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!
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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!