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    What Is Ecommerce Inventory Management?

    A Digital Shelf Guide

    Consumer Behavior Today Is Unrecognizable

    Compared to a decade ago, consumer buying behavior today is unrecognizable. We no longer go shopping; today, we are shopping. We buy in a series of moments, choosing from an array of products on an interconnected digital shelf.

    It’s crucial for brands to manage both inventory and the consumer experience. A supply or inventory issue can quickly become a consumer experience issue — a chain reaction that has been occurring at unprecedented levels since the outbreak of the COVID-19 pandemic.

    Traditional inventory management methods aren’t equipped to support all of a brand’s routes to market. Many brands have improvised by patching together legacy enterprise resource planning (ERP) and multiple inventory-tracking systems.

    This way of coping, however, prevents a single view of inventory, which makes it difficult for brands to manage multiple routes to market.

    Brands need more than a single view of inventory. Instead, they must innovate, using ecommerce inventory management signals such as stockouts, delays, or surpluses to inform their merchandising strategy. A multi-view approach to inventory management can help brands maintain visibility and differentiate themselves on the digital shelf.

    Trends in Ecommerce Inventory Management

    Shoppers today discover and buy products directly from media platforms as they go about their daily lives. 

    But they can only discover products with available inventory, and they’re often intolerant of orders that can't be fulfilled because of inaccurate inventory levels.

    These buyer behaviors make front-end-focused systems for inventory a requirement rather than an opportunity. In this new environment, brands must handle ecommerce inventory management and shopping experiences together.

    Here are some other trends that are influencing ecommerce inventory management needs.

     

    Direct-to-Consumer (DTC) Commerce Growth

    One of the trends increasing the need for tight collaboration between inventory, product content, and shopping experiences is the rise of DTC selling across marketplaces, social platforms, and brand-owned DTC sites.

    A well-oiled consumer experience is central to DTC selling, so strong brand storytelling and compelling product content is crucial for DTC businesses.

     

    Third-Party Seller Growth

    In 2021, 67% of Amazon's sales came from third-party sellers, according to business intelligence firm Marketplace Pulse. In fact, most of Amazon's overall growth came from third-party sellers: Amazon's retail sales went up 14% in 2021, while the marketplace grew nearly 30% in the same year.

     

    New Routes to Market

    There's also been a significant increase in new routes to market, such as marketplaces on Instagram and Buy on Google or traditional first-party and drop-shipping retailers like Bed Bath & Beyond.

    Each of these new routes to market provide an opportunity for brands to be agile and diversify their go-to-market (GTM) strategy.

     

    Bigger Need for Search Engine Optimization (SEO)

    On the digital shelf, back-office functions are just as much a part of the product experience as messaging and photography.

    An unintended stockout on Amazon, for example, doesn't just mean immediate lost sales. It also means potentially losing sales to a competitor's product that continued to show up in results because search ranking algorithms didn't punish it for a stockout. Even after restock, it can take months to bring back product SEO traffic.

    On the flip side, an overstock can result in price and value decline due to excess supply and elastic product demand.

    Why Traditional Inventory Management Falls Short

    Traditional inventory management systems are designed for organizational handoffs — not end-to-end coherence.

    A marketer's goal, for example, might be generating consumer demand. For a person in operations, on the other hand, the goal might be to optimize shipping efficiency by looking upstream at the ERP. With traditional inventory management, these two perspectives and goals are nearly impossible to connect into a streamlined workflow.

    Traditional inventory management systems also aren’t built for dispersed digital shelves that combine branded experiences and transactions.

    ERP systems typically track high-volume shipments of wholesale pallets based on predictable schedules. They aren't geared toward supporting fast-paced omnichannel commerce environments where it's critical to manage inventory effectively to support individual consumer orders.

     

    Why Duct Tape Doesn’t Belong in Inventory Management

    The fact that traditional systems don’t measure up to the realities of today’s digital shelves means that many brands with ERPs struggle to keep pace with hybrid wholesale, marketplace, and DTC commerce. They also have difficulty meeting customer expectations for providing up-to-date, unit-level, and real-time inventory changes across selling points.

    Some brands may deal with these new requirements by “duct taping” systems and processes together, introducing:

    • An electronic data interchange (EDI) provider to handle drop-shipping communications;
    • An integration platform to handle connections with top marketplaces;
    • Spreadsheet exports to communicate inventory to long-tail retailers and sales teams;
    • An ecommerce platform for their brand site;
    • Third-party logistics (3PL) and other warehouse management systems to support fulfillment; and
    • A separate inventory management system just for DTC inventory.

     

    Disparate Systems Result in Challenges for Brands

    Cobbling together disparate systems introduces complexity to the tech stack, resulting in multiple brand challenges.

    First, brands lose a single source of truth for product content that supports multichannel strategies. Without this central source, brands can end up disconnecting product information management (PIM) data from inventory — giving teams only one piece of the puzzle.

    Marketing and operations teams then have to learn and work in multiple systems, with handoffs and integrations increasing chances for human error.

    Without a single solution to manage products, inventory, and orders, marketing and operations teams must work in multiple systems, follow numerous different processes, and miss out on valuable consumer insights because of the disconnect across channels.

    Consistent product content is at the heart of any strong ecommerce strategy, so it’s imperative that brands use a single platform to manage content across products, inventory, and order management systems.

    Brands must also be able to prioritize actions across all touch points and test new routes to market. But when they use multiple solutions and systems, execution remains a challenge.

     

    3 Principles for Creating Inventory Systems for Modern Commerce

    The secret to growing a brand is bringing the product closer to the consumer — on the digital shelf itself. There are three principles for creating inventory systems within this new world of commerce.

    1. Link Experience and Inventory

    Inventory tracking and demand planning must take place as close to the end consumer point of sale as possible. Think of inventory as a component of the consumer experience.

    2. Provide a Single View and Mode of Management Across channels

    Inventory systems need to support a variety of routes to market and accommodate all of the changes and actions required to allocate products across different channels.

    3. Drive Predictive Actions

    Pay attention to continuous signals from the digital shelf that may drive an increase or decrease in velocity or changes to merchandising strategy.

    A New Vision for Ecommerce Inventory Management

    In this digital environment, products are at the center of a brand's winning omnichannel ecommerce strategy, and inventory management is now a critical component of driving consumer experiences across the digital shelf.

    It’s important for brands to focus on insights about the future, rather than what’s already happened. That’s why they should observe signals that occur on the digital shelf and provide real-time inputs to forecasting.

    These signals include a viral post that drives a sudden increase in sales, enhanced content that increases conversions, or a competitor's product launch that lowers sell-through rates.

    Even knowing that a blizzard is expected next week in a specific market would help a brand proactively move inventory or adjust shipping service level agreements (SLAs) to serve shoppers.

    Consumer buying inspiration and purchases can happen anywhere — and managing this reality requires tight integration between back-office and front-office systems.

    Salsify Orders & Inventory

    Learn more about Salsify Orders and Inventory, and discover how it offers a centralized commerce hub for brands to manage product content, inventory, and sales.

    LEARN MORE
    Salsify Orders & Inventory Learn more about Salsify Orders and Inventory, and discover how it offers a centralized commerce hub for brands to manage product content, inventory, and sales. LEARN MORE