Ecommerce Inventory Management Strategies

5 min read
July 26, 2023

There is a lot that goes into running a successful Ecommerce business. However, in addition to covering the basics of a good marketing strategy, engaging website, and proven shipping strategy—this isn’t all you need to keep your business running smoothly.

You also need an Ecommerce inventory management system. This is put in place to help retailers grow every aspect of their business, streamline warehouse operations and make more-informed financial decisions. 

Sounds like a great addition to your business, right? It is, and it can be the foundation of your business moving forward. After all, most Ecommerce comes down to knowing and managing how much inventory you have. If you want to learn more about the best Ecommerce inventory management systems and what they can do for you, we have you covered.

Ready to learn more?

Ecommerce Inventory Management

  1. What an Ecommerce Inventory Management Strategy Can Do
  2. Best Ecommerce Inventory Management Strategies
    1. ABC Analysis
    2. Dropshipping
    3. Just-In-Time Inventory
    4. Safety Stock Approach
    5. First In, First Out

What Can an Ecommerce Inventory Management Strategy Do?  

The key to any successful Ecommerce business? Inventory. You can’t make sales unless you have products to sell. This can help your business stay organized, predict future income, and keep your quantities accurate so you don’t lose customers due to incorrect information.

At its most basic level, Ecommerce inventory management is just the act of tracking your inventory, but there are multiple systems and approaches that you can take to help your Ecommerce brand thrive. 

The right approach is important because it touches nearly every aspect of your business, from offering visibility to forecasting future purchases and more. It can also help automate inventory workflows and ensure that your customers have a positive shopping experience. 


What Are Some of the Best Ecommerce Inventory Management Strategies?

Every business is unique, which is why there are equally unique Ecommerce inventory management strategies as well. Every business has unique needs and will need an equally unique solution to help track and manage its inventory. 

Here are a few of the most popular approaches that may be able to help your business thrive.

ABC Analysis 

ABC Analysis is perhaps the most common approach to inventory management and categorizes all inventory into three categories based on profitability. There are several ways to do this, but a common approach is:

  • Category A: Inventory that is high in value but low in quantity.
  • Category B: Inventory that is moderate in value and quantity.
  • Category C: Inventory that is low in value and high in quantity. 

There is no right way to break inventory into categories like this, but it allows your business to create diverse product lines and customizable strategies and restocking approaches based on the category type. This allows for more control over each product’s replenishment. 


Many people have been hearing about dropshipping recently as this accessible inventory management strategy grows in popularity. This isn’t exactly the most straightforward practice because your company will never actually touch your inventory. 

This is a popular strategy for first-time Ecommerce sellers who want to build their business quickly but who don’t have the funds or the facility to house lots of inventory. Dropshipping can be appealing for sure; however, there is one giant caveat: you have zero control over the customer experience. 

Since your manufacturer is doing the majority of the work after a customer makes a purchase, it's up to them how the product is stored and shipped. Keep this in mind before you choose a manufacturer. 

Just-In-Time Inventory 

This is a common approach for smaller Ecommerce brands that don’t necessarily have the budget to keep a large amount of inventory on hand or one that depends on buyer trends. This strategy is implemented by businesses that only need to stock orders once they are purchased by the customer. This means that the volume of inventory is typically equal to the number of orders filled. 

If you create a custom inventory or seasonal merchandise, this is a popular inventory management solution. If demand increases, companies can order just enough to fill their orders, and if demand winds down, they don’t have to worry about clearing out dead stock. 

Safety Stock Approach

The safety stock approach is another popular inventory management system that online retailers have been using for years. The approach is simple. Brands hold extra inventory in case demands increase unexpectedly. The great part about safety stock is that it helps you cover unexpected issues, delays, and demands in fluctuations so your brand can consistently deliver what your customers are looking for. 

It will cost more money upfront to stock these items, and there is a risk that you could end up with dead stock if you aren’t careful. However, it helps your company maintain quality service and prepare for unknowns like changes in consumer demands, different lead times for raw materials, and incorrect forecasting.

First In, First Out 

The final option that many Ecommerce businesses consider is known as the First In, First Out approach. This is a popular option among retailers that sell perishable goods or those with expiration dates. With this inventory management approach, the first products to arrive in the warehouse are the first to be fulfilled by customers. 

It also works for nonperishables as well and can work when your company wants to get rid of a certain product. However, with this approach, it’s important to stay on top of the price patterns of goods and materials as well as inflated profits as you determine the difference between the costs of goods received and goods sold. 



At the end of the day, there is no one “best” approach to inventory management solutions; there is only the best strategy for you and your brand. Take the time to think through what you want out of your inventory management system and what your goals for your business are. Then, it’s time to start trying out the approach you think will work best for you so that you can create a better overall experience for your dedicated following of consumers.


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