Inventory management practices to help you prepare for the shopping season 

Everyone loves a good holiday, be it buyers or retailers. The holiday season is significant for the retail industry because it is a time when consumers are most likely to spend money on gifts for friends and family, hosting and going to parties, and other holiday-related expenditures. 

In 2022, despite a December slow down in consumer spending, holiday sales were up 8.3%. The same Forbes report states that non-store sales, including ecommerce, were 9.8% higher than the previous year. This increase in spending has the potential to significantly increase a retailer's annual sales and determine whether the company has a successful or loss-making year.

Additionally, retailers can increase brand loyalty and draw in new clients during the holiday season. During this time, retailers frequently and significantly spend on marketing and advertising in a bid to attract customers and persuade them to visit their store or website over those of their competitors.

The holiday season sets the tone for the coming year, as it can influence consumer habits and purchasing behavior well beyond the holiday period. Successful retailers use the holiday season as an opportunity to showcase new products, create positive shopping experiences, and generate positive word-of-mouth, which can lead to repeat business and continued growth.

In the last few years, we have seen the buzz around holiday promotions start as early as October, which has extended the holiday season. If you are running an online store, here are a few reasons why you must focus on the holiday season.

  • Increased sales: With the arrival of festivals and holidays, especially those which have a culture of buying gifts attached to them, customers tend to spend more money than other times of the year. Therefore, retailers need to focus on this period to maximize their sales and profits.

  • Customer expectations: During the shopping season, customers expect retailers to provide them with a wide variety of products and services, as well as great deals and discounts. Retailers need to focus on meeting these expectations to ensure customer satisfaction and loyalty.

  • Competition: The shopping season is a highly competitive time for retailers, with companies vying for a share of the market. Retailers need to focus on standing out from their competitors by offering unique products and services, as well as attractive deals and promotions.

  • Marketing opportunities: The shopping season provides retailers with numerous opportunities to market their products and services to a wide audience. Retailers need to focus on creating effective marketing campaigns and strategies to attract customers and increase sales.

In summary, retailers need to focus on the shopping season to maximize their sales and profits, meet customer expectations, stand out from their competitors, and take advantage of marketing opportunities.

All these factors make inventory management an essential task during the holiday season. Before we go further, it is important to understand the concept of seasonal inventory.

Seasonal inventory and common mistakes made by retailers in ecommerce business 

Seasonal inventory consists of products that sell at a higher volume during certain times of the year, such as holidays. Getting the optimum quantity of this inventory is vital for the success of holiday sales.

Effective inventory management is critical for the success of an ecommerce business.

 1. Misjudging optimal stock levels 

Misjudging optimal stock levels can have several negative consequences for a business. It can lead to increased carrying costs, inefficient operations, stockouts, and missed sales opportunities. Here are some common issues that may arise from misjudging optimal stock levels:

  • Excess inventory: Overestimating demand or purchasing more inventory than necessary can result in excess stock.

  • Stockouts and lost sales: A stockout happens when a product gets sold out and is not available for a customer to buy. In times of high consumer spending, a stockout often happens. While it might look like a good thing, it is a result of poor forecasting and planning. Ideally, sellers have to foresee the demand considering the existing conditions and build up their stock for the holiday season.

  • Increased carrying costs: Carrying costs include expenses such as warehousing, insurance and handling. Maintaining excess stock due to misjudgment increases carrying costs, impacting profitability.

  • Cash flow constraints: Keeping excessive stock ties up valuable working capital that could be used for other business purposes, such as investing in growth opportunities, paying suppliers, or meeting operational expenses.

  • Inaccurate demand forecasting: Misjudging optimal stock levels often stems from inaccurate demand forecasting. If demand patterns are not analyzed properly, businesses may end up with insufficient or excessive stock.

 2. Lack of in-demand products 

Consumer demands and trends are constantly changing in a market and a retailer needs to keep the trending preferences in mind to have the right product in stock. If a business fails to do so, they may find it challenging to sell their products.

There can be reasons beyond one's control leading to a shortage. For instance, a natural calamity can damage the stock and create a shortage for the product overnight. Another factor could be the availability of substitutes or alternatives that are more appealing to consumers. For example, if a new technology or product is released that is more efficient, cost-effective, or environmentally friendly, consumers may switch to it, resulting in a decline in demand for older products.

For example, in the 1970s and 80s, there was a demand for disposable cutlery worldwide, which remained popular for a good three decades. Many even saw this as a way to save water. But today, people are reverting to good old steel cutlery for get-togethers since most people are aware of the hazards of plastic waste.

 3. Overstocking 

Retailers go with the flow of trends but they can go overboard in their estimates. This is the opposite of a stockout. This is the inventory that is in excess and does not get sold. Conditions like inflation, rising consumer debt, and weak economic conditions can lead to a situation where there is a lot of unsold stock in the inventory. This can be even more difficult to deal with if the merchandise is very specific for a season. This locks up capital, occupies storage space, and increases holding costs. Excess inventory can also become obsolete or perishable, leading to financial losses.

For instance, Christmas costumes or outfits are sold specifically for the holiday and won't sell well after it. One way of dealing with dead stock is to offer discounts when the sale doesn't reach the desired numbers.

 4. Mismanagement of leftover stock 

Inability to plan correctly and predict the demand during the holiday season can lead to pile up in a space that is not ready for the huge inflow of stock. This also brings into picture the importance of storage and warehousing.

 5. Poor tracking across multiple locations 

With multiple storage locations, it can become difficult to track which items are stored in which locations. This can lead to overstocking or understocking, which can affect the overall inventory management process. It can also increase the cost of labor needed to manage the inventory. There is also a risk of losing or damaging items. More than anything else, it can be challenging to have a real-time view of inventory levels for each item. This can create problems with inventory planning and ordering.

Pro Tip: To overcome these issues, companies can implement a warehouse management system (WMS) that can help with inventory tracking, labor management, and space utilization. Additionally, they can invest in automation technologies such as automated storage and retrieval systems (AS/RS) to optimize the use of space and minimize labor costs.

 6. No online presence 

When running a regular brick and mortar store, it makes a lot of business sense to start an online store for the business as well. It's a well-known fact that ecommerce businesses are growing by the day, so businesses will do well to get the best of both worlds by starting an online store with the help of an online platform. To comprehensively understand the process of starting an online business for an offline store, check out this blog. It's never been easier to build an online store for your business.

 7. No omnichannel buying experience 

An omnichannel business is created when a brand makes itself available to customers across multiple channels. In today's day and age, a brand cannot simply wait for the customer to reach them but should proactively seek out the customer where they are likely to be found, be it an online store, physical store, or a social media platform. Many a time, long standing brands decide to undergo an overhaul and change their business to adopt the omnichannel model.

For example, JFA is a popular furniture brand in India. After more than eight decades of operations, they decided to switch to the omnichannel model. Here is a video of how they did that by opening an online store and automating their inventory systems.

Why inventory management is crucial for an ecommerce business 

Inventory management in an ecommerce business encompasses the management of pricing, stock amounts, location, and mix of inventory. An automated inventory management system aids both the company and the customer and ensures a smooth flow of business.

It is crucial in ecommerce for the following reasons:

  • Meeting customer demand: Inventory management helps businesses keep track of their stock levels and reorder products before they run out. Ecommerce businesses need to ensure they have enough inventory to meet customer demand.

  • Optimizing cash flow: Overstocking ties up valuable capital in inventory, and understocking can result in missed sales opportunities. Effective inventory management helps ecommerce businesses optimize their cash flow by minimizing excess inventory and ensuring funds are available to purchase new inventory as needed.

  • Reducing fulfillment errors: Inventory management helps businesses keep track of their stock levels and ensures the right products are available for order fulfillment. This reduces the chances of errors and avoids disappointing customers.

  • Minimizing storage costs: Inventory management helps businesses optimize their storage space by only purchasing quantities of products they can sell before their expiration date or before they become obsolete. This reduces storage costs.

  • Improving order accuracy: Accurate inventory management helps businesses track the movement of each product and ensures orders are fulfilled accurately. This leads to happy customers and repeat business.

  • Regularly track inventory levels: Regularly tracking inventory levels is crucial to ensure there is always enough stock to meet demand. This helps avoid stockouts, backorders, and lost sales.

  • Utilize inventory management software: Inventory management software can help automate and streamline the process of managing inventory. It can track inventory levels, reorder points, and help with forecasting demand.

  • Categorize products: Categorizing products based on their sales velocity, demand, and profitability can help prioritize inventory management tasks. This will allow businesses to focus on the most critical products and optimize inventory levels.

  • Set reorder points: Setting reorder points can help ensure there is always enough stock on hand. When inventory levels reach a certain threshold, it can trigger an automatic reorder.

  • Use a first-in, first-out (FIFO) inventory management system: Implementing a FIFO system ensures older products are sold before newer products. This helps prevent inventory from becoming obsolete and reduces the risk of spoilage.

  • Optimize the warehouse layout: A well-organized warehouse layout can improve efficiency and productivity. By grouping products based on their sales velocity, the time spent on picking, packing, and shipping orders can be reduced.

  • Monitor inventory turnover: Tracking inventory turnover shows how quickly products are selling. Analyzing this data identifies slow-moving items which helps businesses take steps to reduce excess inventory.

Best practices for inventory management 

By implementing these best practices, a business can streamline the inventory management process and ensure the right products are always in stock to meet customer demands.

ABC analysis is a technique used in inventory management to categorize items based on their relative importance. The method is based on the 80/20 rule, which states that 80% of the effects come from 20% of the causes.

In ABC analysis, items are classified into three categories based on their value and usage frequency:

A-items: These are the most important items that contribute to the majority of the inventory's value. They are typically the top 20% of items that generate 80% of the sales revenue or inventory value. These items require close monitoring and tight inventory control.

B-items: These items are of moderate importance and represent the next 30% of the items in terms of sales revenue or inventory value. They require less monitoring than A-items but still require a moderate level of inventory control.

C-items: These are the least important items, usually representing the remaining 50% of the items in terms of sales revenue or inventory value. They require minimal monitoring and inventory control.

By categorizing inventory items into these three groups, businesses can prioritize their efforts in managing inventory. The most important items (A-items) receive the most attention, while the least important items (C-items) receive the least attention. This helps businesses optimize their inventory management, reduce stockouts, and minimize inventory holding costs.

Just In Time inventory

Just In Time Inventory (JIT) is an inventory management system where one works with suppliers to ensure that the materials arrive just when the production is scheduled to begin or just when the sale is scheduled to take place. The idea is to have the minimum possible amount of inventory on hand. This method works well only if the forecasting methods are accurate.

Notice that retail giants like Walmart have their shelves stocked with just the right amount all the time. They follow JIT.


In First-in-First-Out (FIFO), the inventory that comes in first is used up first. It is considered one of the simplest methods of inventory management. This method works when dealing with perishables which have a clear expiry date. For this reason, the pharma industry and food industry follows the FIFO method of inventory management.

Tips for effective inventory management during the shopping season 

A retailer needs a concrete plan and strategy to make the most of the holiday season. It can be a busy and challenging time for ecommerce businesses and leaving things to the last minute is a recipe for disaster, leaving a poor aftertaste for the retailer and the customer.

Retailers need an efficient inventory management system and preferably a well-integrated online selling platform to seamlessly get past the above mentioned issues. This will ensure demand is met while avoiding stockouts or overstocking.

Here are some tips for effective inventory management during the shopping season.

Forecast demand: A seasoned retailer will have an idea about demand trends from the years gone by and by staying updated with the changing business climate. Use historical data and trends to forecast the demand for products during the shopping season. This will help plan inventory levels and make informed purchasing decisions.

Since 2003, NRF has partnered with Prosper Insights & Analytics to gauge consumers’ spending intentions and celebration plans for American holidays — from Valentine’s Day to Christmas — and milestone events like Graduation and Back to School. Take the help of such expert studies where needed, which will help you forecast demand in a better way 

Automate inventory tracking: Implement an automated inventory tracking system to keep track of inventory levels in real time. This will help avoid stockouts and overstocking, as well as reduce the risk of human error. Zoho provides comprehensive inventory solutions that can be seamlessly integrated with an online store. Learn more about this here.

Set up alerts: Set up alerts for when inventory levels reach a certain threshold or when a product is running low. This will allow managers or owners to reorder products in a timely manner and avoid stockouts. A good inventory management software will provide data in real time. It is easier than imagined to get all business details from a single dashboard.

Check out the story of Caple, which set up an online store and managed its vast inventory with SaaS-based solutions. 

Prioritize fast-selling products: Google Trends provides a fair idea about what people are searching for and what is high on the popularity charts. During the shopping season, prioritize fast-selling products to ensure there is enough stock to meet the demand. Apart from first-hand experience from prior years, owners can check what is trending currently to be better prepared for this. Businesses can also integrate analytical tools with their online store to make sound decisions.

Offer preorders: Consider offering preorders for popular products to gauge demand and ensure there is enough stock to fulfill orders.

Get logistics in place: Handling delivery and logistics during the peak season can be a nightmare for the biggest retailers in the world, but small and medium-sized businesses don't need to worry. Opt for ecommerce platforms where logistics and shipping solutions are integrated beforehand to avoid chasing partners or third parties.

Monitor inventory regularly: Despite the best measures, things can go wrong when there are huge volumes at play. Monitor inventory regularly to meet demands and make adjustments as needed. Like mentioned previously, a dashboard that reflects numbers on a real-time basis can help during the shopping season.

Sahivalue is a Mumbai-based business selling refurbished gadgets. Here is the story of how a good online store and automation in inventory helped them save time and make faster decisions. 

By implementing these inventory management strategies, you can ensure your ecommerce business is well prepared to handle the shopping season and meet the demands of your customers.

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