Practical Ecommerce

Wanted: crystal ball for inventory demand

The vast majority of articles and blogs regarding ecommerce focus on selling. They discuss the importance of marketing, search engine optimization, site design and navigation, converting customers, and so on. They are all making one huge assumption: you have the correct products to sell.

It is often said that you need a great sales message — that a good sales person can sell anything, even the oft-quoted “ice to Eskimos.” The truth is that whilst it is true great salesmen can sell virtually anything, they would find it much easier to sell the right things, such as wood burners and logs to Eskimos, not ice. For websites the same is true. If you have the right stock that is in demand, if you have it at the right prices, and your competitors have sold out, then it practically sells itself. To achieve this you need luck and a great buyer.

Buying is one of the most important jobs in retail. Whether you are a small independent or a large multi-national. The job is different at each end of the scale. A buyer for a large organization can buy in the pallet loads. He does not really bother about picking out nice stuff from the catalogue’ he tries everything. The key point for such buyers is price. They will re-order what sells and dump at cost or less what does not sell. Smaller independents cannot afford to take this attitude. We also cannot negotiate as much on price. So it is up to the buyer to decide what to buy and not buy.

If you have the wrong products or the wrong prices, no amount of marketing and promotion will help. It is all too easy to say, “Do market research.” But what does this mean? How exactly does this solve all the buying problems?

Whilst research is necessary, and may well tell you certain trends, it cannot tell you everything. It cannot tell you exactly what to buy, how many, and how much you should pay for them.

Buying is a mixture of planning, research, experience, gut feeling, and luck. What is really needed is a working crystal ball. If you could predict exactly what will sell and how fast, and what will not sell, then you are halfway to making your first million. Unfortunately foretelling the future is not an exact science.

For example, in 2013 when Breaking Bad was at its height, the Heisenberg action figure sold at a premium. It was in short supply so any retailer who had stocks could charge virtually anything. Suppliers ran out but promised rapid restocks; so every retailer re-ordered. Then suddenly the restocks arrived and at the same time the demand dropped off a cliff. You could not sell the figure at any price, even taking a loss. What was at a sales rank on Amazon of 1,000 or less suddenly ranked over 250,000.

Nearly a year latter retailers still had stock and most had started pricing at well less than cost just to offload the dead stock and clear the shelves for the approaching holidays. We did this too, at my business, and were down to our last few units. Then suddenly someone protested about the figure depicting crystal meth and Toys”R”Us removed them from inventory. Demand went through the roof and the cheap stocks sold out in minutes. Now nearly everyone is sold out and the prices are again at a silly premium. What was selling for $9.99 is now on sale at $49.99, and is actually selling. The Amazon ranking is now 9 and the manufacturer is saying that it will do a rerun and make more. If we could have foretold this we could have sat on our stocks, not sold at a loss, and sold them now at a reasonable profit. My buyer warned me a month before this happened. He had a gut feeling that demand would increase and told me to stop selling so cheap. I foolishly ignored him. Even he did not know how high demand would get, but he guessed something would happen.

This is the difference between a good buyer and a great buyer. A good buyer will do the research, study the market, look at the sales history and do all the right things to minimize risk and ensure you stock items that sell. A great buyer will, in addition to that, be able to make reasonably accurate predictions regarding trends and get ahead of the game. It is most definitely not an exact science.

Unfortunately most of us are not even good buyers. It is all too easy to fall into the trap of buying what you like and not buying merchandise that you dislike. The problem is that it is not you who you are selling to. So a good buyer will be able to know what your customers want and buy accordingly. A great buyer will know what they want before the customers themselves know.

In some ways, it is better to have a great buyer than a great salesman. Most of all, however, a way to predict the future with accuracy would be invaluable. So if you have a working crystal ball.

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  1. Elijah Moore November 3, 2014 Reply

    While it can’t predict store policy changes like in the Toys R’ Us example, Saleboat, Inc. (www.getsaleboat.com) makes tools that can help buyers understand trends in product demand early on.

    Saleboat’s API makes it easy for retailers to equip their wishlist or favourites feature with automatic e-mail notifications. Retailers can then use Saleboat’s dashboard to analyze trends in product demand and send shoppers targeted communications based on their interests.