Don’t Let Inventory Shortfalls Shorten Revenue Gains

By Shaun Tinney
4 minute read | Last Updated: May 9, 2016

Brands set revenue targets but don’t hold the inventory to hit them.

If a brand’s goal is to increase online sales, there needs to be enough inventory to meet that goal. Without inventory, the goal is meaningless.

Inventory planning needs to account for all variables including marketing, site improvements, or just sheer luck. To account for these variables, marketing and finance teams must sync up regularly throughout the year to ensure inventory planning is lined up with sales goals.

While inventory planning seems like an obvious tactic, many brands only realize during the busy holiday season that they only have a handful of their top selling products available for sale online, and it will take months to restock.

Real-time inventory management is a major roadblock to significant online sales growth, and brands need to plan for it or suffer from lower sales numbers despite high demand.

“Our goal was to increase online revenue by 15% over the holiday season with our new site launch. We didn’t get the inventory right and probably lost an additional 5-10% in revenue.”

– Client of The Good

The problem of growth

Growth is a good problem to have, but it’s unsustainable without planning based on what’s happening in real time. The typical bi-annual planning for inventory impairs the continual, year-round marketing efforts. This is a recipe for an unexpected revenue drop, and unhappy customers.

Unless the feedback loop is complete between finance and marketing within the brand, e-commerce targets can’t grow; products could sell out sooner than expected, hitting targets while overall revenues drop.

Investing in stock

An effective marketing strategy can change sales numbers quickly, but the lead time required to restock products remains the same. Brands can’t plan for everything, but there are a few key times that should trigger a fresh look at inventory forecasts.

Inventory Planning Triggers

Launching a new product

The buzz around a new product launch will draw new and interested customers. The extra traffic will likely result in extra sales of products outside the one just launched. Whenever a new product is launched, keep an eye on the stock levels of all popular inventory, not just the newly minted one.

Launching a new marketing campaign

Aside from the marketing push that goes along with a new product launch, there’s the year round effort to stay relevant to the brand’s customers, to connect with them on a level that matters to them. If it works, the brand is going to sell more products (increasing revenue, decreasing inventory).

Improvements to the web experience

When it’s easier for customers to buy, they buy more, more frequently. Most brand sites are not set up to sell products quickly. Instead their primary purpose (based on thousands of site audits) is to tell the brand story and sign up for emails.

Customers are on a brand site to research and buy products. Therefore brand sites must be set up to help customers quickly research and buy products. Customers are not interested in the self-aggrandizing brand shrine many brand sites are.

Brands that are actually concerned with boosting online sales in a meaningful way are moving away from this ancient marketing mindset toward creating an experience that is simple and helpful to customers, or at the very least not in their customer’s way.

If your brand has made these kinds of improvements to the site’s customer experience, you’ve likely notices the increased number of customers who make a purchase on your site.

This increase in sales will directly impact the inventory available for online sales. Plan for it.

Keep your eye on the balance

To avoid retailers wiping out e-commerce revenue opportunity, order segmented inventory for your e-commerce channel and commit to keeping it segmented. To avoid cannibalizing your own inventory, look regularly at how your efforts to drive direct sales are working out. If things are going well, you’ll probably need to order more than you thought.

Feedback about real time sales numbers must flow through the company quickly enough to adjust inventory based on seasonal sales trends.

Planning is great but only if the plan is agile enough to keep up with reality. Plan for future sales growth early so you don’t go into your biggest season without the inventory to match customer demand.