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Part of creating a profitable e-commerce business requires you to understand how to manage inventory adequately. Having poor inventory management practices can create many challenges for your e-commerce business regardless of the size, customers you target and the products that you sell.


What is Inventory Management?

 Inventory management is an aspect that is necessary for any business, whether small or big. Inventory management refers to acquiring, storing, and shipping stock. It enables you to know how much stock you have available, how much you can sell it at, where it will be stored, and how long you will keep it for.

Having inventory management practices in place ensures that you always have the stock you need available, and that there is a contingency plan in place if things were to go wrong. Inventory management ensures that you avoid wastage and that you save costs and time. This ensures that you can focus on providing your customers with the products they require.


Inventory Management Techniques for eCommerce

 When it comes to inventory management, here are some techniques that you can implement in order to improve e-commerce operations. These techniques ensure that your business remains profitable and that your customers are happy. Here are some methods that you can follow.


1. Ensure that you have safety stock

Issues and complications can arise at any time, and it is essential that you have safety stock. Safety stock is necessary as people can begin panic buying, which happened last year. These trends lead to unexpected supply and demand, and though you cannot always predict them, you still need to be prepared for them. Ensuring that you have safety stock available will help you prepare for any changes that affect the demand for goods.


2. Have a balance of inventory

 Balancing your inventory requires that you are not under-stocking or overstocking, but are in between. Under-stocking and overstocking each have risks. For example, if you overstock, you would lose money due to wastage, but under-stocking could lead to customer dissatisfaction as you will not be able to provide them with the goods that they require. Not having the right stock amount could lead to loss of profits and receiving negative reviews from customers who could potentially damage your company.

To ensure that you balance your stock, you can make use of software that helps you manage your stock correctly, such as inventory management software which allows you to automate inventory ordering. When your stock goes down to a certain number, the software will send you a notification, or it will reorder with the supplier by directly placing an order.


3. Forecast future demand

 Another technique you can make use of for better inventory management is trying to forecast future demand. You can do this by looking at past sales to analyze when demand and interest were at their peak. Looking through the data will assist you in determining what your “base demand” is for each season and will predict demand for any season. Forecasting demand also includes planning for seasonal demands such as popular shopping season like events and holidays. Once you do this, you are able to prepare for increased demand.

When you forecast future demand, you can order and store inventory while predicting the stock levels that will be required; helping you to prevent under-stocking and running out of stock when there is peak demand during that time. For businesses that do not have sales history to refer back to, they can refer to the analysis that they executed using Google Trends and Google Analytics.


4. Prioritize your products

Prioritizing your products assists in increasing efficiency and saving you money. The process of doing so requires you to determine which products you should frequently order. The ABC analysis is able to do just that as it puts your products into three categories which are:

  • A items: There are all the items that are of high-value as they sell out faster, but that you don’t regularly sell, for example, sporting equipment.
  • B items: These are moderate value items as you don’t sell these regularly, but they cost you more to hold, for example, electronics.
  • C items: These items are regarded as being low-value products as they make up the rest of your inventory costs. These items do not add much to your bottom line, but they regularly sell, for example, food.

By prioritizing your products, you will be able to devote more of your money to providing category A items, as most of your revenue comes from there. In the end, it will cost your business more if you fail to give those items than it would if you didn’t provide more B and C items as they won’t affect your bottom line as much. Prioritizing your products also assists you in avoiding overstocking products that aren’t of the most significant value to your business and those that are sold less frequently.


 5. Plan for the worst

 There are many things that can go wrong when it comes to inventory which is why you need to plan for disasters. Having a contingency plan will assist you when things go wrong and help you prevent horrible consequences. The issues that you need to prepare for include:

  • Running out of stock.
  • Not having enough space for stock in the warehouse.
  • Your supplier running out of stock.
  • A manufacturer choosing to discontinue a product you use.
  • Cash flow problems.


6. Consider dropshipping

 Dropshipping refers to the process where goods are shipped directly to your customers with the use of a third-party supplier. Making use of dropshipping for your e-commerce business is an excellent backup for you. It will assist you as you will not have to carry your inventory by yourself, and the manufacturer can directly deliver the goods to the customer, which means that you won’t need to store and hold your merchandise.

Dropshipping saves you a lot of time and labour costs that come with storing and maintaining inventory by yourself, which allows you to focus on other aspects of your business.




Implementing inventory management techniques can help you in improving business operations and make work easier. You will have the chance to increase your profit margins and increase satisfaction, which all guarantee business success.



Take a look at the Effective Methods of Optimizing Warehouse Storage!