Inventory Management – How To Create Balance Between Stock-Out and Dead-Stock Situations

Posted By: editor
Posted On: 03 Dec, 2020

One of the most important tenets of e-commerce business is – make the product available at that juncture where a customer decides they want it – if you lose that opportunity, then the customer may be lost forever. 

With the increasing alternatives for all available products & services and the natural tendency of customers to compare & contrast various choices at hand, the importance of retaining a customer throughout the checkout process cannot be stressed enough. Hence the basic thing to do would be to ensure all popular and/or best-selling products are always available. 

Having said that, it gets costly for a business to hold a substantial amount of inventory with the pure anticipation that a product will become a best-seller in the current season. So, a viable estimate can be reached before-hand with a bit of study on the below pointers:

  • Previous year’s sales during the same week/month 
  • Current year’s weekly/monthly/quarterly sales growth rate 

Though the above data gives businesses an idea of the average sales a product has had in past, it is a lagging indicator and doesn’t necessarily ensure the same amount of demand to continue. 

As additional information, the next things to consider would be confirmed sales of the product from contracts, subscriptions, and planned marketing promotions.  Also, looking at the number of product views and adds-to-cart a product has been having and the change in these numbers over time would help to classify the products into - core best-seller, core popular/ trending, season best-seller, and season popular/trending. 

Putting together all the above information would help businesses to arrive at an optimal equation to predict the plausible demand for the product in the coming weeks. Once that is determined, merchandisers can always stock an adequate amount of inventory and never miss a sale opportunity while also optimizing storage costs. 

However, there is another side to inventory management. Businesses often must deal with slow-moving/ deadstock as well for multiple reasons. If not handled effectively, it might lead to huge losses. Hence, alongside making sure the products in demand are available for customers, businesses can formulate functional specific strategies as below to work with the slow-moving/ deadstock and ensure optimal handling of such products 

Marketing: 

  • Offer discount/ highlight the percentage savings on top excess products to push them for sales 
  • Create a sense of urgency by saying that only very few products are available in stock 

Product: 

  • Bundle slow-moving products with relevant top-selling products and provide the best offers which customers cannot resist
  • Offer lower prices for buying multiple units of these products
  • Identify popular variants (size/ color) of a given product and maintain higher quantities as compared to least selling variants of the same product 

Customer: 

  • Ensure that the right products are re-stocked by keeping customers’ needs in mind. Some of the proxies for observing customer’s interests are products: with high ratings, which are wish-listed, and which are left in carts in the expectations of a price drop 
  • Track performance of all SKUs to identify products which are falling out of favor with customers – make plans to phase out “dying” products 

Website:

  • Design a separate page (section) on the website for promoting daily deals – mainly used to sell off-season or excess stocks. This enables to limit shoppers’ purchase-making decision and have them add the product to their cart immediately 
  • List slow-moving inventory at marketplaces and price comparison websites which have a built-in audience so that products receive more visibility 

Halo allows businesses to leverage data and generate valuable insights that they can use to take advantage of opportunities, boost sales, and grow their e-commerce business. It helps them to keep a pulse on inventory, and hence ensure they are never overstocked or understocked.

Conclusion:

With effective inventory management in place, businesses have a better chance at profitability during both sale and non-sale seasons. Analyzing historical sale patterns and predicting future requirements helps them to prepare for the unexpected. Additionally, formulating timely strategies to clear off excessive/ deadstock plays an equally important role in enhancing profitability.  Hence, it is time to take control of the inventory management and stop losing money and customers.

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