Practical Ecommerce

10 Ways to Save Money on Inventory

Online retailers purchase and manage inventory. The prices they pay for the inventory, the quantities they carry, and the inventory commitments they make can drastically affect their profits.

We recently asked three seasoned ecommerce merchants for money saving inventory tips. The merchants are: (a) Jamie Salvatori, owner of Vat19.com, a specialty-gifts retailer; (b) Dale Traxler, owner of Beaded Impressions, a collection of bead-related sites; and (c) Chad Weinman, owner of HikingBoots.com, a retailer of hiking footwear. Each merchant has years of experience negotiating with suppliers and buying inventory.

10 Ideas to Save Money on Inventory

  1. Negotiate, negotiate, negotiate. Many distributors’ price lists are simply a starting point. Always ask for a lower price regardless of the volume you’re purchasing. Also, if there are gift shows occurring when you go to place the order, ask for the show special (even if you’re not there). This is especially important during the summer when you’re stocking up for the holidays. Good vendors offer 10 to 15 percent discounts during this time of the year. – Jamie Salvatori

  2. Seek Quantity Discounts. If you’re making a larger-than-normal purchase, ask for a discount, extended terms, or free shipping. – Jamie Salvatori

  3. Request a Free Sample. Make sure you get at least one free sample of any new product. Not only do you need this for testing (prior to making a purchasing decision), but also for photography purposes. Yes, it’s only one unit, but if you’re adding several hundred new products a year, it can really add up. – Jamie Salvatori

  4. Remember Returned Goods. Returns and defectives must always be charged back to the manufacturer. Get this ironed out before starting a relationship with a new vendor. If you have to foot the bill for shipping a replacement to a customer, you shouldn’t also be paying for the unit itself. – Jamie Salvatori

  5. Negotiate Terms. Negotiate net 30, net 60, or even net 90 terms with your vendors. This will help your cash flow immensely. If you can swing it, get the terms and pay with a credit card that gives you rewards or points. – Jamie Salvatori

  6. Order on Slow Days. Place your orders Tuesday through Thursday if possible. Mondays and Fridays are the busiest days for most distributors, leading to a higher probability of errors. We find that orders are more accurate and we are more likely to receive better customer service with orders placed mid-week. – Dale Traxler

  7. Collaborate with Suppliers. If you want to make a large purchase or invest in a new line of products with a supplier, be sure to talk to them about your plans, how it may benefit them, and any special challenges you may have. This may lead to a discussion about extended terms, consignment, cooperative advertising or other programs that would be mutually beneficial. – Dale Traxler

  8. Seek Early-Pay Discounts. Pay off your merchandise invoices early. Oftentimes, suppliers will offer significant discounts to dealers if they are willing to clear their outstanding balances within a set time period. These reductions can add up over the long haul to noticeable savings. – Chad Weinman

  9. Partner with Carriers. Major freight carriers like UPS and FedEx offer equipment allowances to their customers. If you are doing any kind of decent volume you can get thousands of dollars’ worth of PCs, printers and other warehouse hardware for free. So long as you meet a minimum volume requirement you incur zero cost. If you’re going to do that kind of volume regardless, why not take advantage of these programs? – Chad Weinman

  10. Invest in Multiple Box Sizes. When it comes to box sizes, one size does not fit all. Billable weight is calculated using either dimensional weight or actual weight. Either way, the more tightly your box fits around the merchandise that you ship, the lower your freight bills will be. The cost you incur to purchase more box sizes will pale in comparison to your shipping savings. – Chad Weinman

Practical Ecommerce

Practical Ecommerce

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Comment ( 1 )

  1. Kerry Murdock May 2, 2011 Reply

    _Editor’s Note: Subsequent to our publishing this article, Ken Kikkawa — CEO of [eHobbies.com](http://www.ehobbies.com) — sent some additional, helpful inventory tips, which we’ve listed out, below._

    – Make small, frequent purchases to maximize your inventory turn and return
    on investment.
    – When you have an item that works, negotiate a discount based on a larger
    purchase.
    – Use a small and trustworthy supply chain if you are first getting started.
    – Find suppliers that have a problem you can solve and negotiate a deal based
    on that.
    – Find dropship partners so you do not have to hold inventory.
    – Sell it before you buy it.