitors and get better, prompter service – meaning you may have lost them for life.

The good news is that savvy inventory tactics are relatively straightforward and, thanks to technology, fairly easy to implement. (Which is great news for those of you who don't want to add robust inventory management strategies out of fear of complexity.) Let’s take a look at a few ways you can put inventory control tactics to work to boost your bottom line.

1) Demand Forecasting, Fueled by Data

Does Big Data sound like a big, scary buzzword? A buzzword it may be; scary, not so much. Your business is already generating data, whether you’re leveraging it or not. When you implement a robust inventory management software application, you’ll have an abundance of valuable data at your fingertips, enabling you to analyze sales trends, returns, and other data points that power more accurate demand forecasting.

Knowing what items customers return most frequently (and the reasons why), for instance, is a critical part of ecommerce returns management and can help you make smarter decisions about your product lines moving forward and, if you manufacture your own products, point to design shortcomings that you can improve on. Being able to access historical inventory levels and analyze what products tend to stay on the virtual shelves longest provides valuable insights that help you make data-driven decisions that will grow your business.

2) Inventory Optimization in Line with Customer Demand

Demand forecasting, of course, makes it possible to optimize stock levels to avoid running out of inventory during seasonal demand peaks, and reduce the odds that you’ll end up with an abundance of inventory that’s just not selling (but taking up valuable storage space). No e-commerce retailer wants to incur the overhead costs associated with storing a warehouse full of products that won't move for the next several months.

The ideal scenario is to have minimal leftover seasonal inventory that you’ll need to store for another year, which frees up valuable warehouse space to stock in-demand items that will move quickly, translating to direct ROI for your company.

3) Understand Product Velocity

In addition to leveraging data to better forecast and accommodate customer demands, a comprehensive inventory management solution can also offer insights into product velocity, which is an important variable for optimizing business processes.

Put simply, product velocity is the speed at which a product sells. Some obviously have a higher velocity than others, and some have a higher velocity at certain times of the year. Holiday products, for instance, likely have a higher velocity in the last quarter of the year, whereas these same products aren’t likely to move much (if at all) during the other three quarters.

There are a number of factors that can impact product velocity beyond demand, including:

  • Price
  • Competition
  • Promotional strategies

When combined with distribution (how readily available the product is), product velocity is a strong indicator of overall sales. So, your inventory management solution should be leveraged as a means to measure and monitor velocity, which arms you with the insights you need to make adjustments to pricing, marketing, and other factors that can ultimately impact your sales.

Finally, understanding product velocity and combining these insights with other information such as demand data makes it possible to optimize the layout of your warehouse to enable faster picking and stocking processes. By moving slower-moving stock to out-of-the-way areas and seasonal, in-demand stock in prime locations near the appropriate loading and shipping docks, you can optimize shipping and improve delivery speed, translating to higher customer satisfaction and repeat buyers.

4) Efficient Returns Processes

Returns are often a major pain point for e-commerce retailers, particularly those who are new to the world of e-commerce and haven’t yet realized the importance of established returns processes. There are many questions to consider in setting up a returns process, including:

  • When a customer returns an item, where do you put it? Is it immediately re-stocked or placed in temporary holding while evaluated for resale-ability?
  • How do you determine if the item is re-saleable? Are there regulatory concerns related to resale of any products that you carry?
  • How are returns verified and customers refunded?
  • Is there a re-stocking fee? Are customers responsible for return shipping?
  • How are customers refunded? Are they given store credit, offered a full refund via their original payment method, or mailed a gift card?

Most of these questions are concerns that customers may seek answers to before deciding whether to make a purchase from an e-commerce vendor, so it’s a good idea to not only establish these processes but make customer-relevant information regarding returns readily available on your website.

Doing so will help to establish trust with potential customers, and clearly disclosed policies also serve as a valuable tool should disputes arise.

Additionally, gaining better insights on the items most frequently returned (in addition to the reasons why) will help you make smarter decisions about your product lines moving forward.

5) Do Physical Inventory Counts

Few people find great joy in conducting a physical inventory count (an inventory audit), but it must be done. Relying on your digital inventory count alone fails to account for things such as lost or stolen inventory, goods that have become damaged in shipping or storage and are no longer appropriate for sale, and errors in software (rare, but possible) that can skew your data and lead you to sell more volume than you have on hand.

Lost and damaged inventory is especially important for accounting purposes, as you’ll need to account for these losses at tax time, and verifying the inventory and assets your company controls is an important part of a company valuation if you’re thinking about selling or looking for investors.

If you do have your sights set on selling your business or seeking investment funding, you’ll want to enlist an outside auditor to observe your physical inventory count. An auditor may also use a number of other auditing procedures to ensure that your valuation is accurate.

Most e-commerce retailers didn’t get into the e-commerce business because they had an insatiable desire to manage inventory and analyze data. But every e-commerce vendor wants to make a healthy profit, and leveraging inventory management to implement savvy tactics that boost the bottom line is one of the most effective ways to impact ROI.

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