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Can Items Being “Out Of Stock” Damage Your eCommerce Business?

Allowing your products to go out of stock can be detrimental to any e-commerce business. Selling across multiple channels is a fantastic method to reach more customers, but selling on various marketplaces mean you stay on top of your inventory. It will take some getting used to.

Your business needs to keep an updated, accurate real-time record of your inventory. It would be ideal to update your master list at least once or even twice a day. Sure you can do this task manually, or you can also utilize various inventory management tools. They can help manage and maintain your inventory almost automatically. There are many multichannel inventory management tools available, such as Magento, Ecomdash, Netsuite or Zoho Inventory. Choose the best one that suits your business.

Why maintaining good inventory health is crucial

E-commerce entrepreneurs should be happy that business is so good that their products get sold out. While the thought of having sold every piece of inventory is satisfying, it should be a cause of panic as well.

You’ve built unprecedented momentum by doing everything right only to be stopped by your own lack of vision.

You and your team worked so hard to source, optimize and market your product to sell online and make it a remarkable success. It sells tremendously, news about your product spreads like wildfire and it becomes an instant hit. You’ve built unprecedented momentum by doing everything right only to be stopped by your own lack of vision. You did not pay close enough attention to your sales velocity and did not plan accordingly. Brilliant leaders will sometimes blunder, it is how you move forward that is crucial.

Selling on Amazon or any e-commerce platform is a tough business to break into. If you’re selling on Amazon, then you should have access to Amazon inventory management tools. The inventory management tab and Amazon sales coach are there for a reason. Learn and master these tools to maintain optimum levels of your inventory health. In case you drop the ball and run out of stock, these are some of the effects of being “out of stock.”

Your customers will go elsewhere

Eager online shoppers that go to your Amazon or eBay listing or e-commerce site with the sole intention of buying your product will be disappointed when they see the phrase “this item is out of stock.” The odds of them waiting for your specific store to restock to buy from you is explicitly close to none. They would most likely look for another seller that sells the same product or something similar and just buy that instead.

So by all rights, the sale that should have been yours will now line the pockets of your competitors. The loss of revenue may be something you can overlook.

If the potential customer is frustrated because you ran out of stock, they may even leave negative feedback on your product page. This is especially the case if your products continually go out of stock. Customer loss will affect current and future sales efforts as well. Instead of you processing a transaction and capturing an eager buyers email for future marketing, you get zero.

Your product ranking will get negatively affected

It’s hard to believe but running out of stock will also cause your product ranking to drop. It took your team a long time to market your product using every possible trick in the book.

Your product sells very well and rises to page one of the Search Engine Results Page (SERP) which gives you even more sales. You run out of stock. Instead of your e-commerce business reaping the whirlwind you and your team created, other sellers will benefit from your hard work. Sellers that have the same or similar product in stock would be there to process the sale that should have been yours. As we all know the more deals a seller gets, the higher their rank increases in the SERP.

Your competitors that have adequate stock will attract the customers looking for your product, and they will make the sale instead of you. Sellers that have the same or similar product in stock would be there to process the purchase that should have been yours. As we all know the more sales, a seller gets the higher their rank increases in the SERP. During the time you are waiting for the delivery of a new shipment of your product, your competitor will enjoy an increase in their sales because of your outstanding marketing efforts.

Any other seller that has the same or even similar product will be converting your customers into their sales. These sales would then help catapult the seller with sufficient stock. If they have a structured inventory management system, they will eventually catch up or even surpass your companies product ranking in the SERP.

The need to re-establish sales

The moment your e-commerce company runs out of stock, other companies will be there to pick up the slack. They will most likely take over the sales of the now in demand item which will allow them to rank up in the SERP.

Once you finally receive a new shipment of product which may take several long weeks, you will have new competitors to deal with. Your team would need to reignite the fire that was once lit and hopefully achieve the same level of success in your initial marketing efforts. Your team will experience the challenge of competing in marketing, sales and also trying to win the buy box against newly established sellers.

Doing all these tasks all over again because the company did not have the foresight to keep a healthy product inventory is troublesome but necessary to get your e-commerce business back on track.

Too much of a stagnant product will cost you

Businesses often get caught up with selling a trendy product that quickly goes out of fashion. Do not make the mistake of purchasing trendy or seasonal products in bulk unless you have a proven track record that they are going to sell. If you are working with a limited amount of cash and make a mistake in investing it in a product that does not sell then that could have a significantly negative impact on your business.

In case you have a lot of funds and have done all the adequate market research plus have good past experience in selling seasonal products then go for it. Make sure to base your purchasing decisions on your own companies capabilities on selling the product. Take into account the sales velocity for one week and multiply that by four to get an estimate for the month’s sales.

To prevent tying up your funds on inventory that doesn’t move, make sure to consider any increase in sales frequency plus growing sales trends and only buy amounts of product you are confident are going to sell.

What is the lead time?

Leads times mean different things depending on the context it is used. In business, lead times mean the length of time it takes to complete a specific operation of a company.

For online shoppers, it means the duration of time from the time a customer orders the product on your site or marketplace to the time they actually receive it. For online sellers, the term lead time is commonly associated when ordering from the product supplier or manufacturer. Order lead time is the duration from the initial ordering of the product to restock merchandise until the time that the sellers receive their shipment of products. It is vital for any e-commerce business to be intimately aware of each of their products lead times.

How to maintain good inventory health

Most e-commerce businesses overlook the need to maintain good inventory health. The only way to maintain good inventory health is to accurately keep track of your inventory. Use sales reports to project sales and order adequate stock in advance while taking lead times into consideration as well. The traditional method of using spreadsheets to track inventory manually has been around since the dawn of logistics. It does work to keep track of everything, but it still needs to be done manually; which can be a tedious process.

Of course, if you want your ecommerce business to evolve, then you and your team need to adapt by using the latest technological tools at your disposal.

Use Inventory Management tools

On whatever marketplace platform you use, there are default tools provided to the seller to help them succeed in e-commerce. One of those tools is the inventory management tab. These tools are designed to help each seller achieve their goals in selling on the marketplace. They are user-friendly and can be used intuitively. All inventory management tools update in real time, and if you are selling on Amazon, the Amazon sales coach even project sales and gives a date on when to contact your supplier to order more products.

If the default tools provided by Amazon don’t appeal to you, then there are a multitude of many different third-party seller tools that will allow you to manage multiple marketplaces on one multi-channel e-commerce software. The most popular ones being Magento, Ecomdash, Unicommerce, Sharetribe, Netsuite and Zoho Inventory. There are monthly subscription fees associated with using these services, but they do make managing inventory across all the marketplaces you are selling in, a piece of cake.

Conclusion:

Proactive management of your product inventory is essential in providing your e-commerce business with good inventory health. Running out of stock is akin to running out of breath in a marathon of swimming meet, you will either lose or drown. Don’t make the mistake of allowing your inventory to become empty it is vital that you or your team manager always study sales reports and use that information for the prosperity of your e-commerce business.

Use inventory management tools, plan ahead, calculate lead times and order products promptly.

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Nathan Sharpe
Nathan Sharpehttp://www.biznas.co.uk/
NATHAN Sharpe is the entrepreneur behind Biznas. He knows that the life of an SME isn't easy, and you have to wear many different hats in order for your business to be a success. He helps others achieve this success by sharing everything he knows over on his blog, as well as any new lessons he learns along the way!

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