3 Inventory Management Methods for Your Online Store

UPDATED: May 22, 2023
PUBLISHED: January 9, 2015

When merchants—even the little guys who run an Etsy or eBay store—sell products online, inventory is a key issue. Where do they store it? And how do they keep track of what’s running low and what’s not moving at all?

The best option may largely hinge on the stage of the business, whether it’s a manageable startup with a trickle of customers or a thriving website with dozens of sales (or more) each day.

As a primer for running a successful e-commerce business, we’ve outlined three methods commonly used in inventory management. In the February 2015 issue of SUCCESS, you’ll find the 3 steps to supercharge your online sales.

1. Start (and possibly stay) small and do things yourself. Let’s say you’ve designed a new iPhone case or your grandmother is knitting scarves that everyone actually wears and receives compliments on. Go the old-fashioned route and have the first prototypes shipped to your house, take orders yourself, package them at your kitchen table, and hand over the packages to the post office or UPS guy while you’re getting started.

Inventory management: You notice that you’re running low, so you enter your inventory levels manually from the admin panel of Shopify, the software that runs your online store, and it will reflect that on your website. You order more items as needed and perhaps you launch a sale of slow-moving colors, styles and models.

2. Outsource fulfillment. In this method—with fulfillment by Amazon (FBA) being the best-known option—you have a third party overseeing packaging and shipping. With Amazon, all of your final products are shipped directly to an Amazon warehouse; Amazon tells you which one. Then when a customer orders, Amazon handles everything—boxing, shipping and customer support. Other alternatives include Shipwire or Webgistix, which both integrate directly with Shopify and give you more control of the customer experience, such as the ability to use boxes with your company logo (not Amazon’s) for branding benefits.

Inventory management: You can sign in to Amazon’s web interface (or that of another fulfillment provider) to have “near real-time” management of your inventory. Amazon will automatically alert you when you are low so that you can replenish your inventory. And again, a sale is an option for the stuff that is collecting dust.

3. Use your manufacturer as your distributor. In some cases, the manufacturer of your products will be the source that does all of the distribution—drop-shipping your product right to your customers’ front door.

Inventory management: Manufacturers often have their own inventory management systems, allowing you to log on over the web to monitor your levels. The balance here is around volume. Ordering high quantities will bring down the cost per item but will increase your total inventory. Conversely you’ll pay more when creating a smaller number of products, but if they are higher-end and you can charge a premium, you can make up the difference with wider margins.

Is your inventory just sitting there? Find out what tactics can help get your products moving.