5 Shop Inventory Management Tips for North American E-Commerce

You’ve worked hard to build your online store, curating products you’re passionate about and creating a memorable customer experience. But as your business grows, managing your inventory effectively becomes crucial to your success and sanity. With hundreds or even thousands of SKUs across multiple channels, keeping track of stock levels, shipping rates, and more can feel overwhelming. The good news is, by implementing a few key strategies, you can streamline your operations and avoid common headaches. In this article, we’ll explore five tips to simplify your inventory management and take your e-commerce business to the next level. Get ready to save time, reduce costs, and gain valuable insights into the products your customers can’t get enough of. The organizational relief you’ve been dreaming of is just a few clicks away.

What Is Shop Inventory Management?

So you've launched your online shop—congrats! Now it's time to get organized. Shop inventory management helps you keep track of your products and ensure you have enough on hand to meet demand.

What is shop inventory management?

Shop inventory management refers to the systems and processes used to monitor your product stock levels and control purchasing, shipping, and logistics. Some of the core components include:

  • Maintaining an up-to-date catalog of all your products including details like SKU, description, price, and available inventory.

  • Recording each transaction like a sale, purchase, or return to keep inventory numbers accurate.

  • Setting reorder points to know when it's time to buy more stock.

  • Managing relationships with suppliers to ensure consistent availability of products.

  • Optimizing your inventory levels so you have enough to meet demand without tying up too much capital in excess stock.

Effective shop inventory management is key to providing good customer service. No one likes seeing that dreaded "out of stock" message. It can also help boost your business's bottom line by reducing excess inventory costs and preventing stockouts.

While time-consuming, establishing good shop inventory management practices from the start will set you up for success as your business grows. Spending a little time each week monitoring and maintaining your inventory can help avoid headaches down the road. Keep your system simple but consistent and accurate—your future self will thank you!

The Importance of Tracking Inventory Levels

As an e-commerce business owner, keeping close tabs on your inventory levels is crucial. If you run out of popular products, you risk frustrating customers and missing out on sales. On the other hand, too much leftover stock eats into your cash flow and storage space. ###The importance of tracking inventory levels

To optimize your inventory, implement a cycle counting system. This means physically counting a portion of your stock on a regular schedule, like once a week or once a month depending on how fast your products move. Compare the counts to your records to identify discrepancies early on. Make adjustments as needed to ensure you have enough supply to meet demand without excess waste.

Closely monitor sales velocity and trends to anticipate busy periods and seasonal spikes. Stock up ahead of time so you don’t get caught off guard. At the same time, watch for declining interest in other products so you can markdown or discount items before they become obsolete.

Analyze how much space you have to store inventory and how much it’s costing you. The goal is to turn over your entire stock at least once every 6-12 months. If items are sitting for longer, consider lowering prices to clear them out or donating to charity.

Finally, rebalance as needed. Shift products between warehouses or facilities to even out supply. Move bestsellers to the most accessible storage areas. Remove defective, damaged or expired goods from your available stock immediately.

Staying on top of these few fundamentals will help streamline your e-commerce business and minimize excess waste. Keep your inventory lean and your customers happy!

5 Tips for Managing Your E-Commerce Inventory

1. Audit Your Inventory Regularly

Perform an inventory audit at least once a month to keep track of stock levels and ensure your records match what's actually on hand. This helps identify any discrepancies early so you can make corrections and avoid overselling products you don't have enough of.

2. Set Reorder Points

For each product, determine a reorder point - the inventory level that triggers you to order more stock. Factor in things like average sales rate, lead time, and seasonal changes. Reorder points prevent you from running out of popular products but also keep you from overstocking. Review and adjust as needed based on actual sales.

3. Manage Excess Inventory

Have a plan in place to deal with slow-moving or obsolete products taking up space in your warehouse. You may need to markdown prices to clear out excess stock, return products to suppliers, or donate to charity. Storing excess inventory costs you money, so take action before storage fees start adding up.

4. Forecast Sales and Plan Purchases

Use your sales records and trends to forecast future demand and determine how much of each product you'll need to have on hand for the next few months. Factor in any sales, promotions or seasonal changes that could impact demand. Place purchase orders with enough lead time to account for shipping.

5. Maintain Accurate Records

Keep detailed records of all inventory purchases, sales, returns, and adjustments. Record the product SKU, date, quantity, and dollar amount for each transaction. Accurate inventory records are essential for managing stock levels, identifying any discrepancies, planning future purchases and calculating key metrics like inventory turnover.

Reviewing and optimizing your inventory management procedures on a regular basis will help streamline operations, minimize excess stock, and ensure your customers can always find what they need. Simplifying this aspect of your e-commerce business will save you time and money in the long run.

Automating Your Inventory Management

Automating as much of your inventory management as possible will save you time and hassle. Rather than manually tracking items and orders, set up systems to handle the details for you.

Use inventory management software

Choose a dedicated inventory management platform like Shopify, BigCommerce or NetSuite to automatically track your product stock levels, orders, and shipments. These tools integrate with your e-commerce store and shipping providers to keep an up-to-date account of what's in your warehouse and what's been purchased. With real-time data, you'll know right away if something goes out of stock.

Offer backordering

For extra convenience, allow customers to backorder out-of-stock items. This means they can still purchase the product, and you'll ship it once it's back in your warehouse. Be upfront about the typical backorder time frame so customers know what to expect. While waiting, send email updates to keep them in the loop on the status of their order.

Automating and optimizing your inventory management will give you more time to focus on growing your business. Let technology handle the small details so you can work on the big picture. Keep evaluating how you can simplify and streamline your operations even further. The less time spent on routine tasks, the more you can devote to strategic expansion.

Key Metrics to Monitor With Inventory Management Software

Once you have inventory management software set up, it’s important to monitor some key metrics to ensure your ecommerce business is running efficiently. Paying attention to the following numbers will help you identify any issues early on and make adjustments as needed.

Inventory turnover

This measures how quickly your inventory is selling. A higher turnover means your products are in demand and you’re not sitting on too much excess stock. Calculate your inventory turnover ratio by dividing the cost of goods sold by the average inventory value. For most ecommerce stores, an inventory turnover ratio between 5 to 10 is good.

Stock to sales ratio

This metric compares your current inventory levels to your sales. A lower ratio, around 1 to 3, means you have a good balance of inventory to meet demand. A higher ratio could indicate you have too much money tied up in inventory. Calculate your stock to sales ratio by dividing your inventory value by your monthly sales revenue.

Excess inventory

Keep an eye on products that are not selling as expected. Look for SKUs that have been sitting for more than 90 to 120 days. You may need to discount these items, bundle them, or discontinue them. Measure excess inventory as a percentage of total inventory and try to keep it under 10%.


The opposite problem of excess inventory are stockouts, when you run out of a product. Monitor your stockout percentage, which should be less than 5% of total SKUs. Frequently stocking out of products will frustrate your customers and lose sales.

Dead stock

This refers to inventory that will never sell, like expired or obsolete products. Eliminate dead stock as soon as possible since it provides no value to your business. Aim for no dead stock if possible.

Keeping a close watch on these key metrics and optimizing as needed will help ensure your inventory levels are supporting your business goals. Make adjustments where required and meet regularly with your logistics team to review reports and address any problem areas.

Simplify Your Inventory Management

So there you have it, 5 easy tips to help simplify your inventory management and make your e-commerce business run more efficiently. Implementing a few basic best practices around forecasting, categorization, storage, and replenishment planning can save you valuable time, money and headaches. Your customers will appreciate your streamlined operation and fast, accurate order fulfillment. And you'll gain peace of mind knowing you have a solid system in place to support the growth and success of your business. What are you waiting for? Start simplifying your inventory management today and reap the rewards. Your future self will thank you!

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