5 Tips for Buying Retail Inventory, for Ecommerce

Smart wholesale buying may result in ecommerce success and excellent profits. But the act of purchasing products to market on an ecommerce website can be more of a challenge than you might initially imagine.

With the possible exception of certain sorts of downloadable or digital goods, most business-to-consumer ecommerce retailers purchase products — apparel, knickknacks, or anything — and sell those very same products.

To select which products to purchase and decide what is a fair price, retail buyers need to (a) know about their clients and understand customer needs; (b) know their stock position, particularly as it affects cash flow; (c) build strong relationships with provider representatives; and (d) measure, examine, and, finally, understand their role in the company. All this has to be done within the competitive retail context.

For many buyers, lots of this work has to be done today, in the first quarter of this year. While at least some small ecommerce companies will only meet with vendor representatives over the phone or through email and only select products from the pages of a catalogue or site, other retail buyers will frequently attend purchasing shows such as Retail’s Big Show on January 11, 2015 in New York; the Outdoor Retailer Winter Market on January 21 at Salt Lake City; or possibly a small membership shows such as the Western & English Sales Association’s Denver Market on January 16.

Irrespective of how a merchant interacts with vendors, what follows are five pointers for purchasing profitable inventory for your ecommerce business.

1. Know Your Clients; Be Your Client

It has, perhaps, become cliché to say”know your clients.” Marketers use the word consistently. Salespeople use it as does almost every company adviser or adviser and here it’s being applied to retail buying professionals. But, notwithstanding the repetition, the thought — knowing what type of things your customers want and need — is essential if you’re going to be investing in products which you expect those customers will purchase.

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But, notwithstanding the repetition, the thought — knowing what type of things your customers want and need — is essential if you’re going to be investing in products which you expect those customers will purchase.

From the perspective of being a retail purchaser, knowing your client is often about being a customer. The ideal buyer of a product class might also be a significant consumer of products within that category. Folks who purchase shoes should love sneakers. Individuals who buy woodworking tools need to have experience as a woodworker.

In actuality, ecommerce entrepreneurs frequently open an internet store because the are involved or even enthusiastic about the business segment they would like to serve.

2. Understand Your Inventory

A 2nd best practice or trick for retail ecommerce merchandise buyers is to understand the stock that you have when you are making new purchases.

At the most elementary level, a purchaser should be aware of the following.

  • Current inventory levels. Just how much or how little is in stock.
  • Sell-through Prices. How many components of important products or categories are offered per week, month, or quarter, and based on this earnings velocity how many components are required.
  • Seasonal peaks. Identify products that sell better at a specific time of the month or year and understand how those peaks affect inventory requirements.
  • Gross margin. For categories or products, know net sales minus the cost of products sold.
  • Product affinity. Identify the connections between products, and search for items which tend to be purchased together, or products which help sell other goods.
  • Merchandise gaps. Discover items that ought to be in inventory but aren’t. If you sell ribbon, do you have needles?
  • Money flow. Understand how holding products in stock impacts your company as a whole.

3. Build Relationships with Your Agents

Manufacturers’ agents can have an effect on an ecommerce business. These sales people can negotiate terms, help with delivery times, adjust allocations, and resolve problems.

Building a good relationship can be a competitive edge. Imagine a toy maker has a hot selling product; the maker could easily sell more of this product than it could make. Therefore it puts the product on allocation, restricting how much any specific retailer can purchase. Often allocated products go just to the large retailers, but even a small seller with a fantastic rep connection could buy them also.

4. Measure, Analyze, and Understand

Even though it can be something of an art to pick trending and hot goods before the industry even realizes they’re trending and hot, retail buying is more properly a science.

An ecommerce retail buyer is going to want to track how products flow through the company and look for opportunities to (a) increase profit dollars, (b) earn higher margins, (c) increase sales velocity, and (d) reduce product outages.

For instance, some purchasing professionals advocate closing out the lowest 5, 10, or 20 percent of goods every year. But one would not know what these products are without quantifying, assessing, and understand the company.

5. Watch Your Competition

The last tip is to simply focus on your competition as you purchase.

You might discover the best thing ever, but when a (foolish) competitor is selling the identical thing at two pennies above your cost, it probably does not make sense to bring that thing in, however much you love it.

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