Buying is a complex process for all retailers, but nowhere more so than ecommerce. Whether you’re selling on Amazon, eBay, and any other marketplaces or online stores. Virtual shelves create endless possibilities for product variations and volumes, but this in turn makes optimizing the mix of goods on sale much more difficult than within a store.
Trying to be everything to everyone is the quickest way to turn the buying process into a costly task, which leaves you with excess stock to sell at markdown price. What successful online retailers need to be doing is re-thinking how they are currently purchasing stock, to see where the process can be refined and made more profitable.
The first challenge in the journey towards better buying is to understand what to buy, and this means knowing your customers. This can be something of a ‘dark art’, as shopper behavior patterns are continually changing, however there are some ways to focus in on what will sell well.
First of all, use any data available on previous transactions to identify trends in product sales. It may be that certain items peak at points in the year, or a range that proved popular 18 months ago have seen sales tail off.
Also, don’t be afraid to use your instinct – and your resources. Most online retailers enter their particular sector because of a passion for the products they are selling. Think about what appeals to you as a consumer, and use these opinions to inform your purchasing decisions. It’s also good to see what your competitors are selling, either for inspiration or to avoid duplicating items.
The next buying challenge is understanding current inventory, to determine what levels of stock need to be purchased. As we touched on when talking about shopper behavior, sell-through rates and seasonal peaks are very important here.
It’s important to look at inventory in terms of cash flow too, as you don’t want to create short-term problems in the name of potential long-term success. Particularly for start-ups, cash flow is one of the biggest business killers.
Once you’ve determined the optimum product mix and quantity, the next challenge is securing those goods at the best price, to maximize margins. Relationship building with suppliers is crucial here, as it can create additional negotiation powers or the introduction of lower rates as a loyalty reward.
For smaller companies, nurturing strong manufacturer relationships will enable your business to stand out from the crowd. Large retailers with multiple outlets are always prioritized by suppliers when allocating stock, as they provide the largest income stream; SMEs and start-ups have to shout much louder to be serviced.
Finally, if you want to make buying more profitable, it’s vital to learn from every experience. Whether you have a dedicated retail buyer within your company, or the role is handled by the ecommerce site founder or manager, sales performance analysis is essential for growth.
The joy of being an online retailer is that every transaction you handle can be recorded and studied, to identify areas in which margins and sales velocity can be increased, and product outages reduced, to improve bottom line profits.
The challenge for senior ecommerce personnel is taking the time to thoroughly review transaction data, and using the results to inform business decisions going forward.