4 E-Commerce Inventory Management Challenges and Solutions

4 E-Commerce Inventory Management Challenges and Solutions

Reading Time: 8 minutes(Last Updated On: April 29, 2021)

Inventory management is a term used to describe the system through which a business handles its inventory; this includes processing orders, inventory storage, and inventory usage.

E-commerce businesses rely heavily on inventory management for knowing when to order more stock, how much to order, where they can store it, and so on.

With so many moving pieces, how can your business avoid inventory management problems? We answer that question in detail below – read on!


Inventory visibility for e-commerce

Due to the nature of online business, there are several inventory management challenges that e-commerce business owners are likely to encounter. Yes, it’s true that running a business online can help by making processes faster and data easier to view and track (see the BeProfit – Profit Tracker app for proof!). But when operations begin moving faster than you can keep up with and you don’t have the time to sift through tons of data, you can quickly start feeling overwhelmed. Don’t underestimate the importance of inventory management!

Note: Inventory management problems can have an impact on other related aspects of your business including supply chain management. Keep in mind that when you work on solving inventory management issues you’re helping the overall health & stability of your business.


Here are the top four inventory management problems and solutions to help you overcome them:


1. Handling multiple channels & warehouses

At the outset of your e-commerce business, you’ll likely start with a single channel for sales and a single warehouse to store your inventory. As your business grows so will the number of channels you sell through and so will the number of warehouses you’ll need to store an increasing amount of inventory.

If you’re not using warehouse inventory management or more general inventory management software, don’t be surprised if you have some difficulties keeping track of what you’ve sold through multiple channels (Shopify, eBay, Amazon, etc.), how much inventory you have left, when to restock, and so on.

Likewise, without a proper online inventory management system, it will be challenging to keep track of multiple warehouses processing orders, how much inventory you’ve got left at each one, and so on.

Solution: Utilize inventory management software and put the power of technology to good use. You’ll save yourself time, energy, and stress by letting an online inventory management system do the number-crunching for you.


2. Overselling and overstocking

Inventory management problems come in many shapes, but overselling and overstocking are two of the most commonly experienced inventory management challenges faced by e-commerce business owners.

Overselling is when you sell the last of a certain item to more than one customer, and overstocking is when you’ve bought too much of a certain item. The first (overselling) is more of a risk to your customer experience and satisfaction. The second (overstocking) is more of a risk to your bottom line since it costs money to store products.

Side Note: Overselling and overstocking are always good to avoid, but particularly during times of the year when sales are seeing annual highs or lows. Think about how your Black Friday strategy could be undermined by not having enough items to sell – or how your bottom line could drop lower by overstocking during a slow season.

Solution: You can overcome this inventory management challenge as well by using either warehouse inventory management or a more general inventory management software. Online inventory management systems provide a host of functions to help you avoid overstocking or overselling. You can get reminders for when item quantities fall below a certain threshold, you can automatically replenish certain items when they run low, and much more.


3. Lacking data insights

Having access to your inventory data is one thing – understanding and making the fullest use of that data is something else altogether.

For instance, it can be helpful to know how much of a particular item you have at any given time, but it’s immensely more helpful to know how that item’s availability fluctuates over time, across channels, between warehouses, and so on. Being able to spot e-commerce trends or capitalize on time-sensitive opportunities are just a couple of ways you can benefit from understanding deep insights into your business’s data.

Solution: Once again, inventory management software will help you avoid this inventory management problem and also make it easier for you to grow a profitable business.


4. Managing sales manually

Managing sales in-and-of-itself isn’t necessarily going to be a big inventory management problem. But if you’re keeping track of your sales with a pen and paper, let’s just say that it’s time for you to upgrade. We’re living in the age of the internet, why are you wasting time, energy, and paper when you can use technology to do the work easier, faster, and eco-friendly? 

When you’re running a small e-commerce business, you can probably get away with managing sales manually. As you start to scale up business though, you’ll quickly realize that doing all of that work by hand simply isn’t feasible if you want to grow.

Solution: As with many other inventory management challenges, this one can also be overcome by using inventory management software to do the heavy lifting for you. But, perhaps more importantly, you’ll want to choose an online inventory management system that can integrate with other tracking tools you’re using and can give you real-time updates automatically.


inventory management best practices


Inventory management solutions

Feeling overwhelmed by the number of inventory management problems you may face while operating your e-commerce business? Fear not! Use the following inventory management solutions to keep your business running efficiently.


1. Own or rent a warehouse

It’s quite common for e-commerce businesses to pay for inventory storage at a warehouse, but have absolutely no say in how the operations at that warehouse are conducted. In that situation, if there are any problems, the online seller’s ability to resolve the issues will be severely limited.

On the other hand, if you were to rent or even own a warehouse of your own, you’d have complete oversight of your warehouse inventory management. You know how the saying goes – if you want something done right, do it yourself!


2. Consider dropshipping

For those online sellers who can’t (or prefer not to) own their own warehouses, dropshipping is the ideal inventory management solution. In fact, the global dropshipping market was valued at $102.2 billion in 2018 – a testament to the sheer volume of business being conducted through dropshipping.

The dropshipping e-commerce model is simple – the dropshipper markets the products, processes orders, and handles customer service while the supplier deals with the production, storage, packing, and shipping.

Who needs inventory management best practices when you can avoid keeping the inventory altogether?


3. Work with the seasons, not against them

When you think about seasonal businesses, oftentimes you may imagine something like pool cleaning, landscaping, food trucks, and so on. But despite the fact that they’re not reliant on the weather to operate, e-commerce businesses also go through their own seasonal fluctuations. Fortunately, online retailers have more flexibility in handling their inventory management challenges than some offline businesses.

There’s no need to keep shelves stocked for appearance’s sake when you work in e-commerce. That means that during slower seasons you can keep your inventory smaller and during busier months you can stock back up to meet rising demand fairly quickly.

You can also make changes to the types of products you offer to meet seasonal demands. For example, if you sell home goods, in the summer you would want to stock up on things like grills, hammocks, and outdoor furniture. In the winter months, you could then stock up on area heaters, weighted blankets, shovels, and so on. 


4. Use the ‘first in first out’ strategy

The first in first out inventory management strategy is when you focus on selling the older items in your inventory first. If you’re selling anything perishable, then you definitely want to employ this technique. If you’re not selling perishables, you still have a lot to benefit from using this tactic.

If you’re selling clothing, for instance, changes in seasons will impact what customers are buying. It would be in your interest to push winter apparel while the weather is still cold since very few people will be looking to buy a heavy winter coat in May. Likewise, not many people will be buying swimming suits in December. Push goods that are relevant while they’re still relevant!

This will help you avoid dead stock and the consequences that come along with it: cost for storage, wear and tear from aging, the strain on your online inventory management system, etc.


online inventory management system


Online inventory management systems

As we highlighted above, the e-commerce industry can see trends develop and change quickly. If you’re not keeping an eye on how your inventory levels change in real-time, you may find yourself struggling to keep up with your competitors.

Our advice: use an online inventory management system so you can get real-time updates and insights and stay honed-in on inventory management best practices.

When shopping for an online inventory management system, here are some of the most useful tools and features you should look for:

  • Multi-channel inventory management
  • Barcoding scanner capability
  • POS syncing
  • Inventory tracking
  • Warehouse management
  • Shipment tracking integration
  • Automatic purchasing for products with low stock levels
  • Mobile app to track inventory management on-the-go


Disconnection between online offer and inventory

Using an online inventory management system to get real-time e-commerce performance data does much more than just save you the time of gathering that data on your own (though that is one example of the importance of inventory management!).

The deep insights that you’ll get from using inventory management software can help you calibrate your inventory planning with the marketing strategy for your e-commerce business in order to continue meeting the ever-shifting market demands.

Which is worse: producing #ecommerce advertisements for a product you no longer have in stock or not marketing for a product you have a ton of? Click To Tweet

Don’t forget that e-commerce marketing can cost thousands of dollars per month. That being the case, you’ll definitely want to make sure that you’re spending your money wisely. Producing advertisements and content to boost sales of a product that simply doesn’t have a high demand would be wasteful. Likewise, not advertising for products that do have a high demand would be a missed opportunity.

Simply put, inventory management software can keep you poised to make quick adjustments in your marketing strategy so that your offers continue meeting real market demands.

Side note: If you’re a Shopify seller and you’ve been looking for a way to easily track your expenses including marketing, shipping, production, and more – BeProfit – Profit Tracker is the Shopify calculator of your dreams.

BeProfit is a cutting-edge Shopify profit calculator that gives you a simple way to track and monitor your store’s expenses and profit margins. The app gives you insights of all of your expenses so you can make data-driven decisions for your business.

Optimize your profit with the BeProfit expense and profit margin calculator, here.


Clear integrations and real-time updates

Are you ensuring that what your customers are seeing online accurately reflects your real inventory? This is an incredibly important question to ask, particularly when you consider that one of the major factors for online shoppers not making a purchase is if they can’t find what they’re looking for.

So, how can you make sure your customers are seeing accurate inventory information on your e-commerce website?

Start by choosing an online inventory management system that can integrate with your content management system (CMS) and automatically update the inventory status for each of your products. Having real-time inventory updates can help you dramatically reduce delays and inconsistencies in orders & shipping and, ultimately, the number of orders that go unfilled as a result of poor inventory management.

As with other inventory management problems and solutions, the effects stretch beyond inventory and into other areas of the business. In the case of providing an updated count of inventory on your website, any problems can easily lead to issues in customer experience and retention.

By-and-large, solving inventory management problems can save you from a lot of headaches that could easily snowball into major dilemmas in your business. Employ inventory management best practices today and watch as your business starts running more smoothly!

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Disclaimer: The information contained in this article is provided for informational purposes only, should not be construed as legal advice on any subject matter and should not be relied upon as such. The author accepts no responsibility for any consequences whatsoever arising from the use of such information.