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Are Lonely Salespeople Costing You Customers?

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Sales has always had lonely moments. However, when the pandemic sent salespeople home to Zoom, the loneliness became palpable. This is becoming a costly problem.

Many of the changes to the sales profession are no longer temporary. Our clients are reporting that a portion of buyers are permanently working from home. Sales organizations are hiring more remote employees and video calls are the expected norm.

In an agenda-driven video sales call, the social elements (handshakes, shared coffee, etc.) that once humanized the sales interaction have been stripped away. Without these emotionally engaging elements, and without a bullpen of colleagues to buoy their spirits, sales jobs are increasingly becoming transactional and lonely roles.

As one seller put it, “Before, I was busy all the time, and some of it was fun. Now, I’m on Zoom just trying to stay awake. I’m realizing I need more social interactions, but at the end of the day, I’m too exhausted to make the effort.”

Left unaddressed, salesperson loneliness can become a costly problem. Recent research conducted by one of us (Dr. Good) reveals that loneliness goes beyond just a hit to morale — it has begun to impact salesperson behavior with customers, leading to an erosion of revenue, margin, and market reputation. Dr. Good’s data was gathered from two studies that surveyed more than 250 B2B and B2C salespeople from a variety of industries, as well as follow-up qualitative interviews, performance data, and observations of more than a dozen sales teams. Findings revealed that salesperson loneliness is causing three problematic behaviors that ultimately create a cycle of poor performance:

1. Social awkwardness

When social skills aren’t routinely practiced, they deteriorate like any other muscle. Sellers in the studies were frequently observed misreading social signals and misjudging the importance of key details in exchanges with customers. While not surprising — all of us are a little awkward these days — sellers play a particularly heavy price for missing social cues. Buyers are less likely to engage, and the trust required for relationship building doesn’t happen.

Further compounding this problem is the fact that sellers may be coming into a sales interaction moments after having been rejected by a previous customer. Without the buffer of peers in close proximately to help them reset, this could increase the potential for a confidence deficit, contributing to even more initial awkwardness on the next call. An awkward start has a chilling effect on customer engagement and can derail or, at the very least stall, what could have been a successful sales process.

2. Loss of focus on customer needs

Sellers who are overeager for social connection don’t listen deeply during the needs assessment phase of the sales process. The data revealed that these lonely sellers were more likely to forget critical customer information.

In a virtual environment, the visual cues that make each customer distinctive and memorable are often absent. When each customer is just another tiny box on your same computer, in the same room, talking about the same things, they bleed together. This lack of distinction makes what happened (and what the customer said) harder to remember. As one seller told us, “I’m on with 20 customers a day, and every call feels the same.”

We also saw evidence that because they don’t have enough meaningful social connections outside their job, sellers can wind up treating the customer as a confidante, someone they share with, rather than someone whose needs should be the organizing element of the conversation. 

Without a clear understanding of customer-specific needs and goals, sellers are unable to create a compelling or differentiated story about their solution. This impaired memory early in the process winds up hobbling them when they try to close.

3. Conspicuous overspending on customers

Nowhere was the direct cost of salesperson loneliness more readily apparent than their expense account. Dr. Good’s studies showed that salesperson loneliness was directly connected to increased spending on customers. It’s not hard to understand why someone who’s lonely would want to buy their clients gifts and meals, or why they might want to reduce the price to maintain a client friendship. These actions usually generate a warm response from customers, and what lonely person doesn’t want to generate a more positive emotional reaction from the people they spend time with?

However warm it might feel in the moment, this “sweethearting” did not improve salesperson performance in either of the two studies Dr. Good conducted. While buyers may have been grateful, and sellers may have gotten the dopamine high of a positive social interaction, this conspicuous overspending did not create additional revenue. It was a cost with no return on investment.

In the current social-starved environment, many sellers are over-indexing on the old adage, “people buy from people they like.” In an effort to be liked, salespeople have forgotten that the true purpose of sales: to improve life for customers.

How Managers Can Help Lonely Salespeople

As humans, we’re hardwired to seek meaningful connection. The challenge for sellers (and their managers) is two-fold: the shift to virtual created a huge interpersonal void for salespeople whose time had previously been filled with human interaction. Second, when salespeople try to mitigate their loneliness, their coping behaviors play out with customers, which has a direct impact on the organization’s financial health and reputation.

The three above behaviors create a dangerous cycle that erodes competitive differentiation, eats away at the margin, and results in costly turnover in the sales role. With the virtual world of selling unlikely to fully revert, it is crucial that leaders proactively mitigate this problem. Here are eight strategies to break this cycle:

Create situations that encourage non-competing.

When every sales meeting feels like Shark Tank, with coworkers pitted against each other, it reinforces the loneliness. Go beyond the usual sales reporting meetings and give your salespeople regular opportunities to be together without an agenda or contest. Something as simple as a weekly 15-minute “Share your favorite TV binge” huddle gives sellers a way to connect with coworkers rather than thrusting their loneliness on unsuspecting customers.

Activate a sense of shared purpose.

Sales loneliness magnifies when sellers feel that they’re nothing more than a lone wolf quota filler. You can help counter this feeling by regularly reinforcing a sense of higher purpose. Make a practice of discussing how your organization’s solutions make a difference to customers, and how each member of the team contributes. This reminds sellers that their jobs have meaning and that they’re part of something bigger than themselves.

Design a structure for peer-to-peer support.

Hold regular peer meetings in which sellers brainstorm together to help improve each other’s skills. For example, you can ask people for their favorite questions to ask during discovery or how to open new conversations without awkwardness. Putting sellers in a situation where they’re sharing best practices creates a support structure they can draw upon during times of challenge and change.

Do some brain training.

Listening skills were the most obvious (and potentially detrimental) thing to decline for reps experiencing loneliness. Reverse this trend by running a quick training drill for your sales team where they practice listening and responding to each other describing personal things like weekend plans or how they’ve arranged their workspace. Improving their listening skills in lower-stakes social settings, where there’s not a deal at risk, will help them do the same in front of customers.

Make sure your sales team is crystal clear on your value proposition.

When a rep has confidence in the value proposition they’re offering to customers, they’re less likely to discount or “sweetheart.” Without this solid base, a rep is more likely to feel like they are risking the personal connection by offering a price that may be perceived as too high or overspend on the customer to mitigate negative feelings.

Set spending guidelines and model appropriate gifts.

When spending guidelines are vague, it diverts attention from the true objective of the sale, which is to improve life for customers. Show your sellers exactly what appropriate and effective spending looks like. Perhaps it’s giving customers a helpful book about an issue they’re facing or providing a coffee gift card for them to use in your meeting. Demonstrate to your team that your solution combined with their own expertise is enough; you don’t need elaborate gifts to make connections.

Encourage your salespeople to schedule small breaks between client calls.

Tell your salespeople, “Give yourself five minutes between calls to review the notes, have a glass of water and remind yourself how we improve life for these customers.” This will increase their confidence in their offering and give them a chance to shake off what may have been an unsuccessful past call.  Grounding themselves in the value of their offering helps them start more strategically and curbs the impulse to overshare.

Encourage friendships outside of work.

Your customers don’t need another friend, but your salespeople probably do. But to have friends, you have to be a friend. Truly caring leaders would be wise to encourage salespeople to seek opportunities to pursue friendship outside of work. While friendship may seem like a touchy-feely topic inappropriate for leadership commentary, the research tells us that a salesperson’s lack of friends can be quite costly. Given the high stakes, it’s a problem worth addressing.

Salespeople are no different than the rest of us. When they’re lonely, they become more awkward, they tend to overshare, and they try to connect in using whatever means they have at their disposal. The above strategies can help mitigate salesperson loneliness, and ensure that your team is approaching customers with calm confidence. 

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Are You Tracking the Customer Service Metrics That Really Count?

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The biggest customer service problem for many managers is that they focus almost exclusively on day-to-day tactical customer service issues and fail to develop the latent, strategic customer service opportunities that would lock in and grow their most important customers. Here’s a typical situation.

Several years ago, we facilitated a workshop on customer service for executives. About 30 top managers gathered for a full-day session. We shared our latest research findings and invited leaders from Ritz Carlton Hotels, Disney, and a few other customer service leaders to share their insights. At the end of the day, we led a session in which the participants discussed their thoughts and experiences in turbocharging customer service.

We started the session by asking, “What is customer service?” This straightforward question drew a variety of more-or-less expected responses: line fill, case fill, answering the phone in 30 seconds, no telephone tag, fast order cycles, etc. The thread that linked these responses was that they were all tactical operating measures.

More importantly, they were all internal metrics. This is a common problem. For example, what good are high fill rates if the customer has too much of the wrong inventory? Or if the customer is ordering twice as often as is economical? Or if their phone call about a disruptive service problem that shouldn’t have arisen in the first place was answered quickly?

The customer service measures that really count are those that reflect what the customer is actually experiencing, not what you’re experiencing in your operations. It’s a common false assumption to conflate the two. Not only that, but what really counts is the customer’s perception of service, which managers often simply — but falsely — assume reflects actual service. In fact, customers’ perceptions of service are strongly determined by their worst experiences, not the average. Even if a customer’s really bad experiences are rare, those will be the most memorable. (Just think about the one time you had a terrible meal at a restaurant.)

At the end of the workshop, executives had developed a long list of tactical customer service measures, so we asked a different question: “What could your competitor do that would be your worst nightmare?” At first, the group was silent. Then, after a few minutes, the discussion gathered steam and moved in a different direction. The answers varied in form and content, but they all had the same underlying message: “If my competitor could coordinate internally to really improve my customers’ profitability, business processes, and strategic positioning, I would be in deep trouble. My customers would abandon our relationship and run to the competition without looking back.”

Improving a customer’s profitability, business processes, and strategic positioning was the strategic customer service breakthrough that was most important of all. So we asked the logical next question: “If this is the ultimate win strategy, and we now know the secret to competitive success, why don’t we do it first? It seems we have a golden opportunity to secure our best customers and take away our competitors’ prime business.”

The answer to this query still echoes in our minds. In essence, everyone in the group said in so many words, “We can’t. We just can’t.”

Why not? The common obstacle among the leaders was getting their functional departments to coordinate around innovative strategic customer service initiatives. This happens when groups are too focused on their own departmental objectives and metrics — like the internal tactical measures the group focused on initially.

While tactical customer service measures are typically managed by a single company department, strategic customer service innovations necessarily involve the coordinated activities of multiple departments. Here, we had a textbook definition of what we call “organizational indifference.” It doesn’t come from a malicious lack of cooperation — instead, counterpart managers in other departments naturally focus on the measures top management has told them are most important, and for which they’re being held responsible.

To break through this organizational wall and create truly effective strategic customer service innovations, leaders should roll out testbed projects: limited opportunities to experiment and discover potential breakthrough innovations.

Accelerate change with testbed projects

All companies face the twin problems of conceptualizing strategic customer service innovations and overcoming organizational indifference. Many fail to act decisively, putting themselves in danger of being overtaken by more capable, better-coordinated competitors.

Here’s an example of how one company did it right. About 30 years ago, health care company Baxter’s Canadian subsidiary joined with a small hospital customer to explore how to create innovations that would benefit both parties. Baxter wisely chose a situation in which the conditions for innovation were ideal: This was a relatively small community hospital that was newly built. It had a new staff and the need to develop new processes, and the young CEO was eager to create innovations that would change the industry.

Baxter and the hospital CEO created a joint team to explore new ways to work together. In the process, they developed several important supply-chain innovations, including the first working model of vendor-managed inventory, which is now a staple in the field.

This process had two critical outcomes.

First, because the hospital was a relatively small customer, it gave Baxter’s top management a low-risk way to conceptualize a new mode of doing business. And since it was a new organization, it allowed them to refine the actual processes in a “live” situation.

Second, this successful testbed enabled managers throughout Baxter to actually come see it, and to participate in developing it. Those managers could talk to the nurses, doctors, and administrators to get a feel for how things were going. In the process, many of the visiting Baxter managers offered the joint team suggestions on how to improve the process. By incorporating these suggestions, the team developed widespread buy-in while making the process better.

Contrast this with the case of a major multi-state, regional Bell company located in the U.S. southern states around the same time. This strong, successful company was a regional powerhouse with ample resources. Company leaders were deciding whether to develop broadband services for their customers, and if so, how to structure and support them.

The obvious path was to conduct a traditional market research study, which naturally showed that the customers were generally interested, but not enough to pay the full cost of the service.

At the same time, however, innovators in the company whom Jonathan worked with offered an alternative proposal: to conduct a limited testbed project by wiring a small, upscale community with broadband that could link the town’s “communities of interest” (schools, sports, clubs, etc.) through the network. The argument was that this would give the customers an opportunity to forge new communications pathways and develop a sense of the potential value firsthand.

In essence, this strategic customer service innovation could have been a forerunner for many of the internet-based services we now take for granted and would have catapulted this company far in front of its competitors.

Bell had ample resources. But the innovators in the company failed to gather support from their counterpart managers because none of the company’s department heads could see a direct benefit for their own departments, and they preferred to channel the resources to their own tactical customer service projects, which had modest but measurable benefits. In the end, the finance department killed the project, noting that it could not convince them that it offered returns comparable to those that flowed from existing operational programs with certain returns, like replacing old switches.

This well-respected industry giant languished and ultimately disappeared, merged into another regional Bell, and then both into another.

Develop breakthrough strategic customer service

Here is a three-point plan that innovative management teams can use to create strategic customer service testbed projects that will enable them to learn by doing and overcome organizational indifference.

Choose your opportunity carefully.

The cost of testbed projects is relatively low, and the results can be transformative. There’s little downside, but it’s critical to be thoughtful when selecting testbed customers. Baxter wisely chose a situation in which the conditions for an exploratory testbed project were ideal, and they avoided approaching the company’s premier customers, which would have raised a red flag for the sales group.

Make changes as you go.

Very often, the most important findings emerge only after a testbed project evolves over time — perhaps a year or so. The second and third-order changes are the most powerful because they’re reflective of customers’ real-time experiences and feedback. The Baxter project design went through several iterations as the team worked with the hospital personnel and incorporated their newly discovered needs and concerns.

Very few successful business ventures wind up pursuing their original business plans. Rather, the key to success is to learn from experience and evolve rapidly. The most successful venture investors understand this well.

Involve your counterparts early.

Strategic customer service innovation is a whole-company issue. Get your functional counterparts from other departments involved from the beginning. Let them help shape the project and discover how it will directly benefit them, and in the process they will become champions.

For example, Baxter’s supply chain VP was interested in trying out a new, automated picking system. He was able to incorporate it into the testbed project to show the system’s viability and favorable economics. Moreover, when the sales group saw that revenues rose by over 35% in this highly penetrated customer, they became avid champions.

Once the resulting innovation proves its worth and earns widespread acceptance, top management can commit to it and change the functional departments’ planning, resource allocation, and compensation systems to enable the it to grow and thrive.

. . .

Strategic customer service breakthroughs enable you to powerfully impact your customers’ profitability, business process effectiveness, and strategic positioning. They are the ultimate winning customer service strategy. The most effective managers create a comprehensive customer service program that drives innovations built on effective, day-to-day, tactical customer service excellence.

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Spotting a wholesale supplier scam

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Protect your business

Merchants are legally obligated to obtain a supplier’s agreement if they are reselling goods through any channel. However, often times, the last thing on a merchant’s mind when thinking ahead to driving revenue is the chance of encountering a wholesale supplier scam — but it can, and does, happen. Wholesale supplier scams can occur in many ways, but the most important thing to remember is that your supplier is ripping off you AND your customers. Today we’re going to take a look at a few common types of scams and offer tips on how to spot and avoid them to protect yourself and your business.

Types of supplier scams

In the process of buying wholesale goods, there are a few key opportunities where suppliers can take advantage of your business to boost their own profits.

The dropshipping scam

Today, most wholesale suppliers also offer dropshipping in order to better accommodate the online channel and take advantage of demand outside their traditional stock and carry houses.

However, some suppliers offer to dropship in order to scam buyers — they accept their payment without shipping the orders. Here is how a dropshipping wholesaler scam works:

  1. A customer purchases an item from your website or online marketplace channel.
  2. Your wholesale supplier receives notice of the purchase and does not ship the goods.
  3. Your customer contacts his or her credit card–issuing bank for a refund, which results in a chargeback for your company.
  4. You pay chargeback fees, refund the money and continue to pay your wholesale supplier who is scamming you out of money.

When dropshipping suppliers fail to send out your goods, you not only lose the money you paid to the supplier for the goods but also the fees you paid for failing to ship.

The replica goods scam

In the replica goods scam, you sign a supplier agreement with a company assuming the goods they provide are authentic and legitimate — a commonly seen example is fashion accessories: Louis Vuitton, Prada and Dolce and Gabbana. However, what you actually receive are replicated goods that you then ship to your customers.

There are many websites devoted to educating consumers on differentiating between real and fake high-end global brands. Legitgrails even offers services that inspect and authenticate the products in question for you.

wholesale scammers
Photo: LegitGrails

Once your customers receive their packages, they may identify the replica and contact their issuing bank for a chargeback. A worst-case scenario — your customer may sue you for fraud.

The “pay now, get later” scam

This scam preys on small business owners who are often just starting out or who may just be naïve. The way it works is that you issue a PO with your supplier for a new shipment of goods. However, the company says that you must pay first before they will ship. There may be a variety of “reasons” for this, such as the product being back ordered, and a pre-payment is required to get in line for stock. You pay the invoice, yet you never receive your shipment to refill your own stock.

Of course, one of the challenges with this situation is that it’s not entirely uncommon for real wholesale suppliers to ask for payment early. Many retailers don’t have the option to fight Net-0 payment terms and, in reality, won’t know it’s a scam until it’s too late. Just try to make sure that, at worst, you get a shipment confirmation before you pay an invoice.

Spotting wholesale supplier scams

Now that you understand the different types of scams, it is important to learn how to spot them. Below are red flag signs that will help you avoid falling victim to scam artists.

Communication red flags

Being able to easily communicate with your wholesale distributor is a key part of doing business. You want to be able to quickly reach them if an issue occurs so that your orders can proceed.

For that very reason, suppliers who scam often have poor communication practices. They need to make it difficult for you to contact them so that they can scam you without consequence. Here are a few communication red flags to look out for:

  • The supplier does not have any contact information on their website, making it very easy for them to disappear with your money and leave you with no way of contacting customer service.
  • Similarly, the wholesale supplier may also provide phony contact information, which will also leave you with no method of contact.
  • When you contact the supplier, the person who answers does not state his or her name or the company name, making you feel like you are calling an individual’s private number and not a business, which you probably are.
  • Without notice, you can no longer contact your wholesale supplier. It is as if the company no longer exists or never existed in the first place.
  • You are always dealing with intermediaries rather than the formal points of contact.

Avoid suppliers with poor communication skills, as this is often a clear sign of a scammer.

Business practice red flags

Even the most skilled scammers will show small signs of fraudulent activity when doing business with you. Stay aware of these common ways that scammers deviate from standard business practices:

  • The wholesale supplying company does not require your business ID or tax ID number to conduct business with you. Legitimate wholesale suppliers use the number as a sign that the buyer meets government business standards and is trustworthy, while a scammer doesn’t care.
  • The company denies your request for samples of products or starts acting strange when you ask for one. This is often a sign of a replica goods scam or some other issue involving low-quality goods.
  • Your wholesale supplier offers unbelievably low wholesale prices — so low that it seems as if the supplier probably won’t make any money from your purchase. Instead, they’ll make money by scamming you when you purchase goods.

Watch out for suppliers working around standard business practices to avoid potential scammers.

Verifying your wholesale supplier

Fortunately, there are a few ways you can verify that your wholesale supplier is legitimate. Do your due diligence by investigating their website, communication, and business practices. This will allow you to determine whether they’re legitimate or a scammer.

Check communication

A primary way of checking a supplier is verifying their contact information. Since many scammers make communication difficult, being able to contact a supplier is a sign of credibility.

  1. Identify the supplier’s full business name and contact information on the website. Note whether the information is transparent on their website or if it’s difficult to find.
  2. Call the supplier to see if they answer. If the listed phone number is out of service and you’re unable to contact them, don’t place an order.

Secure and trustworthy suppliers are open with their communication and maintain public records of their existence to foster long-term business.

You can verify the identity of a wholesale supplier on LinkedIn or other social media platforms. You can also look up the company on reputable wholesale websites. Or you can check EDGAR, the SEC’s database of corporate filings at a state level, for company registration info. If the wholesale supplier claims that they’re based in Georgia, there should be a record with the Georgia Secretary of State for that company.

Check business practices

Before you place a significant order, verify that the supplier has solid business practices and won’t scam you in payments or shipping goods. Start with creating a quality control inspection process for every supplier you’re considering.

As an example of quality control, you might immediately delay using dropshipping services from a wholesaler that may be prone to replica goods. Instead, you could start by sending the goods to your own warehouse first and establish some rapport before you decide to use their dropshipping service.

In addition to checking goods, you will also want to inquire about different payment methods for the merchandise. Most scammers prefer Western Union or even Bitcoin, as the payments are untraceable (although Bitcoin has become a more widely accepted payment type recently). However, if the supplier accepts credit cards or, better yet, checks, then it likely has a merchant account from a legitimate payment processor that has already verified the business.

Check business reports

There are plenty of reports for tracking scammers that you can use to check your supplier.

Research the company for wholesale scams on sites such as Better Business Bureau (BBB) or Ripoff Report. The BBB can help verify the legal status of the company and will provide information on any claims of fraud.

wholesale scammers

wholesale scammers

Complaint websites like these will show you complaints made by others on these public forums. Taking these steps will allow you to ensure that the supplier is real and trustworthy or will let you detect a scammer before they can take advantage of your business.

Preventing future fraud

If you are scammed by a supplier, don’t immediately assume you’ve lost. There are several actions you can take to potentially reverse the fraud and prevent the scammer from hurting others in the future.

Reach out to your marketplace

If you used an official marketplace to find your supplier — such as Alibaba or eBay Wholesale Lots — you might be able to reverse the issue. Many of these sites have rules to protect buyers against scams if they report the fraud.

Before reporting the scam, it’s best to familiarize yourself with your marketplace’s official rules.

If you’re using another marketplace, simply search on Google “[your marketplace’s name] fraud policy” to learn about what they define as scamming.

wholesale scammers

wholesale scammers

Once you’ve familiarized yourself with your marketplace’s policies, you can determine whether your issue qualifies as a scam, and you should be protected. If it does, report the scam to your marketplace so they can take action.

To find another marketplace’s reporting process, search in Google “[your marketplace’s name] report fraudulent seller” to learn how you can take action against your supplier.

Reach out to the manufacturer

If your fraudulent supplier is a wholesale distributor rather than the manufacturer, one course of action might be reaching out to the actual manufacturer of your goods. While it’s unlikely that the manufacturer will reimburse you for your losses, contacting them may help prevent the supplier from scamming future buyers.

Why? Manufacturers want to ensure that their distributors are conducting reliable, high-quality business. Otherwise, those distributors are likely to lose customers, be unable to buy more supply and hurt the manufacturer’s business.

With that in mind, manufacturers should be eager to hear about your experience with a fraudulent distributor. Notifying them may start a conversation between the manufacturer and distributor if they are directly linked without other distributors in between. If enough complaints have been filed, it may even prompt the manufacturer to cut off their supply to the distributor.

Report supplier on major forums

To protect other buyers, you can also report fraudulent suppliers on ecommerce forums.

There are a few forums that are specifically dedicated to reporting scammers.

  • Econsumer.gov is for reporting international scamming incidents. There’s a category for ecommerce to report fraudulent wholesale suppliers.
  • Supplier Blacklist is an international, user-generated blacklist of fraudulent suppliers.

You can also try posting on industry-specific forums, but be sure to carefully check their rules. Many forums, especially ones associated with marketplaces, prohibit specific seller complaints as spam.

Sharing your experience on forums most likely won’t lead to reimbursement, but it will protect buyers from being scammed by the same fraudulent suppliers in the future.

Stay watchful to avoid supplier scams

Apply these standards for handling scams, and you’ll be prepared to protect your business against fraudulent suppliers. If something seems suspicious or odd, always investigate it. Checking requires time and effort, but it’s better to ensure the supplier is credible than risk dealing with a scam.

For more information on reporting a wholesale supplier scam, check out Wholesale Forum.



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The quick guide to inventory management for ecommerce

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Everything in its place

To build a sustainable, profitable, scalable ecommerce business this year, you need to understand the ins and outs of managing inventory. Poor inventory management can be a complex challenge to overcome for any ecommerce entrepreneur, no matter your expertise, the size of your business, the types of products you sell, or the audience you serve.

As the year progresses and you work through plans for launching a new ecommerce business, you’re likely thinking a lot about how to approach and optimize inventory management.

Making the wrong choices when it comes to how you manage inventory can be incredibly costly. Making the right choices can be incredibly profitable.

So, what do you need to know to be successful in the year ahead?

This article will provide you with a brief overview of inventory management. First, we’ll highlight a few terms you need to know, then we’ll detail some of the challenges that ecommerce business owners face, and finally, we’ll wrap up by providing you with a handful of actionable best practices and recommendations that you can use to build or optimize an effective inventory management strategy for your business.

Glossary of inventory management terms

Before we dive too deep into how to optimize inventory management, it’s helpful to first understand some of the terms and concepts that you’ll encounter along the way. Here’s a list of 20 words and phrases to become more familiar with:

  • Inventory: tangible items, products or goods that you intend to sell to customers.
  • SKUs: a stock-keeping unit (SKU) is an identification code that you use to classify and organize products.
  • Variants: variations of the same product, such as different colors.
  • Units of measure: whatever you use to measure your stock (items, pieces, bundles, kilograms, ounces, etc.).
  • Supply chain: the processes and systems involved in producing, managing and distributing products.
  • Deadstock: inventory that you have in stock but can’t necessarily sell anymore.
  • Buffer stock: the amount of extra stock on hand that’s used to limit the risk if supply and demand are uncertain.
  • Minimum viable stock: the minimum amount of product you need to have on hand to keep up with consumer demand and fulfill orders without delay.
  • Reorder point (ROP): the pre-determined level to which inventory must drop before ordering additional inventory.
  • Lead time: the time delay between when inventory is ordered from a supplier and when it arrives.
  • ABC analysis: a method for prioritizing your existing inventory using three categories: (A) high-value products with a low frequency of sales; (B) moderate-value products with a moderate frequency of sales; (C) low-value products with a high frequency of sales.
  • First in first out (FIFO): Shopify defines FIFO as an “accounting method [which] assumes that sellable assets, such as inventory, raw materials, or components acquired first were sold first. That is, the oldest merchandise is sold first, with its associated costs being used to determine profitability.”
  • Just-in-time (JIT): a fulfillment method where inventory orders are made just in time to keep up with demand from consumers. This method allows you to avoid tying up money in unsold inventory but creates potential risk of not being able to fulfill a sudden surge of orders.
  • Dropshipping: a fulfillment method where you don’t actually store any inventory onsite. Instead, orders are fulfilled, and inventory is shipped directly from a third party to the customer.
  • Centralized inventory control: software that allows you to easily manage, track and control inventory across multiple ecommerce websites like Amazon, eBay and Etsy.
  • Inventory management software: tools that help you track inventory, streamline processes, automate tedious tasks, and leverage data and other insights to boost success.
  • Cost of goods sold (COGS): your cost of production. (This is especially important from a tax perspective.)
  • Carrying cost/holding cost: the cost of holding your inventory in a year versus the value of the inventory itself.
  • Inventory auditing: the act of manually counting or checking inventory to ensure that it matches the numbers that exist within your tracking and automation systems.
  • Inventory forecasting: making informed decisions about ordering and reordering products based on historical data, trends and seasonality in your business.

Understanding these terms and concepts will ultimately help you become more informed and strategic when it comes to managing and optimizing inventory management processes and tasks at your business.

Challenges with inventory management in ecommerce

Every ecommerce business owner encounters inventory management challenges at one point or another. Knowing what some of these challenges are ahead of time and how to address them are what separates good inventory management from great inventory management.

Here are some of the most common inventory challenges that can ultimately affect the growth and profitability of an ecommerce business as well as customer experience and retention:

Challenge #1: Overstocking & overselling

In ecommerce, a good grasp of your inventory and the shopping habits of your target audience will help you accurately stock and sell your products. If you underestimate your customers’ needs, your supply may not meet demand. If you overestimate how much product you need, you’re likely to spend more than you make.

Although it can be advantageous to keep a large supply of inventory on hand, especially as you approach a busy season, it can present some challenges:

  • It can be expensive. Unless you’re dropshipping inventory, you’ll need to store the products you order from manufacturers. As you can imagine, too much inventory and not enough orders can wreak havoc on your ability to come out ahead at the end of the month.
  • There’s potential for having too much dead stock on hand. As mentioned earlier, deadstock refers to inventory that you basically can’t sell because you have too much inventory and not enough demand. It happens when products perish or deteriorate over time, but it can also happen as trends and shopping behaviors shift.

On the flip side, not having a good pulse on your inventory can result in accidental overselling — i.e., letting customers buy products that are out of stock. When you oversell a product, you create customer service and reputation challenges that can take time to overcome and repair.

These days, consumers want transparency when it comes to working with ecommerce brands. They want to be able to know and trust that if you make a promise, you’ll keep your word. When you oversell inventory, you risk delaying fulfillment and potentially damaging the trust you built up with people who chose to order your product. A quick fix for this would be to flag products as in or out of stock online so customers can see available quantities for themselves.

Challenge #2: Manual management that doesn’t allow for scale

Another inventory management challenge that many ecommerce business owners face relates to scale. When you’re in the early stages of building your ecommerce business, it’s relatively easy — and tempting — to manually track and fulfill orders, even across multiple channels. But it becomes much more difficult as you work to scale your business to meet the growing demands of your customer base.

For many ecommerce business owners, scaling means selling products on additional channels, such as Amazon, Etsy, eBay and Alibaba. It also means working with multiple partners, vendors and manufacturers. It might even mean storing inventory at multiple warehouses around the country.

Taking such steps to grow your ecommerce business in this way is next to impossible when you rely only on manual management methods. With manual management, you also stand the chance of encountering data mistakes that affect inventory management. For example, this could lead to overestimating or underestimating the inventory available to customers.

Some examples of ineffective manual inventory management methods include:

  • Using offline spreadsheets to track inventory numbers
  • Using a suite of separate tools that aren’t integrated or synced with each other
  • Using an offline program that can’t provide you with automatic real-time updates
  • Using paper and pencil to manually track and fulfill orders

When you’re just starting in the world of ecommerce, it can be tempting to track and manage inventory manually to save money and keep a hand in every aspect of your business. To avoid and prepare for some of the challenges mentioned above, however, you must take the time to investigate and make plans to adopt more scalable inventory management processes, tactics and tools that support continued growth over time.

Challenge #3: Lack of visibility across multiple channels & multiple warehouses

Lack of visibility is another common problem that ecommerce business owners tend to face as product demand increases and inventory management becomes more complex. There are two main visibility challenges that can impact your ability to meet demand and grow your business:

  • Lack of visibility across multiple channels. As mentioned above, as you grow your ecommerce business, you’ll likely decide to start selling your products across multiple channels (Amazon, Etsy, eBay, etc.). The problem is unless you’re using inventory management software, it’s not always easy to keep track of the sales and orders that come in from each channel and how those sales and orders are impacting the inventory you have on hand.
  • Lack of visibility across multiple warehouses. As your business grows, you might find yourself partnering with more manufacturers and warehouses to meet the growing demands of your customers. Your goal is to have inventory on hand and accessible when demand suddenly increases. But again, without inventory management software in place, trying to keep track of orders, inventory and relationships across all warehouses, partners and manufacturers can be a dizzying process for anyone.

inventory management

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Without complete visibility across your entire inventory management system, it’s difficult to know which decisions need to be made and by when they need to be made to continue boosting sales and meeting consumer demand.

Also, keep in mind that a consistent brand experience across channels is key to maintaining customer satisfaction. For example, pricing and product availability should be monitored and adjusted uniformly across all channels.

Challenge #4: Lack of insights

The final inventory management challenge that many ecommerce business owners face is a lack of data insights. Data and data analysis will help your company find areas of improvement that can lead to an increase in your engagement and revenue.

To boost profits, support growth, and cater to the needs of your customers, use data to help you understand how your inventory is fluctuating over time and how demand is changing over time. Your insights can aid in forecasting what your inventory should look like in the future when to reorder products, when to scale back on products and where breakdowns in your processes are happening.

Oftentimes, you need to be able to access and act on inventory data within a day or even a few hours to capitalize on or fully understand an emerging opportunity.

Without a centralized system that pulls inventory information from every source on a real-time, 24/7 basis, it’s virtually impossible to leverage data to make these kinds of informed decisions about your business.

Getting started with inventory management

Now that you understand some of the concepts and challenges relating to inventory management in ecommerce, it’s time to take action. To build an optimized inventory management system for your ecommerce business, take the following steps:

1. Understand basic product category demand

The first step in getting a better handle on inventory management, especially if you’re launching a brand-new ecommerce shop, is to understand how demand fluctuates for your product category over time. You can achieve this by using Google Trends to look at how search demand and interest have changed over the past 12 months or even the past five years.

Here’s a dramatic example showing when people are searching most often for snowblowers throughout the year:

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As you can see, interest begins to grow as early as October 2021 and peaks between January to February 2022. By understanding trends in this way, you can gain a better understanding of when you might want to order more or less of the products you sell.

If you have an established ecommerce site, another option is to use Google Analytics to see which pages and products your audience visits the most and how long they spend there. This insight will not only tell you what types of products attract your audience’s attention but also which products are popular and require more buffer stock.

2. Forecast future demand based on past sales

The second step in optimizing inventory management is to attempt to forecast future demand — including seasonal demand. To do this, simply look at past sales and determine when demand and interest were highest. Also, look ahead to find major selling opportunities throughout the year — like holidays and events — and plan for increased demand.

From there, order and store inventory accordingly to prevent any items from going out of stock during peak demand times. If you don’t have any sales history, refer back to the analysis you performed with Google Trends and Google Analytics.

3. Set initial minimum viable stock or minimal stock levels

If your ecommerce shop is already running, you should also take the time to set minimum viable stock levels for every product you sell. Remember: your goal is to determine the lowest possible inventory you can have in order to meet demand and avoid delays in fulfillment.

To land on your number, you’ll need to have a good understanding of demand and the amount of time it takes to replace out-of-stock inventory. When quantities dip below the number you designate, place a new order with your manufacturer or wholesaler. Think of this exercise as a starting place. Don’t be afraid to adjust this number over time as you experience growing or waning demand from consumers.

4. Prioritize products with an ABC analysis

To boost efficiency and save money, take the time to prioritize products using the ABC analysis. The ABC analysis is a method for prioritizing your existing inventory using three categories:

  • (A) high-value products with a low frequency of sales. For example, big-ticket items like workout and sporting equipment.
  • (B) moderate-value products with a moderate frequency of sales. For example, electronics and jewelry.
  • (C) low-value products with a high frequency of sales. For example, clothing and food.

ecommerce inventory

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ABC analysis is based in part on the Pareto Principle, which explains that 80% of your sales can be attributed to 20% of your customers. These customers buy category A products, which account for the majority of your revenue. Therefore, it’s more costly to your bottom line to lose these customers than it is to lose customers who buy category B and C products.

Your goal here should be to understand which products need the most attention from an inventory management perspective. For example, products that fall under your A category (the highest-selling products) may need to be ordered more often than products that fall underneath your C category (the lower-selling products).

5. Gear up for seasonality

If you’re running an ecommerce store that will take advantage of a particular shopping season — like holidays — or time of year — like summer — do what you can to be prepared.

Keep inventory levels low during slow months, but don’t wait too long to ramp up your supply. Near the end of a peak season, promote special offers to sell off the majority of inventory to avoid carrying too much dead stock.

Keep your operating costs down for as long as you possibly can, and while business is slower, use the time to make sure you have all the pieces in place — like partners, tools, warehouse storage, people resources, etc. — to ensure a smooth and successful sales period.

6. Implement inventory management software

To build and scale an ecommerce business today, invest in inventory management software. You can manually work through some of the tips outlined above, but using software will help maintain accuracy while saving you time and money.

The benefits of inventory management software include:

  • Helping you keep a pulse on inventory
  • Ensuring you’re never overstocked or understocked
  • Syncing inventory tracking across all the channels on which you sell products
  • Compiling real-time inventory data within one convenient system
  • Leveraging valuable insights

With more time and data added to your business, you can take advantage of new product opportunities, boost sales and successfully grow your ecommerce business.

Think about your inventory management strategy

As you think about improving inventory management for your ecommerce business, there are a few questions to ask yourself. How do you approach inventory management at your business? What challenges have you faced and been able to overcome? What have you learned that might help other entrepreneurs and business owners?

The answers to these questions will inform how you implement inventory management, how your business grows, and how you continue to meet the needs of your customers.



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