How to prevent overstocks and stock-outs in your business
The size of merchandise in a store has a great impact on retailer profits. The key is to stock such a quantity of products that will neither cause surplus inventory nor stock-out issues. It may be a tough job for merchants to adjust their inventory levels to customer demand but it’s feasible. With some hurdles inherent in the process, it’s still possible to keep your supply in line with your customer needs.
1. Problems due to overstock
First of all, the excess stock is a serious impediment to cash flow because money becomes tied in products. Merchandise that gets stuck on shelves for a short period of time is not a problem yet, but it becomes a headache once products stay there for months or even years. This pertains to types of goods whose prices diminish because of them being out-of-date.
Wholesale price fluctuations may also occur with other products, which once purchased at an excessive price will be sold at a lower price, causing loss to merchants.
As for the surplus inventory, there are other reasons why goods don’t sell. These include the situations when more recent models are available or when the market is saturated with similar products and there’s no demand for them. Then, the capital invested in such merchandise is easily lost.
2. Problems due to out-of-stock
Stock-outs are another problem related to sourcing products. It sometimes may happen that a store has lower stock numbers than it could sell. In this case, although the capital is not frozen in inventory, it doesn’t mean that the merchant won’t be in the red eventually. Rather, the customer who intends to buy an item which is out-of-stock will turn to other stores. And in this way, your potential profits move to your competitors. Even worse, this may give rise to loyalty issues and bring even more loss to your business.
Keep in mind that stock-out issues affect your brand image and perception. A store with items that are mostly unavailable tends to be seen as poorly stocked and not worth being recommended to your customers’ friends. Left with a negative shopping experience of your store, most of your customers will spread a word about other well-stocked businesses.
3. How to avoid both
The easiest way around it would be to forecast your future demand and your customers purchasing ability. We all know that gaining this knowledge is as impossible as being precise about inventory counts.
Fortunately, some business models on the market allow you to meet your customers’ demand more accurately. One of such models is dropshipping which eliminates the need for keeping inventory because it’s the wholesaler who takes responsibility for delivering a product to the end-customer. A retailer is only a middleman in the supply chain. At the same time, this model is not free from shortcomings as it relies on excessive margins, cutting the profits of the retailer.
Luckily, there exists a tool that helps you to keep a nearly perfect balance between stock levels and your customer demand so that you don’t face overstocks and stock-out issues. It’s REST API, a tool that automates digital product sourcing in your store. To be more precise, when the end-customer orders a game and transfers the money, the store automatically sends the game to the store, without the customer’s knowledge. The stocking is automated and takes place in a blink of an eye so that you can avoid running into excess stock. To some degree, the risk of being out-of-stock is kept to a minimum provided that the game is available on the platform. And odds are high that the game is in stock on CodesWholesale.com because of multiple suppliers registered on the platform.
Finally, it has to be said that REST API doesn’t have to be the only method of sourcing products for your business. You can still buy the inventory using your preferred sources. REST API can serve as a reserve supply, a kind of backup source which you resort to if you can’t obtain a given product from your existing suppliers. Isn’t it a tempting perspective for your business?
About the author
- E-commerce owner and blogger. A trained accountant and an avid gamer. Healthy food aficionado.
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