April 30, 2018      3 min read

E-commerce denotes any exchanging of money or services online. Basically, any business transaction that occurs in the online space is labelled as e-commerce. This can refer to a seller on Etsy, or to retail giant Amazon. Regardless of the size of the seller, there are some inventory management principles that apply to both.

Get online

Small online stores can sometimes become apprehensive of automated inventory management systems, opting to keep things small and on paper. While the feeling is that they are more able to control every aspect of it, in fact, they lose control of their inventory management, particularly as things grow.

The benefit of automated inventory management systems, particularly if you are a big company with a multi-faceted selling approach, is that it provides centralised data and maintains coordination. This is paramount to ensure there is no instance of over-promising and under-delivering which is very easy to do when you are not aware of what is being sold in every income stream.

Unlike brick and mortar stores, online outlets are open 24/7 and have the ability to reach far more people regardless of age, income or geographical location. This creates more selling opportunities, especially as an online store doesn’t have closing hours. This might create inventory management pressures for the vendor. With an perpetual inventory management system, it can monitor stock levels and ensure there is always enough to fulfil a client’s order.

Owning a Warehouse

You can be a successful online retailer without having to store your inventory in your own warehouse. This solves the business the headache of inventory storage costs. Dropshipping involves finding a trusted supplier who will oversee the entire picking, packing and shipping process. The item will arrive on your customer’s door as if it is from you, however you have not had to procure, manage or store a single product.

The benefit of this method is that it creates what is known as ‘endless aisle’ which describes the experience of a customer, in that there is an endless supply of product. But as great as this sounds, there are challenges to consider. If communication breaks down between yourself and the supplier and you are not informed of low stocks, the whole process can come to a grinding halt and result in a stock out situation. Your company is also at the mercy of the supplier and their business management. This means that if issues occur resulting in their closure, through no fault of your own, both you and your customers will suffer.

To this end, it is exceedingly important to choose your suppliers wisely and foster trusted relationships. It is also vital to ensure your inventory management systems are compatible and harmonious so that they each communicate well and support the other’s activities.

Next Steps

We have considered only two of several important aspects of online retail. The take-home message is that inventory management software is essential to the success of an online retailer. This is because it provides centralisation and coordination, it provides transparency and real-time updates and it facilitates the ability to forecast. Anything that helps to minimise the unpredictability of customer-demand and gets your business functioning well and under control is a step in the right direction.

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