2019-05-06 09:00:39 Inventory English Review this checklist of tips on how small business owners and people who run ecommerce sites can integrate best practices for inventory... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2019/05/samuel-zeller-118195-unsplash.jpg https://quickbooks.intuit.com/ca/resources/finance-accounting/inventory/e-commerce-inventory-management/ 14 E-commerce Inventory Management Tips

14 E-commerce Inventory Management Tips

7 min read

If you run an e-commerce site, you know the success of your business is tied to properly managing your inventory. Not having enough of a popular product could cost you your best customers, but if you end up with inventory you can’t sell, your bottom line is likely to take a serious hit. Brick-and-mortar businesses have long understood the importance of smart inventory management, but this practice is crucial for e-commerce enterprises as well. When you organize the acquisition, storage, and sales of your product, you put your business in a good position to provide excellent customer service and manage your finances wisely. Online retailers and other self-employed businesses managing inventory can benefit from running through this checklist of best practices.

1) Forecast Your Business Inventory Needs

By breaking down your customer orders from past years, you can determine when you’re most likely to need particular products. Analysing your peak seasons (such as Christmas or summer) and paying attention to customer trends helps you to tweak your historic performance. It’s prudent to also pay attention to your inventory of shipping boxes and packing materials.

2) Organize Existing Inventory Using the FIFO Method

The FIFO (first in, first out) method of managing inventory calls for you to sell goods in the same order you purchased or made them. Older goods are more likely to go out of date or receive damage, thereby becoming a loss on your balance sheet. Organizing your warehouse to make older products most accessible is the simplest way to implement the FIFO method.

3) Classify Inventory Based on Popularity

When you have inventory that doesn’t sell, it only makes sense to stop stocking it. This makes it important to use stock-keeping units (SKUs) to track items. It also helps you figure out how to clear your shelves of low-turnover products, such as by having a sale. On the flip side, make sure you have inventory on hand for your most popular items, especially if you anticipate a spike in customer demand.

4) Take Advantage of Multiple Sales Channels

Amazon is, of course, the e-commerce leader, and taking advantage of its clout can benefit your business. Many shoppers head straight to Amazon when they’re ready to purchase or even research an item, and you want to come across their screens by being there. Other online retail channels may be appropriate for your products as well. If you sell artsy items, clothing, or jewelry, Etsy is worth looking into, and many online retailers also do well by selling on eBay. None of these channels have to supplant your website. Instead, they can work in synergy so customers can find you anywhere they prefer to shop.


With many of the major sales channels, you can take advantage of inventory and shipping services they provide. For example, Fulfillment by Amazon (Amazon FBA) lets you turn over many of the most significant inventory chores. Amazon FBA stocks your products in an Amazon warehouse and takes care of the “picking” (or finding the item on the shelves), as well as packing and shipping those items to your consumers. You gain from Amazon’s broad customer base, and the trust consumers put in it to fulfill their orders.


If you want to carry this outsourcing technique over to other selling platforms, check out e-commerce fulfillment providers such as Shipwire. Like Amazon FBA, these third-party services keep your products in their warehouses, which may save you money and employee time.

5) Consider Alternate Storage Options

Look into the possibility of storing some products in regional hubs so you can get orders to your customers quicker. You may be able to make storage deals with national chains that have warehouse space available. As you organize your warehouse, keeping popular items easily accessible can speed up your packing and shipping time.

6) Use Cloud-Based Inventory Software

With real-time inventory software like QuickBooksOnline, you can have up-to-the-minute information on the state of your inventory at any moment. The best inventory software does the following:

  • Assigns barcodes to each item.
  • Updates inventory records whenever an employee scans that barcode, noting the removal of an item from the warehouse shelf.
  • Updates your website immediately whenever you run out of any product.
  • Provides tracking information during shipping, so customers know when to expect delivery.

Inventory software can also provide you with valuable sales analytics data. Likewise, it can send you notifications whenever you run low on a product-by-product basis.

7) Conduct Inventory Audits

Even with the best inventory management software, it’s still a good idea to conduct regular audits. For many businesses, this takes the form of a yearly physical inventory in which the staff count every single item by hand. Other high-volume companies may even want to count inventory on a weekly or monthly basis. An audit can catch errors, such as if an employee fails to scan a product’s barcode when removing it from inventory for shipping. An audit can also help prevent theft.

8) Review Your Inventory Budget

As you go over your inventory numbers, it’s smart to compare them against your budget and make tweaks as needed. Perhaps the products you order regularly have undergone price changes that affect your budget. Make sure your planned inventory order falls within your budget. You may need to allocate funds intended to cover one category of products to another once you compare your inventory and sales budget.

9) Manage Inventory-Related Costs

Using smart inventory management software is a good step toward minimizing the carrying costs involved with your inventory, but you can also take other steps to keep costs under control. If you have inventory you can’t sell, you might see if your vendor is willing to take it back. Other options include sales that offer drastic discounts on under-performing items. You might even consider holding markdown or liquidation sales for product lines you plan to eliminate from your product catalog altogether.

Some small businesses also find it cost-effective to donate unwanted product to nonprofits, taking a tax deduction to mitigate any losses. You might also negotiate better payment terms with vendors and reduce shipping costs by arranging for drop-shipping, which means manufacturers and vendors ship directly to your customers to save your business money on processing costs.

10) Update Your Orders

Once you update your inventory list through a manual count of products, you’re in a good position to update your orders. Keeping inventory in stock proves important because you can lose customers — sometimes forever — if you don’t fulfill their orders. Use your cloud-based inventory software to replenish the stock needed as inventory becomes low, ensuring you don’t run out of your best-selling products.

11) Keep Your Website Updated

If you run out of a certain product, it’s important to update your website immediately. When customers place orders and pay for products but fail to receive them in a timely manner, they may turn to other sellers. Ideally, your cloud-based inventory management software updates your website automatically, but you may want to put fail-safes in place to make sure this happens reliably. Consider whether to add information on your site stating when you expect the product to be back in stock. You may also want to take back orders with promises to fulfill them by a certain date.

12) Adjust Safety Stock Levels

Inventory management typically ends up feeling like you’re walking a tightrope between having too much stock on hand and not having enough. When you have too much stock, it decreases in value as it sits there and takes the place of products that might sell more readily. Plan to have a 30-day supply of inventory, especially for your key products. Consider that your safety stock, and replenish it every time you start to dip into it. As you plan for orders of new stock, pay attention to how long it takes your vendors to deliver the items you need.

13) Focus on Quality Control

If your products look (or are) damaged in any way, you may want to pull them from inventory. Ask employees who fulfill your orders to keep their eyes open for damaged goods, and use a checklist to note them during your regular inventory audits. Watching out for the maintenance of your warehouse and shipping equipment is also key to keeping your order fulfillment processes smooth. Broken machinery can halt to the whole process, so take care to monitor your equipment and catch breakdowns immediately.

14) Adjust Inventory for Seasonal Events

Many online retailers make a significant portion of their income at the end of each year as consumers spend money on gifts for Christmas and other holidays. But those aren’t the only holidays to watch when stocking your shelves. If you sell stationery and office supplies, the end of summer may be your busy season as students get ready to go back to school. Likewise, winter typically heightens demand for coats, boots, and ski equipment, among other products, and summer may boost demand for sunglasses and swimwear. Use your inventory management season to track the rise and fall of product demand so you can plan accordingly and avoid losing money due to lack of stock.

If you’re self-employed, advice on inventory management and other business basics can help your business thrive. Online retailers who do a good job of tracking inventory stay in a good position to grow their companies — but financial management proves crucial as well. For instance, cloud payroll software can streamline your regular payroll while also preparing you for tax time. Using an accounting system, such as QuickBooks Online, you can generate a Profit and Loss statement automatically. Try QuickBooks Online today.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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