When you first create an online store, you’re likely to have just a handful of products and a couple of orders a day. But as your online store takes off, your product range is likely to sprawl, and tens or even hundreds of orders may flood in everyday. When this happens, it’s time to take stock control and inventory management seriously. In this post – the sixth in our how to start an eCommerce business series – we explain six reasons why.
How can stock control impact you?
- Their idea not serving the market need
- Not being able to support growth
- Poor allocation of resources and money
- Ignoring customers.
For eCommerce businesses, all of these issues are intertwined with stock control. Getting your inventory management right as your store grows, can help you:
- Understand which products are selling well, and hence serving the market need
- Ensure you have the systems and stock in place to support growth
- Allocate resource and money to developing products that will sell, not sit on shelves
- Enable you to respond to customers, by ensuring your best-selling products are always in stock.
Inventory management isn’t always easy, but it’s entirely possible with a forward-thinking approach and the right technology. Here are our top six reasons stock control is important for your eCommerce success:
- Reduce your storage costs
- Improve your sales forecasts
- Handle returned orders effectively
- Improve your fulfilment accuracy
- Prevent theft and fraud
- Better satisfy your customers
1. Reduce your storage costs
As your online store takes off, it can be tempting to add more and more products to your range. But for eCommerce stores, the Pareto Principle almost always applies – 80% of your sales will come from 20% of your products. The other 80% of your range will cost you money, as sits on the shelves of your own warehouse or an outsourced fulfilment centre like ours.
Through stock control, you can ensure you know which of your products are making you money and which are costing you money – and start phasing out the latter. Yes, it can be hard to say goodbye to products that you’ve spent time and love developing, but ultimately, being ruthless with your range will help you:
- Reduce the amount of storage space you require, and hence your storage costs
- Make it easier to pick and pack orders for delivery, again reducing your costs
- Limit your financial losses, should you need to sell products at a radically cut price (or bin out-of-date products entirely)
- Save orders being delayed, as you spend time making space for new products in your warehouse, rather than picking, packing and shipping them.
2. Improve your sales forecasts
Deciding which new products to order in – and when to do it – can make or break your eCommerce business. Order too much too soon and your storage costs will go up, while your cash reserves go down. Order too little too late and you’ll annoy customers with out-of-stock products or delayed deliveries.
Making these decisions can be complex, so it’s surprising that only 15% of small businesses use forecasting software to help, compared with 46% who reorder their inventory based on information from previous months – aka guess work.
Fortunately, this forecasting software is readily available today, especially if you outsource your order fulfilment. For example, the order fulfilment software that we provide to our clients uses rate-of-sale information, to tell them how much stock they’ll need to re-order and when.
3. Handle returned orders effectively
No eCommerce business wants orders to be returned, but sadly they’re an inevitable part of retail.
How you handle returns will have a big impact on your customer experience – 92% of online shoppers will buy from a business again if returns are easy. But it will also have a big impact on your bottom line. This is where stock control can help in two ways:
- Keeping your product range small, as described above, will make pick and pack easier, helping you eliminate the worst kind of return – the 23% that are due to the wrong item being sent to customers.
- Having a clear returns management system in place, to decide whether items can be put back in stock, or need to be repackaged or even binned, will help you save time and money in the long-term, as you recycle products and know exactly how many you have in stock.
4. Improve your fulfilment accuracy
Having good stock control in place makes it easier to manage your storage. In turn, this means that products can be found quickly, handled efficiently and delivered to customers as soon as possible.
Here are some things to avoid:
- Storing multiple SKUs in a single location – one jar of honey can look very much like another one
- Storing products with varying units of measurement together – those 200ml and 300ml jars can be easily confused.
In addition, using a warehouse management system will help. Humans alone are capable of 97% pick and pack accuracy. Add technology into the mix and that goes up to 99.999% –another area that outsourced order fulfilment can help with.
5. Prevent theft and fraud
A shocking 64% of small business owners have experienced employees stealing stock. Inventory management can help you prevent this.
For example, tracking stock levels and locations is an excellent way of monitoring your products, as well as the staff who are handling it. This approach helps to ensure your stock stays on the shelf until it’s picked, packed and sent to customers. It’s also simple to do, by applying barcodes to all of your products, and using a combination of mobile scanners and cloud-based databases to track them.
Not only does this help prevent stock theft, it also reduces the human error involved in pick and pack tasks, or manipulating data in spreadsheets. It’s exactly how our network of fulfilment centres works.
6. Better satisfy your customers
Customer experience is vital for the success of your eCommerce business – a 5% increase in customer retention can boost profits by up to 95%.
Stock control plays a big part in customer satisfaction – it ensures that you develop your product range to meet your customers needs, and that the items they order are in stock, on the shelf, easy to find and quick to post.
The Pareto Principle applies to them too – 80% of eCommerce revenue comes from just 20% of customers. Ultimately, stock control will help you keep that 20% coming back for more.
If you’re interested in learning more about how our service can improve your stock control, get in touch for a free, no-obligation consultation. Or read more advice on how to start an eCommerce business.