Inventory Management for Your Online Store

Are you an online business that thinks inventory management is not necessary? Read how sloppy inventory management can make or break a business.


Rita does an online business of quirky t-shirts for the college-goers is facing certain hurdles in managing her inventory and cashflows. Rita’s t-shirt prints are based on the popular memes that float on social media, DC and Marvel superheroes, and college lingos. The t-shirts get sold as long as the fashion is not obsolete. Recently, the Bernie Sanders meme did multiple rounds on social media, eventually driving more demand from college-goers for t-shirts bearing the same meme print. But the recently released movie of DC Comics Wonder Woman 1984 failed to create magic, which led to a lesser demand for wonder woman t-shirts. Going through the notion that the DC character movies are usually a hit, she stocked more Wonder Woman print t-shirts and less of Bernie Sander’s meme t-shirt. Her inventory planning backfired her when she started to lose customers since meme print t-shirts were out of stock. Now Rita cannot buy new stocks since a lot of money is tied up because of the overstocked inventory of the DC print t-shirts.

The inventory management problems faced by a D2C fashion owner like Rita are not very uncommon. Good inventory management is crucial for the growth of a company. Demand for a product is highly dependent on the volatile nature of trends, consumer choices, and seasonality. A business owner needs to understand to create a balance between having too much or too little. Similar to cash flow, it can make or break a business. 

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Inventory management can make or break a business.

What is inventory management? 

Inventory management is tracking the company’s stocked goods by monitoring their weight, dimensions, amount, and location. Inventory management aims to minimize the cost of holding inventory by helping business owners know when to restock products or buy more materials to manufacture them. 

What will happen if inventory management is sloppy?

As said, that a balance needs to be maintained, we shall bifurcate the disadvantages arising from both understocked and overstocked inventory. 

Problems due to understocked inventory 

Missed Sales 

Be it a start-up or a Fortune 500 company, the only means of revenue generation for a company is through sales. It is sales, that the company can set aside a separate budget for marketing and promotional activities, giving salaries to employees, and buying stocks. Missing sales due to understocking on a peak season truly hurts a business, knowing that the company could have made profits. Understocked inventory results in customers migrating to your competitors. The damage caused due to lost sales depends on the price of the item and order quantity. New businesses that run out of stock frequently will have trouble reaching the break-even. 

Lose customers

Online businesses have become highly competitive. For a single product, there are many shops to buy from online. Customers will not come back to your store if they find someone else who can promptly fulfill their demands at a competitive price. As per a study from Harvard Business Review, 31 per cent of customers will buy from a different online store if the product is not found in your store due to understocking, and 26 percent will substitute a similar product with some other brand. 

Understocked inventory results in losing a repeat business. Every customer that turns away is a lost source of recurring profit for your business. 

Problems Due to Overstocked inventory 

Held up money

Overstocked inventory holds up money that could be utilized for better use. The same tied up money can be used to pay salaries, pay off debts, purchase more understocked inventory, and other miscellaneous expenditure. Inventory has a limited shelf life because of spoilage, obsolescence, material degradation, or changing consumer trends. If the inventory expires, the tied-up money in the inventory is lost that becomes detrimental to the company’s cash flow. Businesses need to determine with accuracy the inventory requirement without understocking or overstocking it. 

Excessive spending on warehouse 

Warehouse storing charges depends on how much inventory is stored. Inventory that does not sell fast, is bound to increase your storage costs.

A proper Inventory Management improves cash flow 

Good inventory management makes your business more cost-efficient, as it helps manage cash flow. A poor understanding of inventory management leads to a miscalculation of supply. An inventory is a finished product that we have purchased with cash and will be sold in exchange for cash, but if the demand is low, we will not be able to liquidate it, eventually increasing our storage costs. Higher unsold inventory means more cash outflow, and running out of stock means missing on sales revenue. With more cash inflow a company gets extra resources to expand the business. 

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Higher unsold inventory means more cash outflow, and running out of stock means missing on sales revenue.

Effectively managing inventory from Shopify 

D2C stores or small online stores are now not only about giving discounts to entice customers but also aim to provide convenience, wider product availability, and experience. Online businesses are adopting an omnichannel approach to ensure that customers can receive the product faster. This is why businesses need to have superior tracking over inventory on both offline and online channels. An organized multi-channel inventory management helps to evade losses from misplaced items, returns and spoilage reduces inventory costs and paves the way for better customer service. 

Small businesses usually manage inventory manually by creating large spreadsheets. Now imagine this, say you are dealing with multiple product lines, you will need to develop spreadsheets for each product type. And every time to track and update inventory you would refer to multiple documents, unnecessarily consuming time and creating confusion. And to make things worse, if your colleague fails to update the sheet with the latest number in inventory, it will be a doomsday for your business. 

Now, here lies an advantage for businesses that are operating on Shopify. Shopify comes with in-built inventory management features at the backend for its customers. Also, it has a plethora of inventory management apps that helps you to make inventory decisions effectively. So, let us begin managing the inventory from Shopify. 

Benefits from Shopify Inventory Management 

Tracking and updating inventory easily

From Shopify, we can customize the Stock Keeping Units (SKU) and inventory number for each product based on category, type, season, etc. Each product in the inventory app consists of an inventory field that can be adjusted manually. You can view the number of each product you have on your Inventory page. You can also use filters to sort through product information by availability, quantity, product vendor, tags, and product type. We can also change inventory quantities in bulk through the bulk editor option for multiple product variants and locations appearing on your Shopify store. Inventory adjustments made for bulk inventory are displayed in rows and columns similar to a spreadsheet. 

Inventory history 

Shopify can provide you the inventory history of up to 90 days of any product or variant. Inventory history is viewable that includes the date of inventory adjustments made, the changes made by the individual, and the updated quantities of the inventory.

Inventory transfers 

We can log, track and receive transfers between various warehouse locations and suppliers. 

While the above features will be helpful for small to mid-sized online businesses, but they might not be sufficient for businesses who are scaling and are selling on multiple e-commerce platforms like – Flipkart, Amazon, and other social media pages, etc. Thus, managing inventory using the in-built inventory management from Shopify can be a daunting task. Shopify has various inventory management apps that will give access to greater functionality.

What Shopify Inventory management apps can offer?

Below are a host of benefits that Shopify inventory management apps can offer the businesses: 

  • Multi-channel functionality 

The inventory management apps can enable tracking of stock levels across multiple sales channels such as Shopify, Flipkart, Amazon, Etsy and Facebook Shops. It reduces the risk of stock counting errors and helps to keep a watch on sales across channels.

  • Automatic order generation and replenishment  

Based on sales velocity, lead time, delivery date, and inventory availability across warehouses the apps can automatically generate purchase orders whenever stock is low. When a business handles more product lines, its inventory replenishment becomes more complicated. The apps can recommend order quantities that will streamline replenishment, thus minimizing errors.  

  • Sales analytics

It provides a detailed in-depth report of stock level across all the channels and warehouses, from which we can determine product sales, profitability, sales margin, etc. 

  • Demand forecasting 

From the past sales data and business trends, the apps can suggest which products are worth reordering and to be kept on the shelves. 

Things to consider while selecting an inventory management app 

Any app we choose to manage inventory should have:  

  • It should be able to integrate with other existing apps that you use. 
  • If you have a physical store, then select apps that can integrate with the Point of Sales (POS) billing system. This will allow you to automatically sync online and in-store orders and stock levels, ensuring no discrepancies between stock levels in your online and offline sales channels.
  • The app should have sales forecasting capabilities offering an approximate projection of market trends and growth rates.
  • Should generate a variety of real-time actionable reports on inventory analysis.

Popular inventory management apps on Shopify 

  1. Stocky 

  2. Trade

  3. Skubana 

  4. Stock Sync

  5. Trade Gecko 

A good inventory management app will help you streamline and automate inventory management, save on and reallocate resources, and help you forecast trends, which is crucial for running a successful e-commerce business. With the above knowledge, find out the right app for your store, so that you can keep inventory under control and sales graph on an increasing mode. Download the app now to get started. 

Shalmoli Sarkar
Shalmoli Sarkar
An MBA in marketing and a BTech in chemical engineering, Shalmoli writes on marketing strategies and business technology for new and aspiring entrepreneurs.

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