Almost every e-commerce brand experiences seasonal peaks. But without proper fulfillment management, what could be a period of increased sales can easily overwhelm emerging businesses. More specifically, strategically managing inventory levels allows e-tailers to operate efficiently and meet consumer expectations of an ideal shopping encounter. Creating these positive experiences bolsters your brand’s image by providing shoppers with the items they want when they want them, and also allows you to maintain positive business margins
Make Space for New Inventory
Seasonal shifts in consumer demand can turn top sellers into shelf dwellers. When your warehouse is filled with these slow-moving products, you are paying for unnecessary storage costs. In addition to these expenses, you’ll also have to pay for storage for new items and products. If you don’t have space for the new inventory, you may impact your fulfillment partner’s ability to receive and putaway items into inventory. Lack of updated inventory on your selling platforms could lead to cash flow problems, further harming your business.
To prepare for each new season, you’ll need to use strategies that allow you to clear out the old to make room for the new. The right strategies will depend upon your business, but some examples include:
Clearance: Holding a flash sale — a discount or promotion offered for a limited time, with limited quantity — combines the appeal of timeliness and affordability, adding a “buy-it-now” aspect that may draw customers to huge savings. Make sure your fulfillment team is informed prior to implementing this strategy so they are prepared to accommodate a potential spike in order volume and keep everything running smoothly.
Liquidation: This is another useful strategy, as it can quickly relieve you of large amounts of aging products. However, liquidation companies can be picky with what they take, and you shouldn’t expect much cash in return.
Donation: While donating excess products won’t directly increase cash flow, you may qualify for tax deductions that will help your business in the long run. It may also help with marketing your brand’s reputation, as research suggests that most customers have a more positive image of companies that support social or environmental issues.
The ideal method will likely depend on your consumers and products, so it’s important to weigh the benefits of each and choose which is best for your business.
Categorize SKUs with ABC Analysis
Proper seasonal inventory management also requires conducting seasonal stock keeping unit (SKU) velocity analysis. By conducting ABC analysis based on SKU velocity, you’ll be able to identify fast-moving items, thus affecting where your fulfillment team stores it so that you can reduce pick times and get items out to customers quicker.
This is the formula you should follow. Identify:
- “A” inventory – Fastest-moving SKUs require prioritized location in the warehouse for easy access and more frequent picking, as these are the most popular ordered items.
- “B” inventory – These products fall between the fastest and slowest movers and should occupy space that isn’t prime location but can still be easily accessed.
- “C” inventory – Slowest-moving SKUs should be stored out of the way, as they won’t need to be picked or accessed as often. Minimize the amount of these products to reserve space for more valuable inventory. Figure out how to liquidate or get rid of slow moving items.
By properly storing SKUs based on their demand, your fulfillment team will be able to expedite picking and packing. When you properly manage your inventory, you’re able to better manage the relationship with your customers and get the right orders out on time. Getting items to carriers more quickly improves the likelihood of orders arriving on time. By putting strategies in place to manage inventory, you are also minimizing the amount of lost sales due to poor inventory management. Additionally, limiting the number of slow items helps ease the transition into future seasons, as you’ll likely have less aging inventory to deal with.
It’s important to conduct this analysis with every new season. Prior to each count, create plans for how to monitor each group to better prepare for velocity shifts.
Conclusion
While exact tactics for seasonal inventory management will vary by industry and product, the core strategy involves maintaining just enough SKUs to satisfy demand. Holding on to too much inventory will increase storage costs, harm cash flow and make transitions into future seasons more difficult. Not having enough items can discourage repeat purchases. Knowing how to adjust and plan before, during and after seasonal changes can help your business maximize sales and minimize costs, improving your bottom line.
As a founder and CEO of third-party logistics provider Dotcom Distribution, Maria Haggerty leads the charge toward helping retail brands achieve loyalty and return sales by acting as a catalyst for improvement. Recognizing that the e-commerce journey does not end at delivery, Dotcom guides clients in transforming lackluster packages into unboxing experiences worthy of excitement, praise, and sharing. Previously, Maria was a CPA at Arthur Andersen and CFO of GoodTimes Home Video, where she helped grow the company’s distribution business. Follow on Twitter @dotcomdist, @mhaggertyceo, or emailinfo@dotcomdistribution.com for more information.
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