Optimising acquisition costs and marketing channels is extremely important. Still, many brands overlook just how equally important it is to optimise their inventory management, one of the critical factors in online sales success.
According to an estimate by IHL Group, e-tailers can pursue $117 million in additional revenue for every $1 billion in sales by addressing inefficiencies and disconnected inventory data across their organisation.
This article will break down the common mistakes to avoid and the best practices to improve your inventory management.
1. Inventory management: common mistakes to avoid
Inventory forecasting will never be 100% accurate, but you can take specific measurements to avoid the most common inventory management errors and minimise the impact on your revenue.
According to IHL Group, inventory management errors are responsible for $1.75 trillions in losses each year for D2C brands:
- Avoidable returns: $642.6 billion annually
- Out-of-stocks: $634.1 billion per year
- Overstocks: $471.9 billion per year
In 2021, Meta's advertising revenue reached the $117 billion mark and Google's $209 billion... The numbers reflect the increasing investment brands are making in customer acquisition.
Knowing that 80% of consumers are willing to switch brands and buy from another website if the product they want is out of stock on your site. Nothing is more painful for a brand than losing a sale to a competitor after spending money to drive traffic to their product pages 🙄.
💡 Bigblue tips
We will address the importance of integrating the data of your e-commerce with your warehouse, but if you are on Shopify, you have the option to:
- stop selling a product (hide the product or display that it is "out of stock" on the product page)
- put an item on pre-order
Our recommendation is to synchronise your data in real-time or every hour between your e-commerce store and your warehouse. And don't forget to remove out of stock products from your marketing campaigns to avoid unhappy customers.
To compensate for out-of-stocks, you may tend to overstock... but remember that the more products you bring to the warehouse, the higher your storage costs will be.
We had an example of a brand launched in 2020. At the beginning of our collaboration, we found out that they had just bought an entire year's worth of sales of a single item. Their forecasts were inaccurate, and they still have not sold all the units. It was risky and cost-intensive for a new brand, which led to a cash flow problem.
2. Stock management: best practices
A. Track sales on your CMS and anticipate seasonality
Nothing is more reliable than your order history on your Shopify or CMS to prepare your inventory forecast.
💡 Bigblue tips
To avoid mistakes, we advise you to take into account and anticipate your temporary operations and marketing campaigns, for example:
- Your campaigns with influencers
- The peak period and sales, for example, Black Friday and Christmas
- Your press campaigns and TV appearances
Pap et Pille, a brand that we love that trusts Bigblue with delivering their cookies (on both B2C and B2B), participated in the TV show Qui Veut Être mon Associé last December. Their orders exploded by more than 100% the next day following their appearance!
B. Anticipate the delivery times and warehouse management
It is also necessary to consider the time needed to bring the goods to the warehouse. An essential step to avoid stock-outs before intensive sales periods, Black Friday or Christmas sales, for example.
💡 Bigblue tips
- Plan for one month of buffer at least: make sure your products arrive at the warehouse a month before Black Friday and the sales period.
- For greener logistics, favour ship and rail freight. This type of transport takes two months from China at a lower cost under normal circumstances.
- In case of emergency, opt for air freight (able to deliver within one week).
- If you have several warehouses, look at your options to repatriate your stocks quickly.
C. Restock as often as possible
To avoid overstocking errors and optimise your logistics costs, you need an accurate estimate of the time to sell your inventory. To calculate it, take a look at your sales history, production costs, and replenishment times and costs.
You can rely on an Excel file to track your inventory. But there are solutions to save you time.
💡 Track your merchandise inventory with Bigblue and determine your best sellers by week and month, quantities sold, and days to deplete based on your order history. You can also set up alerts to restock them.
D. Test pre-orders to launch a collection
Pre-orders are an exciting option to test the market before you launch a brand or before releasing the production of your new collection. Below is an excellent example of the brand Asphalte that works exclusively with pre-orders for each product. They received 13,303 pre-orders for their new jeans.
Or the case of Zèta Shoes, with whom we have collaborated since the launch of its Ulule campaign that exploded their objectives by 2.683%. From one day to the next, Laure Babin, founder of Zèta-Shoes, found herself sending 2,700 pairs of shoes instead of the 100 orders initially planned.
E. Add the returned products back to your stock
A well thought out returns policy is imperative as 92% of shoppers have indicated that they would buy from the same store again if the returns process is simple.
A good returns management can work as a safety stock buffer. To play this card, you will need to have a solid integration between your warehouse and your CMS and take into account the return and processing times at the warehouse and the ratio of damaged products that cannot be put back in stock.
💡 Bigblue tips
Facilitate returns; despite their bad reputation, they can become your best customer retention lever. You can use a returns portal to collect information on
- The most frequently returned items and adapt your collections
- Reasons for returns: wrong size, damaged item, style. Based on the reasons for return, you will be able to anticipate which items can be put back in stock.
- Offer the possibility of printing return labels at the post office to make it easier for customers and shorten delays.
F. Manage your packaging inventory
It's important to remember that you’ll also need to replenish your packaging to ship packages. Bigblue provides you with standard, plastic-free packaging. Still, if you want to offer a fully customised, branded unboxing experience, you'll need a restocking plan for your: flyers, custom envelopes and boxes, samples, and wrapping paper.