There are about 12-million-24 million e-commerce stores across the entire globe, with more and more stores rising each day. Opening an e-commerce store is undoubtedly an easy way to make money. Plus, the possibility of growth for an e-commerce store is boundless. However, the stat also suggests that the competition is heavy. 20% of products generate 80% of sales. The stat speaks volumes about the importance of choosing a unique product line. After all, unique goods for sale eventually produce more profit nowadays since you can control the prices while also avoiding hefty competition. So considering your inventory mix is vital in minimizing the average Cost Of Inventory eCommerce.
Average Cost Of Inventory eCommerce
This article especially talks about ways to minimize inventory costs. Let’s look at seven ways to lower your e-commerce inventory costs.
1. Keep minimal stock
You may have come across the product being out of stock multiple times as a consumer. You certainly neither want your customers to leave your store empty-handed nor overstock the product at your warehouse. If you overstock, the products will occupy space for a long time and may even be outdated, depending on the product line.
So how much to stock? Many retailers spend a lot of money on marketing only to end up with low stock to fulfill customer orders. A simple solution is to start taking pre-orders to get a fair idea of the customer demand, then stock the inventory.
If your product line consists of what other retailers sell, you are more likely to fail. This is why it is crucial to choose products to merchandise that everyone else is not selling. Fashion manufacturers are a great example of offering unique products and also taking pre-orders. Manufacturers of this industry rely heavily on the number of orders rather than on making the product.
So if you do not want your store to say a product is out of stock, focus on taking pre-orders than on the inventory stock.
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2. Remove obsolete inventory
If you already have an inventory system in place, consider removing inventory that is no longer useful. You may overstock when you overestimate your product’s potential. In this case, the number of items will almost always exceed the customer’s orders, resulting in obsolete inventory.
To do so, shorten the supplier lead times. When the supplier lead time is more, you will be compelled to keep more stock to meet all the orders. This will result in higher carrying costs. When a supplier’s lead time shortens, you have more options while placing orders. This will help minimize stock carrying expenses in the short term and reduce the risk of obsolete stock in the long run.
3. Consider dropshipping- Average Cost Of Inventory eCommerce
Dropshipping industry is expected to reach a market valuation of $557.9 billion before 2025.
Dropshipping is one of the most effective ways to minimize inventory costs. Drop shippers purchase goods directly from wholesalers and manufacturers and ship the product directly to the customers. These services will save you a lot of money, given retailers don’t have to own a warehouse to stock the inventory.
It is one of the most preferred models since it also offers management freedom, cuts costs, and enables the selling of innumerable products to customers.
You can avail of dropshipping services online, track the manufacturer and place an order directly from its website. You can even ask the manufacturer for a discount, and you would be surprised to see how much they are willing to negotiate.
4. Automating inventory system management
It’s time to bid goodbye to pen and paper.
Automating your business activities, including inventory management, is beneficial for your store in the long run. Initially, you will have to invest some amount into automating it; however, it will reap long-term benefits. An ideal management system will save you a lot of time which will help quicken other processes.
You can read here how efficient inventory management benefits your store by saving time. You cannot only avoid human errors and manual work but also reduce completion times, increasing productivity and overall business efficiency.
Several automation systems enable you to create automated workflows per your needs. For example, you can upload customers’ contact details to an email marketing tool, respond to abandoned cart emails, etc. Some of the best eCommerce analytics software available in the market also helps stores make informed decisions.
Today’s automation tools make managing easy and provide valuable insights to make the right business decisions.
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5. Negotiate on fixed orders
Depending on your service line, some products may be in more demand than others. In this case, negotiate with the wholesaler on a minimum order of a particular product. Nothing is set in stone. All you need to do is ask.
For instance, you can agree with the wholesaler that when you order x number of product A for certain months, the wholesaler will give you some discount. Many manufacturers have an entire inventory filled with products your store may need, so even they would be happy to sell you at least something.
The key is negotiating and reaching a mutual agreement regarding payments with the wholesaler. However, ensure you don’t overstock in greed of discounts since that will lead to the inventory becoming obsolete.
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6. Purchase in bulk- Average Cost Of Inventory eCommerce
Purchasing products in bulk is the right solution for retailers who know the product demand and have a loyal customer base. If you do not have loyal customers, buying large quantities may result in unsold inventory. Always consider the customer demand before buying the stock.
Also, if you have a regular wholesale supplier, ensure you are on good terms with them. They may offer special discounts. You can even mix and match different wholesalers and purchase different products in bulk from different wholesalers.
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7. Discard dead stock
This is a no-brainer but essential. Discard the stock that you may have held for over a year. Consider multiple options to get rid of the stock. For instance, Facebook offers a marketplace feature where you can also sell the stock. There are apps like Tradesy, OfferUp, etc., where you can sell the stock for leftover stock or stock low in quantity.
Contact a recycler if your products are recyclable.
Getting rid of outdated stock is vital to make space for the new one.
Wrapping up- Average Cost Of Inventory eCommerce
As an e-commerce store owner, you need to plan your stock in a way that allows you to satisfy your customers to your total capacity. You want to lead to a higher customer retention rate by ensuring timely deliveries. So ensure that you’re not compromising on customer services by cutting down your inventory costs.
If you are building an e-commerce store right from scratch, minimizing costs in whichever way possible is vital until you generate some profit. A few tips in this article will help you cut down inventory costs even when you have an already established e-commerce store.
Parita Pandya is an Engineer turned Writer. S
He usually finds herself writing for businesses. When she is not writing, she is either strumming her guitar or penning her thoughts down on paritapandya.com.
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