The Ultimate Guide to Ecommerce Inventory Management

In this article, we’ll look at the fundamentals of inventory management, why it is so important for your retail business, the unique challenges of stock control as a multichannel retailer, and we’ll share some useful tactics and tips for mastering the mystery of inventory management.

Inventory management for multichannel retailers

Many bricks and mortar retailers pride themselves on their mastery of inventory management. Working in their sector for years, knowing their customers on a personal level and understanding the changing taste of their audience (through regular face-to-face interaction) allows them to intuitively forecast when they need to re-order or run down their stock.

This ‘sixth sense’ for stock management is a skill elite retailers develop over time. However, recent research suggests that not all retailers share the same superpower: according to one report, up to 18% of UK retail stock is potentially made up of unavailable inventory.

Retailers, even the superpowered ones, might be reluctant to admit it but that intuition of when to re-order or when to rundown stock has usually been grown through the bitter experience of being over or under-stocked in the past!

And when it comes to selling in physical retail and online simultaneously, the complexity, rate of change and likelihood for error increases tenfold.

What is retail inventory management?

Inventory management is the process of tracking, managing and organising your product sales and purchases into a system that creates maximum profitability for your retail business.

Many exclusively bricks-and-mortar retailers still rely on manual stock management processes.

For exclusively online retailers, their e-commerce system can often perform the basic functions of a modern inventory management system, allowing them to set low stock alerts and to easily analyse past performance to forecast future demand.

However, for multichannel retailers or omnichannel retailers, the challenges of accurately and efficiently managing your inventory dramatically increase.

We have heard a few horror stories over the years from multichannel retailers who did not use a unified inventory for their online and offline shops and who failed to factor in a surge in demand caused by a particularly successful online promotion.

The unexpected success of their promotion meant the majority of their stock was snapped up overnight, leaving them with little to satisfy customers who came into their physical store the next morning.

To make matters worse, the higher online return rate meant a large proportion of stock ended up coming back to them and, as demand had died down again, they failed to sell it at full price – impacting their longer-term profitability.

What systems do retailers use to manage inventory?

Different retailers have different systems for managing their stock and they can range from the old handwritten stock book to complicated excel spreadsheets, right through to specialist omnichannel inventory management software.

It’s safe to say that only the most basic of retailers with the smallest possible range of products could rely on a handwritten stock book! But many retailers still try to ‘make do’ by manually pulling together their system from their cash register receipts into spreadsheets and tables.

Manually entering data massively increases the chances of mistakes and with your shop’s profitability on the line, a small investment in a proper system makes good business sense.

Any manual system limits your business’ ability to grow as the work required to maintain it will inevitably grow as your sales grow. Investing in proper software automates many of these processes, allowing you to continue to grow your business without worrying about the added workload of multiplying worksheets, complex formulae and tricky pivot tables!

When you add multi or even omnichannel sales into the picture, a fairly sophisticated piece of software is called for.

Ecommerce Inventory  Management Fundamentals


There are a number of core principles that any retailer should be familiar with to effectively manage their inventory.

Stock knowledge
Knowing the exact number of items you have in stock, their age and condition, and their location is the most basic element of stock control. But it is surprising how many retailers fall foul of this and have the dreaded “there’s one showing on the system but there’s none out the back” conversation! Or the even worse scenario of delivering an e-comm order from stock that has been in storage so long that its condition no longer meets customer expectations.

Forecasting
Forecasting without a digital system is more magic than science. A proper inventory management system can drastically reduce the margin for error in forecasting and give you a reliable set of stats to look back on. Helping you to make better predictions of future sales.

Multichannel Inventory Management

Bricks and mortar retailers often struggle with good stock control but add in the complexity of selling through your own website, an Amazon store AND potentially another marketplace such as eBay, and it is easy to see how a spike in demand in one storefront can lay waste to your stock holding and ability to supply your other shops.

It is essential that you have one unified stock file that is integrated through your e-commerce system, EPOS and any other channels you’re selling on.

Luckily, AirPOS has a free integration with Shopify which has tried and tested plugins to all of the major marketplaces. This is the most cost-effective multichannel inventory management tool in the market and is ideal for small retailers with ambitions to challenge the big multiples.
Having a live, real-time inventory gives you one single source of truth and clears the way for you to focus on what is most important – increasing your profitability.

To find out more about retail analytics and inventory planning, and for more expert tips, you can read the full guide here.

Learn more about AirPOS Limited

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