One of the most exciting things about starting your online shop is stocking up on inventory. If you carry a broad range of items, it’s easy to lose your focus on the count. Along the way, the numerous options can make you purchase what looks good, feels good, and might be selling good—they say you got to trust those instincts! So you overstock and wait for the orders to come rushing in. But sometimes, they, unfortunately, don’t. Items you deemed aesthetic, trendy, and profitable may not be at the top of your target market’s must-buy list. And so you are left with a problem—you overstocked. You bet a whole load of money over inventory that isn’t selling as hot as pancakes. What do you do now? We got you! Read more as we take a deep dive into the horrors of overstocking.

What is overstocking and why do entrepreneurs do it?

There are a handful of reasons why entrepreneurs overstock, but it usually boils down to making sure a potential customer’s need is within the stock. After all, the opposite of the dilemma is understocking—you lose sales opportunities if you don’t meet the demand. To get down on the nitty-gritty, here are some of the most common motivations behind the excessive inventory:

1. Out-of-Stock Woes

Ending the global pandemic is still every sector’s uphill battle. Although the distancing and isolation procedures boosted the Ecommerce industry, manufacturers and vendors of what we sell online may not be as lucky. Work disruptions result in production delays. To address this, many entrepreneurs chose to overbuy stocks. Apart from the delays, the fear of out-of-stock is very valid because it triggers unfortunate events. You will miss sales opportunities and may even have frustrated customers. When your shoppers are not happy, it gets ugly. After all, your shop’s credible reputation may be tainted. And to compensate, you rush into stocking the problematic item. The rush ends up with you concurring additional expenses in shipping and delivery.

2. Wrong Assumptions

One size fits all—it’s a common marketing strategy, especially for budding entrepreneurs who are still experimenting. But the thing is, this philosophy is not for everybody. As an online seller, you need to have figure-based decisions because assumptions and gut feelings won’t sustain you in the long run. Actual market demand should explain why you are buying a particular stock.

Read how inventory management can make or break your business >

When can overstocking be a bad thing?

So we have established why overstocking happens. Our next question is, is it a good or bad practice? It turns out it brings more harm than good. Let’s take a look at the top reasons why you should not be blindly overstocking inventory:

1. You are losing cash. Until you sell out overstocked items to the last bit of inventory, you are losing cash. And that is all because you did not recover the capital you put into purchasing the items. Also, that cash you are waiting to recover is tied in and not growing anytime soon. Consider this: you could have bought profitable inventory with that money.

2. You are losing valuable warehouse space. Aside from cash, you also cannot recover the storage space you allocated to house the overstocked items. It would be a tad bearable if you are housing inventory somewhere that is free. But if you are paying for your warehouse space, your non-selling items rack up dust and additional expenses. Even worse, the additional items make maneuvering within your storage space a difficult feat. And what happens when you have new inventory? Your warehouse is now an even tighter place.

3. You are risking your stocks’ conditions. The quality of your items will naturally change if you are stocking them up for an extended period. Some discoloration, dents, even some wear and tear—these are the usual indicators of the passing of time. But that is not the worst. Imagine the damages if you are selling perishables and other time-sensitive goods!

Drive your sales through the roof with swift order processing and solid inventory allocation >

How can I wisely stock up my shop?

Now that we know what’s at risk when you overstock, what are some steps you can do to replenish your online store’s inventory smartly? We have three tips for you:

1. Know your target market.

As mentioned previously, the rationale behind your inventory should be demand-driven. And who should be demanding? Your shoppers. You should know and understand the profiles of your usual customers. Learning their motivations and buying behavior can also help you correctly assume what they will need. It is even more advantageous if you can differentiate the ratio between repeat and new buyers. Your repeat buyers will give you a glimpse of what products are must-haves. Your new buyers, meanwhile, will get you to understand what is trendy. They may even make you verify which items in your roster are indeed sellable.

2. Monitor your inventory.

It can get tedious, yes, but keeping tabs on the items you have on hand is the real game-changer. With your inventory sheet, you can perceive which sells and which tanks. You can even see beforehand what item to restock.

3. Invest in an Ecommerce operating system.

It takes a Herculean amount of dedication and time to monitor all aspects relating to your online store’s inventory. And that’s assuming you only made your products available in one Ecommerce platform—imagine the headache when you’re on two, three, or more!

So, what can you do? Earn hard by working smarter.

Investing in an Ecommerce operating system like Omnirio can help you stay on top of your online selling-related tasks.

Omnirio’s omnichannel approach proves beneficial and profitable, especially for online sellers who are already vending on multiple platforms (or even planning, too).

With Omnirio, you can link all your online stores in one dashboard and monitor everything from there. Inventory is allocated well across all platforms and eanbles you to process orders at the speed of light.

As for preventing overstocking, Omnirio will generate data you can use to make well-informed decisions. You can analyze your customers and boost your ROI using their buying behaviors and preferences as your basis.

A tailored Loyalty and Rewards Program is also part of Omnirio’s services. With it, you can be more attractive to repeat and new buyers. Selling your inventory to the last piece is also possible and relatively swifter when rewards are in place.

Start managing your inventory wisely >

To Wrap It

Up It does make sense—if you anticipate the market’s needs and stock up, you won’t miss out on sales opportunities.

But this practice is a risk.

Overstocking when you do not even have proof that it is a sellable item means you sacrifice warehouse space, capital, and a chance to profit. With system’s like Omnirio, the accurate monitoring not only prevent excess inventory; you also give your business the chance to boom.

Ready to “over earn?” Sign up for Omnirio today!

Managing your inventory can be quite tricky. It’s not a problem unique to online sellers — it’s generally one of the most difficult processes in the retail industry.

Businesses with physical products need to keep track of their inventory to ensure there’s enough stocks for customers to expect. It can also cut the cost of acquiring and storing inventory, and aid in growing profitability. It’s also important to manage your inventory because it can tell you whether your business has gained profit or incur losses. Stock mismanagement also contributes to service-level agreement (SLA) violations, which can also increase unwanted charges for your business. The goal is to balance your stocks, minimizing costs, and tracking your inventory efficiently. There’s a science to managing your inventory—and a method to the madness. But first, let’s get started on the basics.

What exactly does managing your inventory mean?

Also known as inventory control or stock control, inventory management is the process of maintaining the right amount of stocks to ensure a business meets the demands on time, without raising the costs of storing stocks.

Why is this process important? For one, proper inventory management requires efficiency, which in turn, drives customer satisfaction.

For example, if your business claims to have certain items in stock and are being processed for shipping but cannot be located, it can become an incomplete shipment.

That contributes to a negative customer experience. Multiply that situation by the hundreds, and you get hundreds of unsatisfied customers.

From a business’ point of view, mismanaged inventory can increase costs, particularly because more stocks are being bought than being sold. A surplus of stocks can result in a buildup of obsolete stocks—products that are no longer in demand.

Find out the best way to manage your inventory  >

Why taking control of your inventory can make or break your business

Monitoring your inventory ensures you have the appropriate amount of stocks according to your customers’ demand. It also protects the production process should you encounter problems with the supply chain, and guarantee your capital isn’t needlessly tied up. That said, what are some problems that business owners encounter when it comes to stock control?

Read more: SLAs and other unwanted charges >

Common challenges sellers face in managing their stocks

Since inventory management is one of the hardest parts of running a business, you might encounter some problems related to stock control. These can include the following:

Absence of real-time reports

Businesses following a manual process of counting inventory can’t create real-time reports or historical trends. Without proper reporting on stocks or trends, it can be harder for sellers to make decisions on stocks to purchase.

Inefficient warehouse management

Whether you operate with a single warehouse or multiple, you’ll need to keep track of inventory data—including real-time numbers.

Without a centralized inventory management system, there could be shipment errors, order fulfillment delays, lost orders, incorrect stock counts, mislabeled barcodes, among other problems.

It gets even worse if your business operates with multiple warehouses. It becomes harder to stay on top of your stocks without proper software designed to support proper inventory management. For instance, if you’re selling a particular product and later find out that your supply can’t meet the demands, you’ll be forced to turn good-paying customers away by telling them their orders are out of stock. This also brings us to…

Lack of centralization

When a business grows, so does their inventory. This means their stocks can also expand to different locations. But manually keeping track of inventory makes it tougher to communicate data across different warehouses.

Manual reporting can’t show real-time data of inventory across locations, which can cause delayed or wrong shipments. Especially if stocks run out fast, it can be impossible to get real-time reports from multiple warehouses.

Suppose you have stocks of a product that you sell across multiple marketplaces like Lazada, Woocommerce, or Shopee. Every time there’s an update in the number of your stocks, whether it decreases in sales or increases in supply, you’ll also need to update your stock numbers for each marketplace—all in real-time.

Without an accurate number of stocks for each marketplace, you’ll become more prone to inaccurate delays in shipment or unfulfilled orders.

Not only is managing your inventory across multiple warehouses tedious work, without the aid of inventory management software, any reports you create can end up showing inaccurate data.

No trend projections

Forecasting inventory trends are important to keep your business afloat. With a manual process in place, a company is unable to anticipate the changing nature of customer demands. Without historical data in place, businesses might fall prey to overstocking or understocking, either of which can increase costs.

Imagine there’s an upcoming sale period, and you’ve got bulks of a certain product. But you didn’t realize that previously, demand for this particular item had dipped. So you’re left overstocked with items nobody’s looking for anymore.

It helps to have historical data to rely on so you can make more informed decisions on your stocks.

Reduce delivery costs and distribute your inventory in a snap >

How Omnirio can help you manage your inventory

Omnirio automatically aggregates your inventory across different warehouse locations. With Omnirio’s smart management, all stores are well-stocked and ready for the big sales.

Omnirio’s technology allows you to manage your inventory and distribute to all your marketplaces in a snap and increase data accuracy across multiple warehouses.

In a nutshell

Inventory management is one of the most crucial parts of business. Keeping track of your stocks and making sure you don’t incur losses is harder without the right platform to guide you. Stay on top of your inventory using trusted inventory management software to keep your business afloat.

Try Omnirio today.

Would you believe that turning your entrepreneurial dreams into reality is now quick and easy? Thanks to Ecommerce platforms like Lazada, Shopee, Shopify, and Zalora, setting up a shop won’t take as much effort, time, and money compared to establishing a brick-and-mortar one. Since you are working with an existing platform, all you need are documentation, your branding ideas, a gadget, and Internet connectivity. In a matter of days, your shop will be up and running. But unlike a traditional store where it’s easy to identify what your expenses will be, online seller newbies will soon find out that there are charges—unwanted fees that may make or break a starting business. Let’s get to the bottom of it, shall we?

Why am I paying for extra charges?

As with any business, you shell out expenses to keep your operations running.

To give you an idea, here are the fees that will be deducted from you as a Shopee store owner according to Moneymax:

1. Seller Transaction Fee covers payment transactions costs except for canceled, returned, or refunded orders
2. Mall Commission Fee enables access to all the perks and privileges of being part of the Shopee Mall
3. Cashback and Free Shipping Program Service Fee are the service fees if you are part of the Cashback Program and/or Free Shipping Program.

Lazada, another popular online marketplace, has its own set of fees such as Commissions (for LazMall sellers), Promotional Charges Vouchers, and Payment Fees for paid lost claim charges. But, there remains another culprit. Your extra charges may be because of an SLA.

Sell across all online platforms and never miss any sales opportunity until the last piece of inventory! Learn how now.

Reading the Fine Print: SLAs

SLA or service-level agreement is the agreed-upon level of service that a customer expects from a store or service.

Why is there no SLA for traditional retail stores you may ask?

Simply because an SLA is inked between a service provider or store owner and its external suppliers. So if you’re an online seller with an existing Shopee or Lazada store, an SLA between you and the Ecommerce platform is to be expected. An SLA lists down all the metrics, duties, and expectations a purchase entails from both parties (Overby, 2017).

What are the benefits of an SLA? It aims to protect both parties.

Sellers know their duties and the buyer’s expectations of their products. Through the SLA, entrepreneurs and the online marketplace being used are on the same page.

But what happens when you fail to follow the SLA?

It goes both ways. From the platform’s perspective, your performance is negatively rated. As for your shoppers, well let’s just say nobody wants a delayed parcel.

One of the most common SLAs pertains to shipping out a customer’s order at a given time.

This agreement goes by many names—Days-To-Ship (DTS) or Ship-On-Time (SOT) are the most common—but whatever the platform, the allocation is in respect with the item availability and distance between you and your customer. And it ranges days—a couple, a week, or a month even.

Another thing about this SLA is that it is the most common reason for a breach. Failure to fulfill your part in the shipping process may result in penalties, or worse, unhappy customers.

Want to automate order process and stock updates?

Automate order and inventory management

Responsible Seller = Happy Shopper = Good Sales!

We deep-dived into some of the reasons that may possibly bar us from being good SLA-followers. In fact, two of our discoveries pose huge risks and, therefore, losses:

1. Missed Order No matter the love and dedication you pour into your venture, the fact remains that life gets in the way. You won’t always be online. You may have an errand. The shipping date went over your head. These reasons are all normal and human. Unlike a well-oiled machine, there’s just a lot going on that may distract the brain. And yet, this human error can cost your business. When you forget to process or mix up orders, you can’t expect customers to be happy with your service. They want your product and they expect you to efficiently send it out to them.
2. Poor Inventory Allocations Imagine the horror—you already accepted an order only to find out that you ran out of stock. What happens next? An apology and canceled order. You get no sales; instead, you’ll get a disappointed buyer who may not buy back from you.

If not an out-of-stock problem, you may run into some logistical issues or mix-ups, especially if you operate in multiple warehouses.

Poor inventory allocation doesn’t always mean shortages. An overstock of items that do not sell well does not look good on your books, too.

These two issues may make or break your online store, but they surprisingly come with a relatively easy fix: utilizing a smart and centralized Ecommerce operating system.

Never miss an order nor run out of stocks with a centralized system. Learn more 

How can Omnirio help improve your day-to-day operations?

Selling everywhere is a good move if you wish to boost your online sales. But managing multiple platforms is a challenge—this practice is prone to missing out on orders and mismanagement of inventory.

Omnirio solves this dilemma by transforming your selling experience from multiplatform to omnipresent. In a nutshell, Omnirio lets you manage all your online stores from one dashboard.

Since it centralizes management, you can process all orders accurately and automate your stock management for efficient allocation. It even comes with other features to make your customers content and happy—loyalty and rewards programs are readily available and customizable to suit your business needs.

And in terms of innovation? You can keep up with the trends using customer insights gathered by Omnirio. Understand your customers’ preferences and shopping behaviors and plan your succeeding strategies accordingly to boost your sales.

Drive up your sales for as low as PHP 1,000 a month! Learn how here:

To Sum It Up With just one click, you are able to realize your dreams of owning a shop—Ecommerce transformed and will continue to shake up the way retail works.

But just like any normal business, fees and deductions are to be expected in order to operate. You can minimize it though by being a responsible seller who fulfills orders with crazy efficiency. One way to do it is to sign up for systems designed to help you give your all, everywhere, at once.

Want to learn more about the omnipresent experience? Check out Omnirio now!