There are a lot of moving parts within ecommerce inventory management, all of which will require you to make choices. You’ll have to decide how much you want to spend on a system, how basic or advanced of a system you are willing to work with, which features you need, and which you can do without.

The first decision you’ll likely want to make is what business model to use

There are two main options if you don’t want to use third-party systems like dropshipping:

  • First-In, First-Out Inventory Management: The first products you receive are the first used to fulfill orders. This is particularly good for perishable items since nothing is stored longer than absolutely necessary. However, profits may be inflated if your production costs tend to fluctuate.
  • Just-in-Time Inventory Management: You restock an item every time a unit is sold. As such, inventory is always about equal to the number of orders filled. Doing so allows you to not have dead stock tying up your capital or unnecessarily taking up space, which would otherwise raise storage costs and make warehouse inventory more difficult to manage and track. 

Once you have the basics set, you’ll need to think over the details.

Below, you’ll see the full guide on an intelligent inventory management process, including how to implement inventory management software, organize inventory forecasting, and track inventory metrics of your ecommerce store.

Definition and importance of inventory management for ecommerce

Inventory management for ecommerce means tracking and managing stock levels of products sold online. You can accomplish this even with a basic inventory management system, although the features in advanced solutions can make it all a lot easier and more profitable.

Regardless of how simple or complex their inventory management strategy is, an ecommerce retailers simply cannot thrive without efficient inventory management. It’s the foundation for many factors contributing to a company’s success.

Fulfilling customer demand

Effective inventory management is the only way to ensure you have the right products in stock at the right time to promptly fulfill customer orders. It can minimize the risk of stockouts, which is when you get more orders for a product than the number of units you have on hand. 

Not properly predicting future demand leads to backorders or lost sales and disappointed customers.

Minimizing carrying costs

Holding excess inventory can tie up your capital and increase inventory storage and holding costs. Efficient inventory management helps optimize inventory levels so you don’t need as much storage and won’t have to unnecessarily tie up your working capital.

Streamlining operations

When your inventory is completely under control, it’s a lot easier to streamline other aspects of your operations, such as order processing, picking, packing, and shipping. 

This will improve inventory control by ensuring you do the following:

  • Reduce operational costs;
  • Improve efficiency;
  • Eliminate errors;
  • Speed up order fulfillment, etc.

Forecasting and planning

Engaging in ecommerce with inventory management provides you with so much more valuable data and insights. You will find them invaluable for generating much more accurate sales forecasting. 

That will help you:

  • Make more informed purchasing decisions;
  • Keep excess inventory to a minimum;
  • Anticipate and meet customer demand;
  • Track cost of goods and raw materials;
  • Monitor multiple sales channels;
  • Increase profits, etc.

Optimized and multi-channel inventory management helps you avoid losing sales due to stockouts, which minimizes financial losses. It also helps you reduce the wastage of dead stock, which increases your profit margins. That is a stellar combination for your bottom line.

Basic inventory management strategies for ecommerce

Ecommerce business owners need robust inventory management systems to always have products to sell without overselling or running out of stock. However, if you’d rather not deal with complicated or costly systems, some basic solutions can help you with this.

Manual inventory management using spreadsheets

Spreadsheets are probably the most basic way to manage inventory for any type of business. You manually enter all the product information, such as descriptions, SKUs, available units, and more. 

Of course, they are extremely time-intensive and are always vulnerable to human error. Still, they are less complicated and don’t require a large investment.

Basic inventory management features offered by ecommerce platforms

You will find at least basic inventory management features on most ecommerce platforms. They are more than capable of helping you manage and track your stock. Some of the most popular platforms offer a wide range of tools for inventory management that both large and small businesses will find helpful.

Data analysis

The major ecommerce platforms use existing inventory and historical sales data to show trends and patterns in how customers shop. That can help you anticipate increased consumer demand for certain products and make more informed restocking decisions.

Sales forecasting

Sales forecasting and management features can also help ecommerce companies predict their stock and inventory requirements over time. This feature is invaluable for keeping stock at optimum levels.


Some stock management systems have tools that allow you to automate manual tasks. This will not only save you time but will also increase the accuracy of your company’s inventory estimates.

Stock alerts and reorder point management

Two of the most critical parts of engaging in ecommerce with inventory management are setting stock alerts and reorder points. Together, they will ensure you always have minimum viable stock to meet demand and fulfill orders without making your customers wait.

Reorder point

A reorder point is the minimum number of units a product can reach before you need to restock it. Walking the fine line between overstocking and running out of stock can be challenging, but setting a reorder point for each product can give your business an edge.

You can ensure you have no stockouts by setting reorder points for each product above its average sales rate. That will allow you to predict and restock in time.

Stock alerts

Stock alerts prevent product shortages by giving you advanced warning that your inventory is low. You can set notifications according to your preference for how regular and timely you want the alerts to be. 

For example, you can set low inventory of a particular product to be immediately flagged, alerting you, your production team, or your manager.

Advanced inventory management for ecommerce

As ecommerce continues to grow and become increasingly competitive, staying ahead of the game with advanced inventory management features is key to success. 

Here are the five most important features to look for when comparing platforms or considering ecommerce inventory management software for your businesses.

Real-time inventory tracking and updates

It’s almost impossible to run an ecommerce business without real-time inventory tracking and updates. These features provide the most accurate and up-to-date information regarding the availability of each product, which business owners need to fulfill orders and prevent stock outs efficiently. 

It’s the only way to synchronize your inventory so that the stock levels displayed on your website can accurately reflect the actual available stock.

Real-time inventory tracking is usually achieved by integrating inventory management software with an ecommerce platform and other systems, such as warehouse management systems (WMS) and point-of-sale (POS) terminals. 

Inventory levels are instantly updated whenever a new product arrives, a sale is made, or a return is processed. Real-time tracking prevents backorders, overselling, and unhappy customers.

Multiple warehouse management

As ecommerce businesses scale, they often improve shipping and delivery times by expanding their operations to multiple fulfillment centers or warehouses. Managing inventory across multiple locations can be complicated, but it becomes much more manageable with a good inventory management system.

Advanced inventory management solutions offer features that enable businesses to manage and track inventory in multiple warehouses. You can see stock levels at each location, transfer inventory between warehouses, and even automatically allocate stock based on predefined rules.

Some systems also have intelligent order routing, which automatically fulfills orders from the warehouse that is closest to a customer’s delivery address. That simultaneously reduces shipping costs and improves delivery times.

SKU and barcode management

SKUs (Stock Keeping Units) are unique identifiers assigned to products, while barcodes are the visual representation of these identifiers. Efficient SKU and barcode management is essential for accurate inventory tracking and streamlined operations. Together, they allow businesses to track and manage inventory at the individual product level, making locating and identifying specific items easier.

Advanced inventory management solutions usually offer robust SKU and barcode management features. Businesses use them to generate and assign unique SKUs to each product and create and print barcodes. The bar codes are then scanned to update inventory levels. 

The results for online retailers are:

  • Improved inventory accuracy;
  • Faster and more accurate order fulfillment;
  • Reduced errors;
  • Enhanced overall operational efficiency, etc.

Batch and lot tracking

Batch and lot tracking is a feature designed for retail businesses selling products with expiration dates, such as food, pharmaceuticals, or cosmetics. Tracking and tracing products based on specific batches or lots allows a business to ensure compliance with regulations, quality control, and product integrity.

Batch and lot tracking features allow businesses to assign unique batch or lot numbers to products, track the movement of products throughout the supply chain, and easily identify and recall specific batches or lots in the event of a product recall. 

That means an ecommerce business owner can have better control over their inventory, reduce waste, and improve customer safety and satisfaction.

Serialized inventory tracking

Serialized inventory tracking involves assigning a unique serial number to each product unit so businesses can track and trace products at the individual item level. This is particularly useful for high-ticket items, electronics, and products subject to warranty tracking.

Tracking individual units allows you to monitor the complete history of each item, from production to sale and even throughout its entire lifecycle. That level of visibility makes it much easier for businesses to combat theft, counterfeit products, and warranty fraud. 

It also ensures accurate record-keeping, enables efficient after-sales support, and improves customer service.

Inventory management integrations for ecommerce

Integrating inventory management systems with ecommerce platforms is crucial for efficient operations and seamless customer experiences. Here are a few types of integrations that can help businesses improve efficiency, reduce errors, and ultimately drive customer satisfaction and loyalty.

Real-time inventory updates

Integrating your inventory management system with your ecommerce platform allows for real-time updates on product availability. This means that your inventory levels are automatically adjusted as soon as an order is placed online, preventing overselling and stockouts. 

Real-time updates also enable accurate product information, preventing customers from ordering out-of-stock items.

Centralized data management

Integrating inventory management with ecommerce platforms creates a centralized repository for all product data. This reduces the likelihood of errors, such as incorrect product descriptions or pricing. 

With centralized data management, changes made to product details in the inventory system are automatically reflected on the ecommerce platform, ensuring consistency across all channels.

Streamlined order fulfillment

You can automate order fulfillment processes by integrating inventory management, order processing, and shipping systems. When an order is received, it can be automatically routed to the appropriate warehouse or fulfillment center based on inventory availability and proximity to the customer. 

This reduces manual errors, speeds up order processing, and improves efficiency.

Enhanced customer experience

Integrating inventory management systems with ecommerce platforms allows for accurate and up-to-date product information. This enables customers to make informed purchasing decisions and reduces the likelihood of purchasing out-of-stock items. 

It can also allow for real-time stock availability and personalized notifications when items are back in stock, enhancing the overall customer experience.

Technology solutions for ecommerce inventory management

Technology solutions have revolutionized inventory management for ecommerce businesses. New advanced tools and software have made managing inventory easier, faster, and more efficient. 

Here are some popular technology solutions for ecommerce inventory management.

Inventory management software

The right inventory management software helps businesses track inventory levels, automate ordering processes, and streamline warehouse operations. These tools allow companies to easily manage their inventory, monitor stock levels, and generate reports to identify trends and make data-driven decisions.

This ultimately reduces inventory costs in the long term.

Point of sale systems

POS systems can be integrated with ecommerce platforms to provide real-time inventory data. This lets businesses simultaneously update inventory levels across all channels, preventing stockouts and overselling.

Barcode scanning technology

Barcode scanning technology can be used to track inventory movement in real-time. This makes it easier to monitor stock levels, verify product codes, and update inventory counts quickly and reliably.

Radio-frequency identification (RFID)

RFID tags can be attached to products for efficient inventory tracking and management. This technology allows businesses to monitor inventory levels, track products through the supply chain, and reduce errors in order fulfillment.

Cloud-based solutions

Cloud-based inventory management systems provide fast and secure access to inventory data from anywhere at any time. This makes it easier for businesses to manage their inventory remotely and share information across teams and locations.

Best practices for successful ecommerce inventory management

It’s almost impossible for an online store to succeed without an effective inventory management system. Too much stock raises expenses and ties up your capital, while too little costs you sales.

Of course, improving inventory management is always an ongoing process. So, it’s important that you regularly review and refine your inventory management practices to stay ahead of the game. These proven best practices can lead the way to successful ecommerce inventory management.

Use inventory tracking tools

Consider investing in software that tracks inventory levels, sales channels performance, and restocking needs. Such an inventory tracking tool can set reorder points to automatically order replacement inventory when stock levels fall below a certain point. So you won’t end up with too much inventory but will never run out of stock.

Forecast demand

You can predict how much inventory you need to stock by analyzing your sales history and market trends. Based on your sales data, you can forecast demand for certain periods of the year. This way, you can order extra inventory in advance to avoid stockouts during high-demand periods.

Optimize your warehouse

Improve order fulfillment times by organizing your warehouse to make it easy to pick and pack items for shipping. Keep the most popular items near the shipping area so they can be quickly picked up and shipped. This will also prevent any delays in shipping.

Conduct regular audits

Regular physical inventory audits can help you identify discrepancies and stock levels that don’t match your records. This will help you identify any issues before it’s too late.

Consider automation

Many inventory management processes, such as purchase order creation, inventory tracking, and demand forecasting, can be automated. Automating these tasks can save you significant time and money, allowing you to focus on growing your business.

Frequently Asked Questions

What is inventory management for ecommerce?

Inventory management for ecommerce means managing and tracking stock levels of products sold online.

Are inventory management systems for ecommerce expensive?

You can just use a free spreadsheet program to manage inventory. However, as you advance through more robust features, the more solutions will cost.

What are the most important ways to optimize inventory management?

Set reorder points for each of your products just above its average sale rate. Then, set stock alerts to warn you when your inventory is low so you can reorder more merchandise in time.