September 17, 2018

5 Ways To Use Inventory Management To Directly Improve Your Online Sales

Written by
Mohammed Ali

For a long time, inventory management and actual sales have existed in separate silos. Intuitively, we know that inventory and selling are linked- after all, we only sell that which we actually have. However, is there a way to use effective inventory management to actually sell more? In other words, apart from the existing idea that sales and sale forecasts impact inventory, could it be that the opposite is also true?


In this article, we show you five ways you can use better inventory management as a way to sell more and make better profits. At the end of each section, we offer one key takeaway that you can implement right now.

1. Evaluate Carrying Costs Vs Sales

The basis of needing to manage inventory is that too much of it eats up your working capital and too little defeats sales by sending you out of stock. A balance between the two is key to running your retail business smoothly.

Carrying costs are the amount of money you are spending on your inventory. In other words, instead of paying you back, inventory is causing you to block up money in the form of products plus extras such as warehousing fees.

In this situation, it is often better to sell as much of the excess stock as possible, even at a lower price, than to hoard stock and keep paying for it. This is the basis of most end-of-season sales and the lucrative discounts that accompany them.

For your individual case, you need to evaluate these aspects:

  • Does holding inventory of a certain product cost more than selling it at cost?
  • Can I afford to sell this inventory at cost? (If you’ve taken out a loan to fund these products, you really need to evaluate this)
  • What options do I have apart from running a sale? (Some vendors take products back and refund a portion of your money)

Once you’ve made a choice, host that sale and clear up your warehouse so newer, better products can come in.

Bottom line: If it’s holding you back, you need to let it go. Inventory carrying is often more expensive over time than selling it off for far lesser. This exercise also holds a valuable lesson- if you have too much unsold product, it means that you need to rethink your product mix and understand what your market needs a little bit better.

2. Prepare For The Holidays

Many retailers would agree that even September is too late to prepare for the holidays. One key aspect that many people forget while gearing up for the holidays is accurate forecasting and inventory planning.

In fact, holiday sales are the perfect time to control your inventory levels even more accurately. Too much product at this point could stay in your warehouse until the next year’s holiday season. Use market trends to see what products people might be most keen to buy this time around. Browse through your competitor’s website and catalogs to see what they’re up to. Most retailers release a holiday catalog well in advance to help people make a choice.

When the holiday shopping begins, do not be in a rush to order way too much of everything! Instead, use the time you have now to decide your vendor mix. Opt for those vendors who have a proven track record of delivering in short spans of time even when the orders just flow. Test them out and assess their product’s quality.

Bottom line: By the time holiday shopping begins this year, get ready to sell more but control your inventory better. When better sales numbers meet controlled inventory costs, you make more profits.

3. Product Bundling

Bundling relevant products together is a time-tested technique for selling more. Usually, people buying an aroma vaporizer would also be looking for oils, so why not suggest them immediately?

On the inventory end, bundling is only possible when you have complete transparency over your catalog. Evaluate your product mix to identify which products go together and use relevant tags so the systems automatically pick them up.

Today, there are also more sophisticated methods of bundling that use a customer’s buying patterns to suggest relevant products. A good marketing automation tool connected to an ecommerce store or your online catalog can suggest bundles based on buyer interests.

Bundling is an advantage for your inventory too, because it keeps the products moving and gives you a chance to better forecast sales for two or more products at a time.

Bottom line: Your product catalog is a virtual representation of your store’s layout. If you have a retail outlet, you would surely put stockings next to shoes, right? Likewise, bundling should be intuitive and help you sell more in one go.

4. Prevent An Outage

There’s really nothing worse than visiting a web store only to discover that most of their products are out of stock. On the other end of inventory hoarding, some retailers make the mistake of stocking too little to avoid losses.

If you sell niche products that take a while to ship from your vendor to you, you’d be losing hundreds, if not thousands, of dollars in business in this time period. How do you prevent an outage?

By using inventory calculations, of course. For every product in your catalog, calculate the reorder level, know the lead time and hold enough safety stock. If these terms sound alien at this point, this guide can help.

Also, remember that these calculations are not permanent. For every change in the sales cycle, you’ll need to keep evaluating if these numbers still apply to you.

Bottom line: Use math! Inventory is not guesswork. When done correctly, accurate maintenance of inventory can help you sell more and build loyalty simply by having enough to sell in the first place.

5. Use A Robust Product

Still using spreadsheets to manage inventory?

It might work when you’re a small retailer managing no more than ten unique products and a few sales every day. However, the moment you scale, this can turn out to be a huge problem.

You would never know if you’ve run out of stock overnight, and by the time you raise a new purchase order, it would be too late. Your backorders would pile up, angry customers write in and call…you get the drift, right?

Manage your inventory better instead with software that’s built for that purpose. When your inventory is streamlined, you’d feel more confident about selling across multiple channels and making more from each of them.

Bottom line: If you haven’t already, give an inventory management software product a try. These products can help manage inventory even for orders placed while you sleep, and can be accessed from anywhere. Moreover, since they automatically pick up data from your orders, the scope for human error is zero.

Mohammed Ali is the Founder and CEO of Primaseller—a MultiChannel Inventory Management software that helps sellers manage inventory better and fulfill orders on time, with nifty integrations that make business better. When not running a startup, Ali is often caught lapping up the latest book in fantasy fiction.