Learn how Product Out-Of-Stocks Can Help You With Better Inventory Management. ‍

If your eCommerce brand follows a poor inventory management strategy, it will face product stockouts. And more than 50% of your customers who land on those out-of-stock pages will opt for a competitor's product.

Now, most eCommerce businesses restock the products within a week unless there's a supply/ manufacturing issue. And because it's restocked in such a small period, many eCommerce business owners find the loss numbers manageable.

However, the numbers become daunting when we measure the number of all out-of-stock events by their average duration. Research shows stockouts that last ten days are responsible for 50% of lost sales due to product unavailability.

So, the longer your inventory is empty, the more revenue and reputation loss you'll have to deal with. This is why businesses must have a demand forecasting strategy to manage inventory properly. And the better you manage inventory, the fewer stockouts you'll face.

In this blog, we'll share how demand forecasting can help manage the inventory, the associated challenges, and how you can use your out-of-stock strategy for this purpose. Hop on!

What Is Inventory Management?

An inventory consists of all the products that your company handles with the intention of selling them. And inventory management is the process of controlling and tracking the inventory.

In this process, everything from production to sales is monitored to ensure that the right quantity of products is available at the right time. Inventory management consist of five stages:

• Purchase: Buying raw materials to turn them into products
• Produce: Making finished products using raw materials
• Hold: Store finished products before sale
• Sell: Shipping products to customers in return for payment
• Report: Updating the inventory count and revenue generated

With proper inventory management, you can give a smooth shopping experience to your customers. Moreover, it's the most critical factor determining how often an eCommerce business will face a stockout.

How Does Demand Forecasting Help Improve Inventory Management?

Demand forecasting in eCommerce is used to estimate customers' demand for products.

Simply put, predicting future sales. With demand forecasting, businesses get a basic idea of how many sales they can expect for a particular product.

When demand forecasting is not a part of the strategies, decision-makers do the guesswork to reach an expected sales number. It will consume production cost and storage space without generating revenue if the expected sales number is too high from the true value. And if it's low, there will be a stockout leading to a bad customer experience.

But with a forecasted number (using the right data), more often than not, your product count will go neither too high nor too low. This will improve the cash flow too for your brand.

ECommerce Demand Prediction Challenges

Nothing great ever comes without challenges, and eCommerce demand prediction is no different. Here are some of them:

Applying the Wrong Forecasting Methodology

Many Shopify store owners apply the wrong methodology to make product demand predictions. And sometimes, relying on just one methodology is not enough to come to the right conclusion. You should put some time and thought before you go with any of the following options:

• General Collective Knowledge: Get collective input from your sales, marketing, and support teams about product performance, sales trends, etc. This is the best way to identify the current trends with higher demand in the market.
• Expert Insights: Gathering thoughts and insights from experts in your industry can help you determine the demand for different product categories.
• Historical Analysis: This forecasting methodology will help you make the best business decisions. Here, you use your own store and product data to forecast the demand. For example, if a product did well on Christmas last year, there are high chances that it'll perform well this year too.

Moreover, there's a way that helps your forecast demand without having to go with any of these methodologies — Back in Stock Strategy. Later in the blog, we'll discuss how you can implement it for demand forecasting.

Using Incomplete Data for Decision Making

Using incomplete or unfiltered data can increase the difference between the true demand and forecasted demand. Your dataset needs to be extensive to make more informed eCommerce demand forecasts.

3 Ways to Forecast eCommerce Demand

Here are some ways to estimate the demand for your Shopify store's products:

Quantitative Data Analysis

In Quantitative data analysis, you use the historical metrics of your store and the fluctuations in those metrics over a period of time. These metrics can be previous sales, repeat purchases, website analytics, etc. You then identify patterns and create a model out of these metrics to predict the demand.

Qualitative Demand Forecasting

In qualitative demand forecasting, the conclusion is based on market research, target audience surveys, and the opinions of industry experts. Moreover, qualitative forecasting also considers the market's economic circumstances.

Using Out-of-stock Products

This is a completely out-of-the-box strategy to forecast demand. So every eCommerce business faces a stockout. But stock outs don't always have to be treated as a loss.

You can find multiple opportunities in it to not just forecast demand but also boost overall sales. You can let people sign up for back-in-stock alerts, which will give you an idea about how many people want your product before the launch.

You can estimate current and future demand based on how many people sign up for the alert. Let's discuss how you can use out-of-stock products to forecast demand.  

Using Out-Of-Stock Products for Demand Forecasting

When some of your products are out-of-stock, you get an opportunity to get to know from customers if they would want to have them. You can create strategies around these products like Restock Alerts, Pre-order, campaigns, etc.

These strategies will help you forecast demand easily and uniquely. Here are some strategies to help you forecast demand and boost sales for your stocked-out products.

Keep Out-Of-Stock Product Pages Live

If you wish to create any strategy around out-of-stock products, you should never unpublish or delete the product page. The idea is that if your customers can't see your stocked-out products, how will they ever feel like buying them?

When you keep the product page live, customers can visit it and find an expected restock time. You can also give them options to sign up to receive an alert or pre-order the product.

These strategies will help in increasing sales as well as forecast the demand.

However, if there are some products that you have discontinued, then you can redirect the customers from the stocked-out page to the product that you want to increase the demand for.

Assess Demand Using Back-In-Stock Strategy

Doing all the qualitative and quantitative analysis consumes multiple resources and a truckload of time. Sometimes, by the time you conclude, the trend in the market changes. This is where a back-in-stock strategy trumps the out forecasting methods.

A back-in-stock strategy gives you access to the data of people who signup to receive an alert. With this data, you can determine which products are most in demand.

If many people sign up for a specific product, it has to be your store's current trending product. So, when you restock, you must have that product in abundance. A back-in-stock strategy ensures that products are constantly restocked in the right quantity — neither too low nor too high.

You can use Appikon Back in Stock Alerts app to create a robust strategy around out-of-stock products. This app allows your customers to receive an alert on the channel of their choice, ensuring the maximum open rate. And the higher the open rate, the higher will be the conversion rate.

Simply put, you can boost the sales of restocked products with a solid back-in-stock strategy while ensuring you have enough left for those yet to order.

Open Pre-orders for Currently Unavailable Products

Opening pre-orders is a significant way to keep selling the products even when they are not in stock. So, when a product is stocked-out, you can replace the "Buy Now" button with "Pre-order Now" so that customers who reach that page are not entirely disappointed.

Ideally, the demand for pre-ordered products is higher than the product that has brought the same number of back-in-stock alert signups.

Here's the thing, when people pre-order a product, they promise you a sale. These are buyers with higher purchase intent. And if they are ready to pay for the product beforehand, the demand for it must be higher.

Suppose you got 25 sign ups for back-in-stock alerts and the same number of pre-orders. So, if you've restocked 50 units of the product based on alert sign ups count, then you should restock around 100 units for the same number of pre-orders.

Moreover, the pre-order strategy is not just for out-of-stock items. You can also use it to forecast the demand for products that you're yet to launch.

Use Historical Out-Of-Stock Data to Identify Trends

If you've faced a stockout for your products in the past, you have access to data related to product trends. You can use this data to identify the products with the highest demand at a given time of the year.

Let's say you run an eCommerce store where you sell products for decoration. Now, it's Christmas, and you've to find out which product will have the highest demand to increase its production and avoid a stockout situation.

Using historical data, you'll find that stars, bells, and lights are some items that have gone out of stock during this time of the year. So, when you keep more units of these products in your inventory, you can avoid a stockout.

Forecast Demand for Better Inventory Management

One of the keys to success for an eCommerce business is forecasting the demand accurately. And doing it using out-of-stock products is one of the easiest and most reliable ways.

Stockouts are something that you can't avoid in an eCommerce scene. It's bound to happen. But if you have a proper strategy around it — restock alerts or pre-orders — you can still keep the sales going and predict demand for the future.

The Appikon Back in Stock Alert app allows you to set up a robust back-in-stock strategy so that none of your customers leave the product page disappointed.

It offers multichannel notification support to give customers a satisfactory purchase experience. Install Appikon today for more sales and better inventory management!