It is debatable if acquiring or fulfilling customer orders is the hardest part of running an ecommerce store. What we do know, however, is that getting inventory management right is key to running a profitable online store. You can get all the traffic in the world, but if you do not have the stock then you only achieved wasting time and money. There are a number of concepts which, when applied to your own business can allow you to grow your business at a greater rate and retain larger profits.
What do people actually want to buy?
Asking what people actually want to buy may seems like we’re going off the inventory management topic, but stay with me.
The Holy Grail of online commerce is to find niche products that your competition isn’t retailing but you can monetise. Tools such as Ubersuggest and Google’s keyword planner will show you a whole range of related search terms denoting what sort of products people are looking for relating to a central theme such as “hiking boots” perhaps “fluffy hiking boots” or “hiking boots for babies”. Whilst tools such as SEMRush, Sistrix are paid tools which will show you the many of the keywords that your competitors are getting traffic for – you can even do this for suppliers. But only real way to find these gold mines is to try a whole range of related products. Test the market and see what ‘bites’.
Don’t be afraid to try product lines from your suppliers which logic dictates won’t sell. Without giving away some of these niches our partners are exploiting, this is exactly how many of them have increased their long-term profits.
Conventional wisdom states that you should be laser focused with your product niche: ‘do one thing and do it well’. But that view is fine if you are absolutely convinced that you have a profitable niche. Many new ecommerce businesses just don’t have this unwavering level of confidence. It also prevents you from expanding into new markets. Be open to new opportunities.
Point to note: View 80% of your product range as core products you have every expectation to sell and sell well. If budget allows, use 20% of your product range to explore other opportunities. You may only need 20% of that 20% to be ‘home runs’ for it to worth doing.
Deciding on what to stock – and how much
From talking to our partners we know that deciding how much to stock of a product is one of the most difficult of all calculations.
There are so many variables to take into account. Seasonality is obviously one.
Steadily as we move from November into December and then on to the week before Christmas conversion rates steadily increase until a peak about 4 days before the big day. It is essential, therefore, that you do not take your mid-November conversion rate too much as an indicator of your sales rate in mid-December. One of our partners sold out of Christmas themed products at the end of November – despite knowing towards the end of the month that this would happen. However, because of the lag between reordering stock and it arriving they didn’t do so. The reason they didn’t restock earlier was that early conversion rates didn’t point to this. If cashflow allows, consider buying on anticipation of doubling or trebling your conversion rate.
Another variant will be competitive price pressure. Black Friday is renowned for online retailers slashing their prices in order to increase sales volume. If your competitors are doing this and you’re not then you might have a harder job shifting stock. If you don’t have any historic knowledge of how your competitors will behave then anticipate a 10%-20% drop in prices around the first week of December and plan accordingly.
Also when deciding how much stock to purchase consider whether you will be offering any loss-leaders to increase footfall. Will you be tying the purchase of those products to any other stock?
Have a think as early as you can if you’ll be doing any promotional work on a specific product or category of products? You obviously think it’ll work, or you wouldn’t be doing it, so ensure you have enough stock early on supply that demand.
It is also essential to consider any best-before dates of your products. Chocolate and other foodstuffs will have best before dates and there may be legal consequences of selling it out of date. It is, therefore, essential that you establish the length of time that products are ‘in date’ – this might not be the same for all manufacturers and all products within a category.
Non-seasonal products will undoubtedly have fewer issues, but don’t think of buying periods as just Christmas, New Year and Easter. Think also the seasons as Winter, Spring, Summer, Autumn as for many markets these periods are key in affecting demand. Think also about school holidays, sports seasons and the like.
In summary: Build a marketing and price promotion plan. Build into that the length of time a product is sellable and what you can do to turn the unsold products into cash.
Sourcing the right products at the right time
You might actually have your suppliers lined-up. You’ve downloaded their brochures and you’ve circled the products you would like to stock but actually getting them online is another issue. Our partners have worked with a wide variety of suppliers around the world and it is interesting to note the differences in business culture – even within Europe.
As a new start-up you’re unlikely to have expensive contact management systems – thankfully a copy of Excel or another spreadsheet should do the trick. For each company name note down their Country, their VAT rate, whether the price you pay includes delivery or note, duties, their contact details, their terms of business, and, as you do business with them, note down the lead time from order to delivery.
Some countries such as Italy may have a longer lead time from making an enquiry to receiving product information to accepting and then dispatching an order. The USA may be quicker but then you’ll have to think about taxes, duties and increased delivery costs and times. Asia, for many products, may offer their own issues – perhaps relating to language barriers, quality, legal, expectations and lengthy delivery times.
Build all of those variables into a mental map of what products you wish to purchase, when they’ll arrive and what potential issues you may have.
Taking delivery of stock isn’t always a simple process and this will directly impact your ability to fulfil orders. We suggest that you do not offer for sale products until they’ve been received and correctly processed inwards.
Some suppliers will give you complete tracking details. You will be able to monitor your stock make its way to you. Other suppliers will give you no information – after paying you might not even hear from them for two or three days.
The best way around this is to as prepared as you can be for stock to arrive both earlier and later than you expected. For new ranges have as much information ready as possible. Load up, but leave unpublished your product listings. Get temporary product imagery sorted. Make sure you have all the product specifics to hand (size, weight, colours, bar codes, “suitable for”, etc.). If you can create product descriptions for products that you’ve not even received yet then you will be at an advantage. After receiving and reviewing the products you can always enhance the descriptions and photography.
When stock does arrive it is absolutely vital that you have the products checked over for damage and accuracy. DO NOT assume that you will receive what you have ordered – this could cause major issues when you incorrectly set stock levels.
Monitoring Stock and Sales
Stock will shift at different rates. It won’t even be a straight line. You will have your steady sellers that are fairly consistent. You will also get those products that seem to be less popular to many, but highly in demand by few. They will sell none for a week or two and then someone will buy a third of your stock. This can cause major issues.
When you have a range of products from the one supplier that sells at different rates you really need to estimate whether it is worth restocking part of the range now or waiting for the rest of the range to get to your ‘reorder point’. That calculation will depend on how much margin you are making from the ‘spasmodic’ products and what the shipping and processing inwards costs are.
Furthermore, have a think if you could use this is as an opportunity to expand your product range?
Pro tip: Time to think a bit laterally. When you get those products back in stock, wouldn’t it be great if you could monetise all that missed opportunity when they were out of stock? This is where you would have had your website created to allow people to register for notifications when stock returns. So as soon as you’ve pressed ‘submit’ on your product page people that want those products are automatically notified.
All of those stages can only take you so far. New businesses are typically bootstrapped. As a company owner you’ll be doing everything: building demand, tweaking the website, responding to customer emails, packing orders, dropping them up at the Post Office or arranging a courier. But what happens when you become more successful? What happens when you just don’t have enough time to pack all the orders, respond to all the customer emails, source new stock and get them fulfilled? At what stage do you take the leap of faith and ‘shoot for the stars’?
There comes a time …
At a certain time, and this will be unique for every online store owner, when the pain points become too painful. When mundane tasks become overwhelming. When you lose passion for packing orders and fulfilling them. At this stage in your company’s development it is absolutely essential to outsource those functions and concentrate on what you get excitement from and what adds value to your business. Not loving part of your business will show. Customers will pick up on it and they will respond.
One of the biggest issues …
All businesses will have that moment when you’ve taken an order and realise when you go and pack it, that it’s not there. You thought it was there. But then you realise, that product with a similar name, or similar colour, has been shipped to another customer by mistake. You’re one short and have a customer that has paid for something that you do not have. What do you do? Do you offer the customer their money back? Do you ask if they would like a similar or better alternative?
Not getting yourself into that issue is the key and is emblematic of becoming more professional and outsourcing the fulfilment of your orders. The tips above have all been about improving efficiency, profitability and meeting customer expectations – and there is nothing more fundamental in that philosophy than the accurate and timely fulfilment of orders.
But how …
Of course, this is the Cloud Fulfilment blog; our objective is to raise awareness of our own solution. It is important to recognise, however, that the reason we’ve invested a significant amount in our technology and logistics infrastructure is that we know all-to-well the problems online retailers face and that a robust, flexible and complete solution can be developed to ease the problems you face.
Essentially we offer an integrated inventory management, fulfilment and marketing solution. We receive your products, process them inward, store them in our warehouses and dispatch them as orders to your website (or Amazon, eBay and Play.com) come in – all for pennies a day.
The detail please … Here’s how it works. You create your inventory of products on our system and then you send use the products individually barcoded in a format given by the system, groups of individual products are barcoded and then pallets (or large boxes) of these groups are also barcoded and sent to a warehouse specified by the system. We then process those products, batches and pallets inward. They are then stored in one of our warehouses until an order is placed. Then it is picked, packed and shipped to the address specified on the order – all at a very reasonable price.
Now. If you would like to skip some of those steps then we can barcode your products for you at an extra cost. Contact us for details.
If you’re a more visual person, we’ve created a video to help you fully understand how it works.