The Inventory Breadth Lever of eCommerce Growth
The Volo Levers framework is something we use to think about how we can improve our sales growth and our productivity on ecommerce channels like marketplaces and webstores. In a recent post we talked about listing quality. In this post we talk about the importance to your growth of having a good range of available products for sale on your webstore and on key marketplaces like Amazon, eBay and OnBuy.
Widening your inventory breadth is about focusing on quality and quantity, so initially we’ll touch on three areas. One, you need to have a command over sourcing and procurement. It’s about constantly researching, finding and working with new suppliers. Some of your suppliers may supply you with physical stock for your warehouse. Others may be drop-ship suppliers, holding the stock for you and, when you make sales, fulfilling and the dispatching the orders for you too.
Two, carrying a large breadth of inventory means an increased reliance on ordering items to replenish stock and back-ordering items that are in demand. The more your inventory breadth, probably also the more supplier relationships you have to manage, and the more ordering and re-ordering you need to do to maintain optimum stock levels.
Three, the more suppliers to work with, the greater the quantity of different supplier information coming into your business, with a varying degree of quality data in those supplier feeds. Some suppliers may still rely on paper, others may use spreadsheets with stock and barcode information, and others may use automated feeds, again with a varying degree of automation. Suppliers also structure their products data in different ways and formats, with varying levels of completeness, which you have to harmonise.
Although inventory breadth is good, there are clearly some challenges that come with trying to increase the range of products on offer. SKU coverage is important, since often it’s not simply a case of one version of each product. In addition to a master SKU for the base product, there’s also a sub-SKU for each variation. Sometimes there’s even a listing SKU for each variation for each marketplace or channel. This makes it more complex to manage your inventory breadth.
Sourcing strategy is key when you’re dealing with a large range of products. The internet has effectively brought the global pool of potential suppliers to your business, which is great for choice but also brings with it the legal, regulatory and tax requirements behind importing goods from overseas. An over-reliance on cheaper products from the farther reaches of the world may leave your supply strategy exposed, as it has in the last couple of years as the pandemic stressed both supply and transportation.
If you use a system to unify your work across multiple marketplaces and webstores, the technology should help you considerably. Re-ordering and managing your records are also more complex when you have a breadth of inventory and suppliers. If you’re doing your re-ordering manually, then you need to know how fast each item of inventory is selling, where it is, how much stock you have left and how many days’ worth of stock this represents before you run out. You also need to calculate the lead-time for getting the stock in from the supplier.
Using virtual suppliers and drop-shipping your orders means that someone else is holding the stock for you. It also allows you to broaden the range of items you sell, but don’t forget that your supplier may also be holding the same stock for several other suppliers, so stock levels can sometimes deplete rapidly and you might not get regular and frequent updates. You still need to get those accurate and up-to-date levels of stock your suppliers are carrying, so that you don’t oversell. You also need to make sure you’re showing the adjusted stock levels for the item across all the places where you sell. Clearly, this gets more complicated the more virtual suppliers you use, the more virtual products you offer for sale, and the more places you offer them.
Volo has been providing technology and expertise in multichannel ecommerce for over 15 years. Over that time we’ve accumulated a lot of software functionality and industry best practices in all the key areas, including inventory breadth. When it comes to sourcing, we advise you to deliberately set regular time aside to source new suppliers. When you’re running an ecommerce business, it’s easy to get sucked into the daily operations. Devoting time to work on your business, not in your business, should give you long term returns.
Verifying suppliers’ data on your products for listings can take up a lot of time. The more you can automate these processes of inventory breadth, taking feeds from your suppliers and being able to turn them into the optimal listing information for your buyers on your various channels, the better and faster your business will grow. Multichannel ecommerce systems like Volo Origin and Volo Vision can allow you to automate your supply and your inventory breadth. That translates to less time integrating your suppliers and managing your inventory and more time marketing your products and growing your sales.
With a broader range of inventory to manage, of course, you also have more of your money tied up in stock. This makes it really important to know the items that are not selling quickly, not selling at all, or haven’t sold for a while and are sitting in the warehouse taking up space and tying up money. On the other hand, overselling and having no fast-selling items in stock is bad for your seller ratings and your marketplace status. Try to make sure that your physical products and your virtual products are always in stock. Inventory management systems like Volo can provide you with analytics on how fast your inventory is moving, how much stock you have left, and when you need to re-order. Volo will also send you automated alerts when your stock levels reach a certain threshold. You can even put rules in place, with manual interventions built in, to automate stock purchase and re-purchase.
It’s important that your supplier feeds, for both physical and virtual stock, are accurate and up-to-date. This helps you avoid overselling and having to back order for in-demand products. Try to get automated feeds where possible from your suppliers, rather than having to phone up or send chasing emails, which is a major time-suck. Volo’s multichannel software can automate and integrate your supplier feeds directly. This will give you a more efficient end-to-end process, freeing you up to grow the business.
Kits and bundles are a great way to increase inventory breadth and increase sales. When you put products together to create kits and bundles, you’re able to create a new product and extend your range. You might sell a sander as one product, for example, and a sanding belt as another. You can then put them together to create new products, a ‘sanding kit’, using your own barcode. It’s the same with a camera, tripod and case, and so on. As well as broadening your range, you’re also driving more sales and higher profitability. You’ll be able to deliver better value for your buyers who know that they can come back to you for more items since your range is so broad. Moreover, you can use bundling to help tag slower-moving items to faster-moving items, as long as the fit is a natural one. Systems like Volo enable you to spot products that are bought together, easily set up kits, bundles and other promotional offers to widen your range and make more sales.
Finally, we’ve talked about the increased importance of stock level and supplier status with a larger product range. Great reporting can give you a real insight into what’s happening across your inventory range. Volo Vision allows you to see what’s happening with your inventory breadth down to the individual item. You can analyse sales performance and stock levels by supplier, channels, regions and time periods. This means that you’re constantly keeping the well-performing items stocked and discontinuing – or bundling where possible – the poorly-performing ones. Volo Vision reporting gives you the information you need to rotate your inventory, orders and suppliers in accordance with your business growth goals.
When you get great at inventory breadth, you can grow your revenues more effectively. Volo helps companies grow their sales and average order values. We do this through automating supply and inventory management processes. Vehicle parts and accessories merchant KMS Parts uses Volo’s multichannel system to manage its inventory of over 1.4 million parts. Felix Liu, eCommerce Manager, KMS Parts: “The Volo system is capable of dealing with massive amounts of data. I’m so impressed with how Volo can deal with all this data. Eventually we’ll go to 3 or 4 million master SKUs, each with a different bar code. Volo’s system continues to handle this no problem.“
To talk more with us about inventory breadth and other growth levers in your own business, please send us a note here.
