Nobody starts an online store because they're excited about inventory management. But it's often the difference between profit and loss. Get it wrong and your money sits in boxes while you scramble for cash to pay bills.
Ordering too much kills cash flow
The most common mistake is ordering way more inventory than you need. It feels safer. What if you run out? What if there's a surge in orders? Better to have extra stock, right?
Wrong. That inventory is cash you can't use for anything else. It's money sitting in a warehouse hoping someone buys it eventually. Meanwhile you're paying storage fees and can't invest in marketing or new products.
Order based on actual sales data, not optimism. Look at what you sold last month, not what you hope to sell next month. You can always reorder. Running slightly low occasionally is way better than drowning in inventory you can't move.
Real situation: A home goods store we helped was sitting on $80k in inventory that wasn't selling. Their cash flow was terrible despite decent revenue. We cut their orders by 60% and focused on fast-moving items. Within three months they had money to actually grow the business.
Not tracking what actually sells
Most store owners have a general sense of their best sellers. That's not good enough. You need actual numbers. What sells daily, what sells weekly, what sits for months.
Your platform gives you this data. Use it. Products with slow turnover are wasting your money. Products that sell fast might be underpriced or need more stock.
Review this monthly at minimum. Markets shift. What sold great six months ago might be dead now. Don't keep ordering something because it used to work.
Seasonal planning requires actual planning
Seasonal products are tricky. Order too early and money sits idle. Order too late and you miss sales. But most people just guess and hope.
Look at last year's data. When did sales actually spike? Not when you expected them to, but when they actually happened. Then work backwards. How long does ordering and shipping take? Add buffer for delays. That's when you order.
And don't be stuck with seasonal inventory after the season ends. Price aggressively to move it. A 40% margin sold is better than a 60% margin sitting in storage for another year.
Dead stock is dead money
Every store has products that just don't sell. Maybe you misjudged demand. Maybe trends changed. Whatever the reason, keeping dead stock around hoping it'll suddenly sell is wishful thinking.
Cut your losses. Discount heavily, bundle it with popular products, donate it for a tax write-off, whatever. Just get it out of your inventory and free up that cash.
This is hard psychologically. Nobody wants to admit they ordered wrong. But that money is already gone. Sitting on the inventory just prevents you from using that space and capital for products that actually sell.
Supplier lead times matter more than price
Cheap suppliers are tempting until you realize they take six weeks to deliver. Then you're stuck either ordering way in advance (cash flow problem) or running out of stock (lost sales).
Reliable suppliers with reasonable lead times let you keep less inventory on hand. You can reorder based on actual demand instead of guessing months ahead. That flexibility is worth paying a bit more.
Have backup suppliers for your best sellers. If your main supplier has problems, you need options that don't involve being out of stock for weeks.
Storage costs add up fast
If you're using fulfillment services or renting warehouse space, storage fees are eating profit every month. The more inventory you hold, the more you pay.
Calculate storage cost per unit. Sometimes it's cheaper to order more frequently in smaller quantities, even if the per-unit product cost is slightly higher. You save on storage and improve cash flow.
This math changes based on your situation, but most people never even look at it. They focus on the cheapest per-unit price without considering total cost.
Returns and defects need a plan
You'll get returns and damaged products. If you don't have a system for handling them, they pile up and create problems.
Inspect returns immediately. Can they be resold? Returned to supplier? Disposed of? Don't let them sit in limbo taking up space and confusing your inventory counts.
Track defect rates by supplier. If one supplier consistently ships garbage, they're costing you money in returns, customer service time, and reputation damage. Find better options.
Inventory systems aren't optional
Spreadsheets work until they don't. Usually right when you're growing and can't afford mistakes. Inventory management systems exist for a reason.
Good systems track stock levels, automate reorder points, show what's selling, flag dead stock. They prevent the common mistakes that waste money.
This doesn't have to be expensive. Many e-commerce platforms include basic inventory management. Use it. Set up alerts when stock gets low. Review reports regularly. Treat inventory like the financial asset it is.