Poor inventory management in the e-commerce world has repercussions for both consumers and retailers. On the consumer side, obviously there’s a chance they’ll receive the wrong item. They also must contend with not being able to order, potential shipping delays, being put on a waiting list, or receiving broken items. In short, they had a need—a product or service—and the need wasn’t met. They’re not happy.
In an era of business where customer experience might be more valuable than brand itself, this is also not good on the retailer end. E-commerce is often driven by repeat business and referral, and delivering bad customer experience won’t lead to either. In addition, a vendor with poor inventory management might send the wrong item to a customer, over-order specific items (or not order enough of a specific item), have poor tracking, and have a disorganized warehouse with poorly trained staff.
Inventory management is crucial. Ralph Lauren saw a three-percent drop in revenue in 2016 in part because of poor inventory management. The ‘days inventory’ metric measures how many days a company holds onto inventory before selling, typically in cost of goods sold or revenue. In Ralph Lauren’s case, both factors are rising, implying that much of RL’s cash is tied up in unsold inventory.
But if inventory management is so important, two questions come to mind:
- Why are brands getting it right more consistently?
- How do you get it right
What’s the issue in e-commerce?
This is twofold.
The first issue is simple human behavior. We’re all busy. Hours/week are increasing steadily. Running an ecommerce business is a complicated mix of logistical work, strategy work, customer issues, and putting out fires. Priority management is essential, but unfortunately, priority management isn’t always, well, a priority.
The second issue is infrastructure. By its very definition, an “e”-commerce business needs to be online. Despite that, several of these businesses haven’t shifted to the most current technologies available for managing their inventory.
It’s helpful to quickly take stock (pun not intended) of how we arrived at this point. In the ‘olden’ days, pre-e-commerce, there was a fairly predictable flow of product through the supply chain. It went from the manufacturer to the distributor or wholesaler, and from there to the retailer. That’s where the consumer came in. Now the supply chain is significantly more omnichannel with the various parts flowing in multiple directions—and often at once.
The only real way to win at ecommerce inventory management in an omnichannel world is by shifting to better, cloud-based management software.
“No one understands the cloud!”
… or so bellowed Jason Segel’s character in the generally-not-good movie Sex Tape. In fact, though, many people understand the cloud—and in hundreds of different industries and verticals, it’s taking hold as where information is stored and logistics happen.
E-commerce is no different. But if you resemble Segel’s character, here’s a quick primer. The traditional model of inventory management software saw your company purchase the software, then install it on one or more computers at the office. The cloud-based model has one instance of the software, but it can be used by thousands at the same time. A single server might be able to handle 10,000 concurrent web sessions.
This leads to several benefits.
What you get in the cloud
Typically, your core benefits include:
- Cost savings
- Enhanced effectiveness
- Improved coordination
In terms of cost savings, there are a number of benefits. Cloud-based is usually easier to deploy and doesn’t require as much cost upfront. Because server maintenance and updates are the responsibility of the cloud provider, you can shift IT costs away from on-site hardware expertise and towards more core business objectives.
Enhanced effectiveness comes predominantly from real-time inventory monitoring. A single change can be updated throughout your system instantly, so your whole staff can have greater confidence in the accuracy of the inventory represented online. The other bonus: because cloud is by definition not tied to on-premise, your staff can access inventory information from anywhere. This is good if they’re traveling to see clients, but also great for off-hours when changes or adjustments are needed.
Improved coordination comes from everyone on your team having access to the same information. Silos are pervasive and powerful in business, but cloud-based inventory management helps break them down. The Operations team can see the same data that the Consumer team can; for them to get on the same page, a meeting doesn’t necessarily need to be scheduled, nor a memo drafted. It’s real-time and it’s available to all. Silo-by-silo inventory management leads to a disjointed experience for the end customer; coordinated inventory management leads to greater customer experience.
A data-driven bedtime story
Business today is all about data. The valuation of companies like Facebook and Uber isn’t necessarily based on their core service by any means; it’s based on the data and information they can generate about people and their habits.
Data should also drive decision-making forward in a quicker, more effective way. This is at the heart of any ‘disruption’ idea. If you’re a small business e-commerce platform looking to land grab some space from an enterprise vendor, it’s actually less about the quality of your products and more about:
- How you manage inventory and work with customers
- How quickly you make decisions and adjustments
The first bullet comes from cloud-based solutions, as we discussed above. The second bullet comes from having good data and being confident that it’s leading you to the right decisions—and in a more agile way than enterprise, who might need 19 meetings before anything is decided.
Consider an industry we all dabble in sometimes: beer, and especially craft beer. SteadyServ is one cloud-based inventory management system, and some of its benefits include:
SteadyServ uses data wrangling and machine learning to triangulate and make sense of data from the point of sale system, the RFID-enabled scales, and the company’s proprietary database of beer with 60,000 SKUs, Hershberger said. The cloud-based system gives owners real-time information on their draft lines, the age of the beer in the coolers, and what extra stock they have available. With that data, bar owners can better determine an optimal mix of products based on consumers’ buying habits, he said.
A couple of key phrases to pull out from that quote: “real-time,” “data,” “optimal mix of products,” and “based on consumers’ buying habits.” That’s how you build a business, e-commerce or otherwise.
But will you make money?
Surely. Lightspeed, a Montreal-based point-of-sale company, has a platform to integrate online and in-store inventory. They grew revenues 123% year-over-year in 2015. While one of their brick-and-mortar clients is the Kardashians’ boutique, they’ve had success with e-commerce platforms as well.
One of their clients, Poches and Fils (a T-shirt company based in Canada), noted that Lightspeed offers a tiered monthly fee that can fluctuate between $79 and $171. Poches and Fils’ previous inventory management provider charged $179/month to start, trending upwards from there. For the lower price, Lightspeed enables the company’s customers to quickly choose among 4,000 unique products and automatically syncs up a customer’s preferred language and currency.
Stephen Rivers, an entrepreneur in the Dallas area, is launching a custom furniture store aimed at the millennial market. When researching inventory management options, he says he “lost some sleep” over the different possibilities available to him. (There are 1.93M Google search results for “e-commerce inventory management.”)
Rivers wanted a small brick and mortar to display the furniture, but the idea was never a conventional brick-and-mortar approach. Rather, he wanted customers to sit on and experience his product lines—then move over to a sleek, beautiful iPad in the corner and do the actual ordering and customization there. He ultimately settled on Vend, in part because it was the first HTML5 iPad point of sale software.
“It’s one less barrier to making the sale,” says Rivers, “but I was just looking for something that had all the functionality and syncing while being simple and beautiful for the actual customer to use.”
The sum of all parts
What have we learned today?
- Poor inventory management hurts you, whether you’re a customer or a retailer.
- If you’re a retailer, it can really hurt you.
- To make it better and more cost-effective for your business, consider a shift to cloud-based inventory management.
- Not only will this help drive revenue, but it’ll make your team collaboration more effective as well.
- You’ll be able to harness data for effective decision-making.
- And, hey, your revenues might grow 123% year over year.
All these seem like very positive aspects for your business, whether you’re just starting out or have a year or two under your belt. Embrace the cloud and get there today.
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