By Dani Avitz
FirmBee / Pixabay
Here’s a scenario you might be familiar with: a quote you received from a supplier is generating virtual dust in your inbox. You haven’t addressed it because you still need to review your list of current inventory so you can determine what you’re going to offer in the new quarter. You haven’t made time to look into your inventory list because you know you’re dealing with overstock, and you’re not sure how to avoid it again the next time you go to source new products.
You have one big headache compounded by financial losses you’ve already suffered this year and you’re beginning to think to yourself, “maybe I’m not cut out for this ecommerce gig, after all…” Sound familiar? If so, you’re not alone. You’re actually one of many ecommerce merchants who are still using traditional approaches to determine what to source and where to sell it.
This traditional approach relies heavily on manual research work to uncover the competitive landscape for the products you’re offering, where these products currently are in their lifecycle, on which markets they’re most desired, and more. Unfortunately, in today’s ultra-competitive online marketplace, this outdated approach takes too much time and involves so many variables that it often ends up being a business-damaging guessing game.
One of the most painful consequences of this traditional approach is overstock. Overstock is a serious risk that can drive a blossoming ecommerce business to the ground. According to a study by IHL Group, in 2015 overstock cost retailers more than $1 trillion globally.
There are a number of reasons an ecommerce seller might be faced with an overstock issue. One of the most apparent is inaccurate product research that led the seller to believe that a certain product would reach its lifecycle peak just in time to for him to generate a sizable profit. Inaccurate competitor data is another popular reason for overstock, leaving a seller unable to offer a competitive price point for a sourced item.
Faced with overstock, sellers frequently miss out on other, more lucrative opportunities because they don’t have any spare funds available to invest. Moreover, to avoid future overstock, an ecommerce seller might employ the help of an analyst. But this time-consuming endeavor is also prone to human error when you consider the number of variables involved in accurately determining what products will sell on each marketplace. And overstock doesn’t just happen to novice ecommerce sellers, a point reaffirmed by the estimated global cost of $1 trillion annually.
In addition to overstock, ecommerce business owners also face a number of other consequences that arise from basing critical business decisions on educated guesses.
So with all of this risk, how can ecommerce merchants best avoid these costly situations? To answer that question, we need to first explore what information they need in order to make informed decisions that will give them the best chance of success.
The two most important factors behind accurate decision-making in ecommerce are: