Prioritization, Forecasting Tools Can Help Project Inventory Needs

Inventory planning for ecommerce is never an exact science. In even the best of times, it can be a challenge.

Halfway through 2021, manufacturers face additional curveballs in the forecasting process:

• Manufacturers are playing catch-up from the first part of the year and managing the delays in deliveries that were expected in Q1 or Q2.

• There continues to be heightened demand in the industry, but it’s not clear where it will go next.

• Suppliers are trying to manage expenses given the extreme increase in raw materials, production and logistics costs.

• There’s cautious optimism around the overall economic outlook, but many are taking a “wait-and-see” approach.

Despite the unpredictability, it’s critical to avoid inventory outages. An “out of stock” message on best-selling products is poison to ecommerce business.

The payoff of having products consistently in stock is obvious. In-stock products are what will get promoted by retailers, and more sophisticated sites have enabled filters that allow shoppers to browse by a product’s availability. And in the current environment, this is what customers are looking for as well—they’re more willing to purchase a substitute than wait for replenishment on an unavailable item.

For a category like outdoor in the first half of the year, we’ve seen manufacturers with steady stock comping 2020 in the triple digits, even with last year’s incredible demand. Those with outages are comping negatively by as much as 40 percent.

So how should manufacturers approach forecasting for their ecommerce channels right now? With the volatility of 2020 and 2021 in mind, there are a few strategies that can help set the stage for success in the next several quarters.

Focus Planning on Top SKUs

Prioritizing your best-selling products can help simplify the inventory planning process, especially if you have a large catalog.

Create a list of your brand’s top 100 SKUs, or however many make up the lion’s share—80 percent—of your sales across your key retailers. These are the products that matter most to your ecommerce business.

Zeroing in on best-sellers can make for more manageable planning. And keeping these items in stock will have the greatest impact on overall sales.

Use Retailer Tools to Help Projections

Wayfair, Overstock and Amazon all offer forecasting tools that can help project inventory needs 9 to 12 months out. These are updated monthly and take into account sales, seasonality and promotions.

If these are key retailers for your business, it’s a great tool to take advantage of and streamline some of those calculations.

Wayfair can also provide suppliers with a “never-out list.” As you might guess, these are the products that suppliers should strive to always have in stock. Again, it’s typically comprised of SKUs that make up the bulk of a manufacturer’s sales volume.

Lean In to Avoid Being Out of Stock

Your best bet in ecommerce is to ensure your top products are never out of stock. If in doubt, err on the side of more inventory, not less.

“When sales are down, inventory is the first thing we look at because it’s the likeliest culprit,” said Aileen English, a BrandJump Account Manager who specializes in Wayfair accounts. “It’s not just availability for the customer. There is a domino effect across your retailers.”

Best-selling products are constantly building higher rankings in the algorithms on retailer sites. A higher ranking comes from many factors, including availability, imagery, sales volume and reviews. It takes time and consistency to build to a higher ranking. 

But the moment an item goes out of stock, that ranking starts to fall, despite the time and effort it took to get there. Some retailers also have pay-to-play options—but those too will fall if an item has an inventory outage.

For home furnishings right now, it’s a push-pull situation to be able to take advantage of the category demand without overdoing it. But brands that can strike the right balance and remain in stock will see the momentum reflected in sales for the second half of the year.