DropShipping inventory management: 4 things to know
DropShipping inventory management is an issue that many entrepreneurs starting their journey assume isn’t something they need to worry about. That’s definitely not the case. Even though you’re not holding stock yourself, you still need to know how many items you have available, and ensure you’re not going to end up overselling. If you’re working with more than one supplier, that can get pretty complicated very quickly – but with the right tools to hand, you’ll be able to handle it seamlessly.
1. What is inventory management?
In retail, inventory management is about knowing what you have in stock, how many items you have in each line, and where it is located. In the past, businesses would handle this with paper-based systems, but as eCommerce has grown businesses have more warehouse locations, and the need for accuracy has increased, that simply doesn’t work. So today retailers rely on automation to help manage their inventory.
2. Why does inventory management matter for DropShipping businesses?
When DropShipping is part of a business, or is the whole business, knowing what your suppliers have available to sell is essential so that you can avoid overselling and needing to cancel orders.
Overselling on marketplaces needs to be carefully controlled. Using Amazon as an example, your order cancelation rate needs to remain under 2.5%, or you risk your account being deactivated. Since this is a metric that contributes to your Amazon Account Health Rating, you need to keep it as low as possible. On other marketplaces penalties may differ.
But it isn’t just the risk of your account being impacted, of course – cancelling orders simply isn’t going to make for happy customers. And when you consider how customers can have a huge impact on your business by voicing their dissatisfaction on their social media, on your listings, and on review sites, it isn’t something you want to risk.
3. How can you effectively manage DropShipping inventory?
The whole point of DropShipping is that you don’t have the hassle of dealing with inventory – but you still need to be able to manage your DropShipping inventory. There are three things you can do to help handle your DropShipping inventory and ensuring that you have adequate stock levels – working with your suppliers, setting rules for inventory minimums, and planning ahead. Let’s take a look.
Working with your suppliers
You’re depending on your supplier to get products out to your customers, but you need to know what they have available in stock to keep customers from being disappointed, and your order cancellation rates low.
But technical setups for DropShipping suppliers can be complex – you need a lot of product information, after all. And if you’re working with more than one supplier, your setup is going to be even more complicated, and there is a good chance that you’ll end up with issues. Unless you’ve also got developer skills in your business and can handle these technical setups, you’re going to either be limited to working with one supplier (and therefore capping the number of products you can list) or you need a better solution.
One of the best solutions for this issue is to sign up for a DropShipping marketplace, where you can gain access to multiple suppliers, with thousands of products. The best DropShipping marketplaces won’t just give you access to inventory from a number of suppliers, it’ll automate processes, so that you don’t have to worry about those technical setups failing.
Set rules for inventory minimums
Let us say it again – you’re relying on your supplier having inventory available to fulfil your orders, and so you need to be certain they’re not going to run out of stock. You’re unlikely to be the only retailer they’re working with, and so you need to be careful that you’re not going to end up with the supplier running out of stock because another business got their order in before you did. When you consider the consequences on Amazon if you end up repeatedly cancelling orders, it isn’t worth risking it.
Setting rules in your DropShipping marketplace is the answer. You can’t demand your supplier holds stock for you, and even if you’re their best seller, they’re not going to! Setting rules that mark the item as out of stock on your sales channels before their inventory hits zero means you can massively lower the risk of products going out of stock.
Make contingency plans
Being prepared for the worst to happen is always a good idea – especially when eCommerce is such a competitive industry. Thinking through your workflows before an issue hits will allow you to handle them much more smoothly. There are occasions when certain products start trending unexpectedly, and so you need to make sure you have access to the lines you need.
Having access to more than one supplier will help you to guarantee that you have enough stock – and if your suppliers have different prices, you’ll need to set rules to keep your margins intact.
If you hold stock in a warehouse, then having access to suppliers that have your best selling products available will mean that you can keep those sales coming in, even if you run out. And of course, it’ll give you access to limitless numbers of products to keep your customers interested too.
4. What automation can help handle DropShipping inventory?
DropShipping is much, much easier to handle when you have automation in place – and when you’re dealing with hundreds, or thousands of orders a day, dealing with things manually isn’t an option. There simply isn’t time! With that in mind, if you’re just starting a new retail business, or you’re adding DropShipping to your business, then get your automation right as you start. It’ll make your job so much easier in the long term!
A DropShipping marketplace
Working with a DropShipping marketplace means that you’ll have access to so much more inventory. Multiple suppliers will have their inventory available for you to be able to source, without needing to mess around with CSV files, work with APIs, or set up FTP file transfers. And if you don’t even know what any of those things mean, then you definitely need to be working with a DropShipping marketplace!
Wondering which DropShipping marketplace is right for your business? Well, you need one that has been set up with your needs in mind. We did exactly that, and built automation such as bulk sourcing, listing tools for your sales channels, automated order processing, dispatch confirmations, inventory synchronisation, and rules. All of these will help you to manage your DropShipping inventory more efficiently and with fewer errors.
An inventory management system
Almost all existing eCommerce retailers will be working with an eCommerce management system like Linnworks to help manage their inventory. It is essential, in order to keep track of stock – especially if you have multiple locations – and to ensure that you don’t oversell on your sales channels and end up needing to cancel orders. That’s why we’ve provided an integration with Linnworks – because it is one of the leading eCommerce management systems in the UK.
By working with the powerful combination of Avasam and Linnworks, businesses can quickly and efficiently add inventory and listings from DropShipping suppliers, allowing them to take advantage of DropShipping sales when it makes sense to. That might be to add seasonal stock without needing to tie up cash, to add larger items without needing storage, or to add a lot more items in order to help scale the business up.
Linnworks can receive stock feeds from other locations, and so by sourcing from a DropShipping marketplace that has an integration with Linnworks just makes sense. We’ve created an easy setup, automatic payments, automatic order processing, custom rules – and most importantly for you when you’re DropShipping -– inventory synchronisation every thirty minutes to help minimise overselling. You can start benefitting from additional sales straight away with an Avasam account. If you’re already a Linnworks user but don’t have an Avasam account yet, you can sign up for Avasam within Linnworks – the information about how to do so is here. You’ll find information about getting started and configuring your Linnworks integration in our Help Centre.
Just because you’re DropShipping and don’t hold your own inventory, that doesn’t mean you shouldn’t be concerned with inventory levels. In fact, because you’re relying on your supplier having enough stock to be able to fulfil your orders – and you have no control over their operations – knowing inventory levels is essential. You can’t risk overselling, and with the right technology, you don’t have to.
Rather than working with each supplier separately, work with a DropShipping marketplace. You’ll get all the stock you’re looking for, from a range of suppliers, with no technical conflicts – just dependable stock and service that you need for your business. Sign up for your free Avasam account today to access thousands of items, and start DropShipping the right way.