e-Commerce Inventory Management 101: Why You Need a Plan

Running an e-commerce business is one of those jobs that sounds easier than it is. It might be simple when you're first starting and your selection is small. As you grow into a more viable business, though, your operations can become cumbersome and complex in a hurry.

One of the parts of the e-commerce process many companies lack is inventory management. In fact, 46% of small and medium businesses either track inventory manually or don't have a set inventory tracking system at all.

The technology exists to make your job easier and more cost-effective, it's just a matter of finding and using it. Online inventory management can cut costs, limit mistakes, and streamline your operations. Here's how they can help your e-commerce business:

Why You Need Online Inventory Management for E-Commerce

As often as it's overlooked, online inventory management is one of the most important ways to make your business more efficient. They come with a wide number of benefits:

Avoid Overstocking & Understocking

The most obvious reason inventory is important is so you know when it's time to restock your supply. If you order too early, you can end up using expensive warehouse space or watching your products age without selling. If you don't order in time, you'll lose valuable sales while you're out of stock.

Online inventory systems can track your inventory more accurately and in real time. It's easy to log in and check your supply of a certain product as soon as you need to.


A manual inventory tracking system seems easier when you're first starting your business. At that point, buying and setting up an online system may not be worth your effort and investment.

As your company grows, however, a manual inventory system becomes unmanageable and error-prone. It's difficult to keep track of all the inventory coming in and going out, and adding new SKUs becomes a frequent burden.

Online inventory management systems, on the other hand, are set up to scale with your business. Depending on the program you choose, you may need to pay more as your operation grows. However, that cost pales in comparison to the cost of your staff's time and the mistakes they'll make with a manual system.

Avoid Overselling

You already know that you lose sales when you run out of stock. After all, what's the purpose of search engine optimization if you don't have products for users to buy? It can be an even bigger problem, though, if you sell customers an item you don't have in stock.

In the event that this happens, you may need to refund the customer's money or notify them that their order will be delayed. Regardless of how you remedy the situation, you've damaged the customer's trust.

If you run out of stock, it's better if your site reflects that accurately. While it's not great to lose that one sale, it's even worse to chase away a repeat customer.

Many online inventory systems can integrate with your e-commerce site. When the inventory system detects that a product is out of stock, it automatically reflects this on your website. A manual inventory system doesn't have this option.

Of course, this won't prevent overselling entirely. In fact, the average retailer only has 63% inventory accuracy, so errors will cause you to oversell here and there. However, this will happen less often than if you were using a manual inventory system.

Coordinating Across Multiple Warehouses

One of the best ways to offer faster shipping to your customers is to divide your inventory among several warehouses. You might also need to use multiple warehouses if some of your products need to be stored in different environments (such as refrigerated storage).

This presents an obvious challenge if you're using a manual inventory system. Online inventory management, on the other hand, is an easier way to keep track of how much total inventory you have and how much is at each location.

Coordinating Across Multiple Selling Channels

A great way to expand your e-commerce business is to sell your items through multiple channels. For instance, you could sell on Amazon, social media, eBay, Etsy, or other sites depending on what you sell.

The problem is that you need to keep your inventory updated on all these sites as well. Marking an item as "out of stock" on your own site is one task, but if you sell that item on six different sites, it's a much larger job.

Some of these sites can integrate with your online inventory management system to keep the availability up to date. In this case, your inventory management software becomes a centralized place where you can see your summarized data as well.

Consistency Despite Staff Turnover

As much thought as you may have put into designing your manual inventory system, you'll need to explain it all every time you add warehouse staff. If it's your warehouse staff that has created the manual system, you could be in even more trouble if you lose all the staff members who know how it works.

Instead, an online inventory management system helps you maintain a consistent system and consistent data regardless of your staff. Many of these programs also have customer support so your employees can ask questions without taking your time.

Production or Reordering Alerts

One big challenge with a manual inventory system is that you need to stay on top of your numbers to see when it's time to reorder a product. You could have countless pages of notes about how long it takes to get each item and when to reorder, leading to a complex and error-prone process.

Many online inventory management systems let you set alerts. When a product gets below a customized number, you'll get an alert to start production or place an order.

Finding the Perfect Online Inventory Management System for Your E-Commerce Business

Inventory management is one of those tasks many business owners forget about until it presents a problem. Unfortunately, you may not realize how much money you're losing in inefficiency and errors. For this reason, an online inventory management can be the next step toward expanding and strengthening your company.

For more tips about operating your online business, check out our online business blog.