Automate Your Shopify Store
Learn about the best ways to automate your e-commerce business and manage your inventory across multiple Shopify stores.
InventoryWhat Are the Easiest Types of Products to Manage on Shopify?Shopify is a powerful e-commerce platform that can help you sell a wide variety of products, both physical and digital. With millions of merchants using Shopify, it's clear that this platform is a popular choice for businesses of all sizes.
Physical products account for the majority of e-commerce sales, but digital products have higher profit margins, so which do you choose? Let's break down everything you need to know about the easiest types of products to manage on Shopify and provide tips for managing them effectively, whether you're a beginner or an experienced seller.
» Want to speed up your site design? Check out how you can use AI to build a Shopify store from scratch
Meet the Expert
Jameela Ghann is a seasoned online store owner with over a decade of e-commerce experience. Apart from running Alora Boutique, she's also the marketing manager for Fera Product Reviews.
What are the different product types available on Shopify?
Shopify offers a wide range of product types that merchants can sell in their online stores. These product types can be broadly categorized into physical products, digital products, and services.
Physical products: Tangible items that can be shipped to customers. Some popular examples of physical products sold on Shopify include clothing, accessories, electronics, home goods, and food and beverage.Digital products: Intangible items that can be downloaded or accessed online. Some popular examples of digital products sold on Shopify include e-books, software, music, and videos.Services: Intangible offerings that can be performed for customers. Some popular examples of services sold on Shopify include web design, consulting, and event planning.
In addition to these broad categories, Shopify also offers a number of more specific product types, such as gift cards, bundles, and subscriptions.
Benefits of managing digital products on Shopify
Digital products generally have the easiest setup process and require the least maintenance and ongoing management on Shopify. This is because they don't require shipping or inventory management. To set up a digital product, simply upload the file to Shopify and create a product listing.
Some of the best digital products to sell include:
E-booksSoftwareOnline coursesMusicVideosTemplatesPrintablesFontsStock photosGraphicsThemes
Digital products are convenient
Customers don't need to wait for a physical product to be shipped. Digital products can be downloaded or streamed immediately after purchase. This is especially beneficial for customers who need access to the product immediately, such as students who need to download a textbook for class or businesses that need to download new software.
There are no shipping costs
There's no need for shipping with digital products, which saves you money and time. And you don't need to worry about packaging, shipping labels, or tracking numbers. Additionally, customers don't need to pay for shipping, which can be a significant saving for large or expensive items.
They never go out of stock
Digital products are a great choice for simpler inventory management. This is because they don't have a physical inventory. Once you've uploaded the file to Shopify, you have an unlimited supply without having to worry about running out of stock. This is especially beneficial for merchants who sell seasonal or on-demand products.
They can be downloaded or streamed by customers immediately after purchase. They don't require shipping or inventory management, they typically have no weight or dimensions, and they don't require special packaging.
Print-on-demand products also require relatively little maintenance and ongoing management. Once you have created your product listings and uploaded your designs, the print-on-demand supplier will handle everything else.
Challenges of managing digital products on Shopify
High competition: About 80% of e-commerce decision-makers consider competition to be tough in their market. This can make it difficult for digital products to get noticed and generate sales.Downloads set-up: Shopify doesn't include digital download functionality by default. Instead, you need to install a free Shopify app to sell digital products.
To do this visit the Shopify App Store, search for the platform’s Digital Downloads app, and click the Add app button. It integrates with your store and allows you to add files to new or existing products.Product descriptions: Digital products can be difficult to describe in a way that is both accurate and engaging. You need to be careful to create product descriptions that accurately describe the product and its benefits, while also being engaging enough to convince customers to purchase the product.Pricing: It can be difficult to price digital products correctly. On the one hand, you need to set a price that's high enough to cover their costs and generate a profit. On the other hand, you need to set a price that's low enough to be competitive and attract customers.
Benefits of managing physical products on Shopify
Physical products can also be easy to set up on Shopify, but there are a few more steps involved than with digital products. You'll need to create a product listing, add product photos and descriptions, and set up shipping and inventory management.
However, if they're dropshipping products, the photos and descriptions might already be done for you! There are many physical products that sell well on Shopify. Some of the most popular product categories on Shopify include:
Clothing and accessoriesElectronicsHome goodsToys and gamesFood and beveragesBeauty productsJewelrySporting goodsOutdoor gearPet suppliesHandmade goods
Higher perceived value
Physical products are seen to have more tangible value than digital products. Customers can see, touch, and feel physical products, which can make them feel more valuable. This can lead to increased customer satisfaction and loyalty.
More opportunities for cross-selling and upselling
Physical products offer more opportunities for cross-selling and upselling than digital products. For example, a merchandiser who sells clothing could cross-sell shoes and accessories to their customers. They could also upsell customers to more expensive items, such as a premium jacket or pair of shoes.
Increased brand awareness
When customers receive a physical product in the mail, they're reminded of the brand and the positive experience they had when purchasing the product. This can lead to repeat purchases and referrals to friends and family.
Challenges of managing physical products on Shopify
Shipping and inventory management: Physical products must be shipped to customers and their stock levels must be tracked. This can be time-consuming and expensive.Product variations and weight: Physical products may have a lot of variations, such as different models, features, and specifications. You need to create a separate variant, upload images, and manage inventory levels for each variation, which can be time-consuming. They also have weight and dimensions, which can affect shipping costs and packaging requirements.Perishable goods and heavy or bulky items: Perishable goods like alcohol or food have a limited shelf life and need to be shipped and delivered promptly. Heavy or bulky items, such as furniture and appliances, can be challenging to ship and store.Returns and exchanges: Physical products are more likely to be returned or exchanged than digital products. Merchants need to have a clear and concise return and exchange policy in place and make it easy for customers to return or exchange products.
How to manage specific product types on Shopify
Third-party apps can enhance the ease of managing and selling certain product types in a number of ways. For example, they can help you to:
Create and manage product variationsTrack inventory levelsFulfill orders automaticallyOffer custom options to your customersIntegrate with other platforms, such as email marketing and social media
Bestsellers reSort lets you customize how your products are sorted based on their features, gross profit, inventory levels, discounts, and other factors. It also analyzes your sales over a period of time you specify. These features can help you increase sales by organizing your products in a way that is most appealing to your customers.
» Read this Bestsellers reSort review to learn more about the app
Physical vs Digital Products on Shopify: Ensuring Easy Management When Choosing Your Niche
When building a Shopify store, it's important to choose products that you feel passionate and knowledgeable about. This will automatically simplify management, even if the products are fairly complex. You'll be able to create compelling product descriptions and answer customer queries with ease.
Launching with a small number of products that you know well and can manage effectively. It's better to start with a few products and grow from there. Along with that focus on high-margin products to generate more profit, even if you sell a smaller volume of products.
Once your store has started to take off, consider using an app such as Bestsellers Resort to make product management significantly easier.
InventoryWhat Types of Products Are Best Sellers on Shopify?Without a stellar product, even the best user experience on your Shopify store won’t cut it. Have you ever wondered what makes certain types of products best-sellers on Shopify? It’s not just about the item itself—it’s a strategy.
There are over 4.6 million active Shopify websites, so standing out requires curating a selection that appeals to your target audience. When potential customers visit your online store, they’re looking for something special, something they didn’t know they needed. Let’s get right into six essential product types that sell well on Shopify.
» Discover everything you need to know about managing multiple Shopify stores
Meet the Expert
Jameela Ghann is a seasoned online store owner with over a decade of eCommerce experience. Apart from running Alora Boutique, she's also the marketing manager for Fera Product Reviews.
6 Best-Selling Shopify Products
1. Clothing and apparel
Clothing and accessories are one of the most popular categories of products sold on Shopify. The global online fashion market is expected to reach $1.2 trillion U.S. dollars by 2027. The fashion industry is ever-changing, but certain clothing and accessories, like jeans, t-shirts, dresses, and shoes, remain in high demand.
To decide what items to stock, look to Google Trends to gauge seasonality and popularity over time. The skinny jeans debate is a great example of how quickly trends can change.
Gen Z canceled skinny jeans in Feb 2021, resulting in a significant spike in searches, but you can see there's a pretty consistent search rate over time with a slight decline in recent years. Does that mean you shouldn't stock skinny jeans? Perhaps not if you were marketing to Gen Z in 2021, but fashion trends change quickly, so best to keep your finger on the pulse when it comes to apparel.
» Ready to start your fashion empire? Here's how to build a fashion store on Shopify
2. Skincare and beauty
Did you know Kylie Cosmetics was launched on Shopify? That's just one example of a beauty brand doing magic on this platform. Of course, it helps if you're one of the Kardashian-Jenner clan. Still, the skincare and beauty category is growing consistently at 7.7% each year on average.
Shopify merchants can take advantage of this growing market by selling high-quality skincare and beauty products that are in demand. To choose the right products, consider factors like skin or hair type and concerns. For example, Satya Organics caters to people looking for beauty products that won't flare up eczema.
3. Electronics
From smartphones and laptops to gaming consoles, electronics is another popular category of products sold on Shopify. The global consumer electronics market is expected to reach $1.7 trillion by 2028.
Shopify merchants can take advantage of this growing market by selling high-quality electronics that are in high demand. To choose the right products, it's important to consider factors such as:
Price: Electronics can range in price from a few dollars to several thousand dollars. It's important to choose products that are priced competitively and that meet the needs of your target audience.Features: Consider the features that are most important to your target audience. For example, if you're selling smartphones, you may want to consider features such as camera quality, battery life, and storage capacity.Reviews: Read reviews from other customers to get an idea of the quality and performance of the products you are considering selling.
4. Eco-friendly items
Eco-friendly products are becoming increasingly popular as consumers become more aware of the environmental impact of their choices. There's a wide variety of eco-friendly products that Shopify merchants can sell, including organic clothing made from natural fibers without the use of harmful pesticides and herbicides, recycled material creations, and renewable energy innovations.
One of my close associates is a successful Shopify entrepreneur who sells sustainable and eco-friendly products. She identified the growing trend in sustainable products and researched popular categories in the sustainable niche. Once she had a good understanding of the market and her competition, she started choosing products to sell based on her own interests and expertise. She also chose products that are easy to ship and store like bamboo toothbrushes and reusable cloths.As a result of her careful product selection strategy, my friend's Shopify store has been very successful. She has a loyal customer base and she is constantly adding new cute products to her store.
5. Personalized products
Personalized products are great for gift sales. They're unique, special, and show that you care about the recipient. Think custom jewelry, personalized knick-knacks, and tailor-made clothing. When choosing a personalized product to sell on Shopify, it's important to consider your target audience and what would be meaningful to them. For example, if you're targeting parents, personalized baby gifts would be a great option. If you're targeting fashion-conscious consumers, personalized t-shirts or jewelry would be a good choice.
6. Subscription boxes
Is there anything better than a monthly mystery box arriving on your doorstep? There are subscription boxes for all sorts of interests, from food and wine to beauty and pet supplies. Subscription boxes are a convenient and affordable way to try new products and discover new brands. They're also a great way to give yourself a monthly treat or to show someone you care with a thoughtful gift. When getting into the subscription box market, make sure you focus on pricing as the strongest reason for customer sign-ups and retention is tipped to be good value for money.
» Out of stock? Unlock the fastest way to set up pre-orders in Shopify
How to choose what to sell on Shopify
Choose products to sell on Shopify based on your passions, expertise, and the market. Sell products that you're passionate about, trending, or popular among a specific niche. Research products to make sure there is a demand, you can source them reliably, and sell them at a profit.
Understand your target audience
A target market is a specific group likely to buy your products. Who are you selling to? What are their needs and interests? What problems do they have that you can solve? Research their online behavior, including what websites and social media they use, and what brands they follow to gain insight into their interests and potential product preferences. Conduct surveys and interviews for direct feedback on their needs and wants. This can guide what they’re looking for in a Shopify store.
Research popular product trends and categories
One of the best ways to find winning products to sell on Shopify is to research popular product trends and categories. This information can help you to identify products that are in high demand and that are likely to sell well.
Here are some resources you can use to research product trends and categories:
Google Trends: Use Google Trends to see how search interest for certain products has changed over time. This information can help you to identify trends and emerging markets.Shopify's Commerce Trends Report: Shopify publishes an annual trends report that showcases the top trending products on Shopify. This report is a great resource for discovering new products to sell and for staying up-to-date on the latest trends.Amazon's Best Sellers List: Amazon's Best Sellers List shows the most popular products on Amazon. While you may not plan on selling on Amazon yourself, this list is a great way to see what products are selling well in general.Dropshipping Apps: Many dropshipping apps have "trending product" reports that analyze what the best-selling products on third-party sites are. This information can be a helpful starting point for finding trending products to sell on your own Shopify store.
Study your competitors
Studying competitors is a great way to understand your niche. Examine their product offerings, especially those selling well, indicated by sales numbers and reviews. Tools like Shopify’s Product Reviews app can highlight top-rated products. Observe their social media promotions and the products gaining the most engagement. Reading their blogs and articles can also provide insights into the products they’re discussing.
Choose your market approach
Deciding between a specific niche or a broader market on Shopify depends on your business objectives, target demographic, and available resources. For beginners, I recommend focusing on a specific niche. This strategy allows you to establish yourself as an authority in a specialized market and build a loyal customer base. Niche markets typically have less competition, offering a favorable environment for new businesses to flourish.
Bamboo toothbrushes have been a niche product success on Shopify due to high demand, competitive pricing, and quality. They also address a need for consumers looking for more sustainable oral hygiene options.
If you have substantial financial resources and a large budget, a broader market strategy could be viable. However, make sure you understand the competitive landscape before adopting this approach.
Leverage seasonality
Seasonality significantly influences the success of certain product categories on Shopify. For example, swimwear sales spike in summer, while winter coats are popular in colder months. However, categories like clothing, electronics, and home and garden products maintain consistent demand throughout the year.
Maximize seasonality by strategically planning your inventory and marketing campaigns. For example, if you sell swimwear, start promotions in spring when people begin planning summer vacations.
Prioritize easy shipping and storage
Choose products that are easy to ship and store if you're managing your own inventory. Small, lightweight, and durable items are ideal. Stackable products save space, reducing storage costs. And if you don't want to worry about storage space and overheads, you can also consider dropshipping where suppliers ship directly to customers.
» What is dropshipping all about? Check out our complete guide on how to dropship on Shopify
Remaining competitive with best-selling products on Shopify
In the Shopify e-commerce market, competition is inevitable so I recommend targeting niche markets with less competition and selling high-quality products and services that your customers can't find elsewhere. Monitor your sell-through rate and adapt to market changes.
Prioritize key metrics like sales tracking, conversion rate analysis, and customer feedback. Use this data to improve your offerings, make sure you're promoting your best products first (we've got an app to help with that), discontinue underperforming products, enhance features of slow-selling items, and introduce new products to meet evolving market demands.
» Need an easy way to organize your stock? Manage your inventory with these essential Shopify apps
InventoryHow to Interpret an ABC Analysis Report for Your Shopify Store Strategic inventory management is essential for eCommerce businesses, and ABC analysis is a powerful tool for understanding and focusing on high-value products. Each year inventory distortion costs retailers $818 billion, highlighting the need for effective inventory management practices. Let's take a closer look at the importance of ABC analysis and how you can interpret it to maximize your revenue.
Meet the Expert
Jameela Ghann is a seasoned online store owner with over a decade of eCommerce experience. Apart from running Alora Boutique, she's also the marketing manager for Fera Product Reviews.
What Is ABC Analysis?
ABC analysis is an inventory management technique that classifies items into three categories: A, B, and C, based on their annual value.
A items: Your top sellers that account for 80% of your total revenue.B items: Your mid-tier sellers that account for 15% of your revenue.C items: Your lowest-tier items that account for 5% of your revenue.
You can optimize your inventory management by knowing which items fall into each ABC category to ensure they're always in stock and avoid lost sales.
» Understand better why you should use ABC analysis for your Shopify store.
Generating an ABC Analysis Report
Generating an ABC analysis report is easy as it's a built-in function in your Shopify dashboard. To generate your report:
Log in to your Shopify adminClick "Reports"Look for the "ABC analysis by product" or "inventory analysis" option
The wording may vary depending on your theme or the apps you've integrated into your store. Once you've accessed your ABC analysis by product, it should look like this:
Configure the parameters and data sources in your ABC analysis report to generate meaningful insights. Use your historical product sales data, such as sales volume, revenue, and dates, as the main parameters and data sources.
For a thorough view, also incorporate your product costs, including goods, shipping, and any other related expenses. When reviewing the generated report, pay attention to timeframes and look at data over specific periods, such as the past year, quarter, or month, depending on your inventory turnover and sales patterns.
How to interpret your ABC analysis report
Let's look at some tips and strategies for dealing with the three types of categories in your ABC analysis report.
A items: High-value, low-quantity products
A items are high-value, low-quantity products. They're the stars of your inventory and essential to your business. To avoid stock-outs and boost sales, you must give A items the highest priority and replenish them regularly. You should also optimize prices, promotions, and marketing for these items. Additionally, you should find alternative suppliers as backups.
B items: Moderate-value, moderate-quantity products
B items are the majority of your inventory and contribute reliably to your revenue. They're essential for a balanced product assortment and a broad customer base.
Strategies for B items include improving inventory turnover, cross-selling, and bundling, adjusting prices, and strengthening supplier relationships.
C items: Low-value, high-quantity products
C items are typically not significant contributors to your bottom line, but they make up a large portion of your stock.
Use inventory management tools to predict demand and prevent overstocking, offering bulk discounts to move the products more effectively. Ensure efficient storage to minimize your storage costs, and negotiate with suppliers to get better pricing and terms.
Easily implement ABC analysis findings via the right Shopify app
Once you've identified your A and B items, you can use the Bestsellers reSort app to specify and schedule them as featured products to stay at the top of your collections. This app has a comprehensive set of advanced sorting rules to automatically organize and sort products in collections.
» Explore this comprehensive Bestsellers reSort review for an in-depth look at its features.
Taking Action Based on the Analysis
Make smart merchandising decisions based on your ABC analysis results. Adjust inventory levels, use thoughtful pricing strategies, and add or remove marketing focus based on the value of each item. For example, keep a low reorder point for A items, a moderate reorder point for B items, and a higher reorder point for C items. Use an inventory management tool like Bestsellers reSort to automatically sort your products based on your findings.
After you've embedded ABC analysis in your strategy, you'll have more power over your sales. Emphasize, promote, and generate revenue from your most profitable items, while keeping a healthy balance with your less profitable ones.
» Optimize your Shopify inventory forecasting
InventoryBlack Friday Checklist: Prepare Your Store for Black Friday Success in 2023Black Friday is one of the most important events of the year for an e-commerce business owner, and the numbers back it up. Data from Adobe Analytics shows that online shoppers spent a record-setting $9.1 billion in 2022.
Projections show that 2023 is set to be on par, with many consumers feeling the sting of inflation and looking for the best holiday deals.
If you want to capture some of the spend for your own Shopify Black Friday sale, it's important to be prepared so you can stay ahead of the growing competition. Let's look at a Black Friday checklist to help you do just that.
» Want your collections to stand out? Keep best-sellers top of mind with this step-by-step guide.
1. Review and Optimize Product Inventory
Since inventory moves quickly on a day like Black Friday, it's essential to make sure you're reviewing and updating your product inventory before you launch your campaign.
Consider using curated Shopify collections, which can enhance your customer's shopping experience and make it easier to find products they're interested in. "Gifts under $50," "Bestselling tech deals," or "Gifts for her" are all great examples of effective collection themes.
It's also important to make sure you're identifying and removing out-of-stock items to avoid customer frustration and messy customer service situations. If you're using Shopify, hide out-of-stock inventory with these apps:
Out-of-Stock Police
Maintaining a well-organized collection layout is even more important during the high-demand Black Friday period. Out-of-Stock Police helps you manage out-of-stock products and optimize inventory more efficiently. It offers many helpful features, like the ability to push out-of-stock items to the bottom of collections and monitor their status.
» Get all the details in this Out-of-Stock Police review.
Bestsellers reSort
Bestsellers reSort can help optimize your store's product organization. This powerful tool simplifies the process of online merchandising by offering a range of smart sorting rules. Whether you want to prioritize products based on real revenue, sales, tags, or other criteria, Bestsellers reSort has got you covered.
» Find out more in this Bestsellers reSort review.
2. Craft Irresistible Discounts
The whole point of Black Friday is to get an incredible deal, so you'd be remiss if you didn't craft irresistible discounts for your customers. The better the deals, the quicker you can draw them in and close the sale. Setting up Shopify Black Friday discounts on the platform is a straightforward process. You can set up multiple types of discounts, such as:
Tiered discounts: The percent off increases the more products a customer buys in one session.Bundle deals: You can group items together and offer them at a lower rate than individually.Limited-time offers: These create a sense of urgency to make a purchase in a specific amount of time.
Personalize Discounts With Order to Discount
Order to Discount is an easy-to-use tool to help you generate automated and personalized loyalty discounts to send to your shoppers and customers via email. You can customize these discount and email templates based on details like order information.
» Check out this Order to Discount review for more info.
3. Optimize Your Site and Use Urgency Tactics
Your website is the tool that customers will use to decide whether to buy from you. That's why it's important to ensure that it's optimized to motivate customers to buy.
Look for an appealing and responsive Black Friday Shopify theme, one that'll catch your customers' eye while making the shopping process as smooth and seamless as possible across all devices. This requires mobile optimization and fast-loading pages.
Additionally, leverage the classic psychological tactic of urgency and scarcity to drive sales by making customers feel a sense of FOMO. You can easily accomplish this with countdown timers for limited-time offers. There are several Shopify apps available to install countdown timers, like Essential Countdown Timer Bar, and Hextom.
4. Strengthen Customer Support and Logistics
Today's customer has high expectations for customer support and even higher expectations for shipping. This is why you simply can't afford to cut corners in these areas. Make sure you have enough staff on hand to promptly handle customer inquiries during the busy Black Friday period.
Make sure that your shipping policies and timelines are clearly stated on your policies, product, and checkout pages. This way, you can be sure you're managing customer expectations right off the bat, avoiding as many customer service queries as possible.
5. Leverage Email Marketing and Social Media Promotion
Email marketing is a powerful tool for reconnecting with your customer base and subscribers, and Black Friday is the time to get creative with attention-grabbing email campaigns and deals.
To do this, use clever, catchy, and clear subject lines, as well as high-quality images and high-contrast text and colors to strategically retain customer attention. Whenever possible, offer personalized product recommendations based on customer preferences and past purchases.
Social media is another powerful Black Friday promotional tool. You can use high-quality product images, storytelling, personality, and humor (where appropriate) to lure in customers. Remember to use engaging educational content as well to keep customers interested and informed about your Black Friday deals.
Use relevant hashtags and, when you have the opportunity, collaborate with influencers in your niche who can broaden your reach and boost your brand's credibility.
Targeted email campaigns are a great way to engage customers, promote products, and drive sales on Black Friday while also nurturing customer relationships for the long term.
Navigating the Black Friday Frenzy
As we approach Black Friday, it's important for e-commerce store owners to prepare as early as possible. Leverage the tools and strategies we've talked about here, including reviewing and optimizing your inventory, creating amazing discounts, optimizing your website and creating urgency, and using marketing strategies like email and social media.
Also, be sure to check out Egnition's apps to make it all faster and easier. Remember: Black Friday success requires a combination of inventory management, strategic marketing, and customer engagement. Taken together, these elements can help you create a seamless shopping experience for your customers and optimize your collections to cater to the high demand.
» Do you have multiple Shopify stores? Learn how to manage them effectively.
InventorySelling Alcohol on Shopify: Decrease COGS With Good Inventory ManagementWhen selling alcohol on Shopify, the goal is always maximizing profitability per sale. One effective strategy involves reducing your production and delivery expenses—also known as the cost of goods sold (COGS). COGS encompasses various factors such as packaging, shipping, labor, and more.
The lower your COGS, the higher your profit margin. And the higher your profit margin, the more money you make from each sale. IHL Services found that the cost of inventory distortion amounted to $1.8 trillion in 2020.
In this comprehensive guide, we'll show you how to reduce your COGS with good inventory management.
» Check out these expert tips for managing pipeline inventory
Understanding COGS in the Alcohol Industry
COGS (Cost of Goods Sold) is the direct expenses you incur to produce or purchase goods you sell during a specific period.
COGS can be made up of these expenses:
Wholesale cost: The price you pay to buy alcohol from your suppliers.Packaging and labeling: The cost of materials and labor to package and label your products.Storage and handling: The toll of transporting your products from your warehouse to your customers, either directly or through a third-party service.Licensing and compliance: This is the cost of obtaining and maintaining the necessary permits, licenses, and certifications to sell alcohol online in your target markets.Marketing and advertising: The cost of promoting your products and brand to potential and existing customers using various channels and strategies.
As you can see, COGS can eat up a significant portion of your revenue, so it's crucial to keep it as low as possible. However, how can you do that without sacrificing quality or customer satisfaction? The answer lies in good inventory management. Next, we share four proven inventory management strategies that can help you decrease your COGS and boost your profitability.
1. Monitor Stock Levels
As a savvy alcohol seller, it's crucial to keep an eye on your inventory levels. You don't want to have too much or too little booze in your warehouse, as both scenarios can hurt your bottom line.
Overstocking alcohol can increase your carrying costs, such as storage fees, insurance, and taxes—not to mention the risk of spoilage, theft, and obsolescence.Stockouts can cause customer dissatisfaction and lost sales opportunities.
» Consider these techniques to manage overstock and understock in your Shopify store
Using a Shopify App
With Out-of-Stock Police, you can access real-time statistics on your inventory performance, such as turnover rate, sell-through rate, and days of supply. You can also set up automated stock notifications that alert you when a product is low or out of stock, so you can restock in time. It's like having your own inventory police but without the sirens and handcuffs.
» Interested in learning more about this app? Check out the following Out-of-Stock Police review
2. Sort Inventory
Sorting inventory means organizing your products into different categories based on criteria such as profitability, popularity, and expiration dates. This way, you can easily identify which products are slow-moving or close to expiring and take proactive measures to sell them faster. For example, you can create special offers, discounts, or bundles to attract more buyers and clear out your old stock.
Using a Shopify App
Bestsellers reSort lets you create custom sort orders for your products using tags, so you can display them in the most optimal way on your online store. You can also configure the app to sort your products based on various metrics, such as sales, views, ratings, reviews, and more.
» Gain an in-depth understanding of this handy app in this comprehensive Bestsellers reSort review
3. Sync Inventory Across Multiple Stores
For any alcohol seller, overselling across multiple stores is a dreaded scenario. It not only leads to disgruntled customers who want their purchases delivered now, but it can also lead to refunds, restocking fees, and potential penalties from Shopify. The consequences are twofold: increased COGS and reduced profits.
Syncing inventory across multiple Shopify stores addresses these challenges. It streamlines order fulfillment and shipping processes by giving you accurate stock levels for each product across your different stores. As a result, you can efficiently ship products between stores, saving precious time, labor, and transportation costs.
Using a Shopify App
Multi-Store Sync Power lets you sync your inventory in real time with two-way sync functionality. This means any changes made in one store will automatically update across all of your other stores in a snap. You just need to install the app on all your stores, connect them with a few clicks, and choose which products and variants you want to sync. The app will take care of the rest.
» Learn more about this app's features in the following Multi-Store Sync Power review
4. Leverage Data Analytics for Demand Forecasting
Alcohol has a limited shelf life, and improper storage can result in spoilage. Striking the right balance is essential—you want to avoid running out of your products, but you also don't want to overstock them and end up with expired items.
That's why you need to use data analytics to forecast your demand and optimize your inventory levels. Data analytics can help you understand your customer behavior, market trends, and historical sales data. This, in turn, can help you make more accurate predictions about how much alcohol you need to order and when.
Using a Shopify App
Here are some of the benefits of using a Shopify app for inventory forecasting:
Automated data collection: The app can automatically collect data from your Shopify store, including orders, products, customers, and inventory, saving you time and effort.Centralized data storage: The app can store all your data in one place, making it easy to access and analyze.Advanced analytics: The app can use various techniques, such as descriptive, diagnostic, predictive, and prescriptive analytics, to provide you with valuable insights and recommendations.Automated & customizable reports: The app can generate reports that show you key metrics, such as sales trends, inventory turnover, stock levels, and reorder points.Forecasting algorithms: The app can use sophisticated algorithms that take into account various factors, such as seasonality, promotions, holidays, and weather, to forecast your future demand.
» Choose Excel over a Shopify app? Use our tips for more efficient inventory forecasting
Additional Tips to Decrease COGS
Negotiate better wholesale prices with suppliersOptimize shipping and handling feesComply with all applicable taxes and licensing requirementsLeverage seasonal promotionsConduct regular inventory audits
Stock Smart, Sell Smarter: Minimize COGS for Maximum Returns
Selling alcohol on Shopify can be a lucrative business, but achieving success relies on effective inventory management. By optimizing your inventory management, you can reduce COGS and improve profit margins. This involves minimizing carrying costs, preventing waste and stockouts, and enhancing inventory turnover.
However, managing alcohol inventory can be challenging. But by using the right Shopify apps, you can streamline the process. These apps offer automation and improved inventory management capabilities, including real-time stock tracking, product reordering, inventory synchronization across various channels, and generation of reports and insights. By leveraging these tools, you can save time, cut costs, and concentrate on growth and providing exceptional customer experiences, ultimately driving higher profitability.
InventoryMy 6 Expert Tips for Managing Pipeline Inventory to Meet Customer DemandInventory management is an essential aspect of any business. What you might not realize is that inventory management isn't limited to managing only the stock currently present in your warehouse; it also extends to pipeline inventory.
Pipeline inventory refers to stocks that are in transit between locations and have not been purchased by a consumer.
Remember, regardless of the lead time and demand rate, once the payment is made to a supplier, the product becomes your inventory.
1. Keep Track of Each Step of the Process
I usually start by tracking where my pipeline inventory is in the supply chain, and I make sure I know how much time the manufacturing and transiting stages will take. This includes considering what aspects of my surroundings can lead to disruptions such as crises, accidents, disasters, or pandemics.
Accuracy is vital, so I like to create a single source of truth across multiple suppliers and freight forwarders. I use a host of different tools, including spreadsheets and real-time scanning technologies via barcodes, stock-keeping units, and smart devices.
2. Ensure Accurate Demand Forecasting
Demand forecasting means I need to know how much a product will be in demand in the future so that I can align my stock according to that demand. Like with the previous step, accuracy is key because I don't want to be overstocked or understocked. I find that going through all the seller reports I get from my e-commerce platform helps with this.
There are a number of factors that can influence customer demand for a product or service. Some of them are:
Pricing: High prices tend to decrease demand, whereas low prices lead to high demand.Quality: Customers are more likely to demand a product or service that is highly qualified.Features: Customers tend to demand a product with certain features such as ease of use, durability, and so on.Competition: Lack of competition can lead to high demand.Brand reputation: Consumers are more likely to buy from a brand they trust and perceive as reliable.
» Haven't done inventory forecasting before? Here's how
3. Consider Placing Safety Stock
Safety stock is an essential aspect of a business. It means that I set aside a certain amount of stock so that I can keep meeting customer demand if any mishap occurs at any point in the supply chain.
So, safety stock serves as backup inventory and is invulnerable to the risk of losing customers and production slowdowns, which can happen because of transit or manufacturing issues.
4. Implement Third-Party Integrations
Integrating third-party apps with my pipeline inventory management system helps enhance the functionality and capabilities of my system. Useful apps like Katana (manufacturing) and Ordoro (inventory management) can help a pipeline inventory management system access and utilize additional data, automate certain processes, and improve the overall efficiency and effectiveness of managing pipeline inventory.
5. Establish a Real-Time Inventory Management System
Establishing a real-time inventory management system with the help of software like Cogsy, Zoho, NetSuite, or Fishbowl allows me to improve real-time visibility and control over inventory levels so I can optimize my operations and make better, more informed decisions.
6. Automate Your Inventory Management Process
Finally, my last tip is to automate inventory management processes where you can. Stop performing tasks manually, like drawing up stock reports. The right software will automatically provide these, thereby streamlining your reordering process. In some cases, you'll even be able to auto-replenish your stock and keep a certain amount of inventory on hand at all times.
Automated processes can also help you forecast sales and lead times. This means that pipeline stock can be adjusted on the fly, automatically ensuring you can meet all of your customers' future orders.
» Explore these best inventory management systems
The Verdict
Almost all e-commerce retailers must deal with pipeline inventory and overall inventory issues in the supply chain. I suggest starting by identifying and qualifying pipeline inventory before you move on to balance your cash flow and supply. You don't want to undersell or sit without stock. By effectively managing your pipeline inventory, you'll be more than capable of dealing with changing customer demand and thereby monitoring the impact this has on your profitability.
InventoryBulk Inventory Management: Weighing the Pros & ConsIt's important for any e-commerce business to have an efficient inventory management system in place, especially when you manage bulk inventory.
Bulk inventory management (BIM) has three steps: ordering your stock in large quantities, storing the stock while it sells, and re-ordering new stock as you sell out.
Below, I examine the advantages of BIM while also weighing its potential risks. By understanding both sides, you can make an informed decision about whether BIM will help you manage your Shopify inventory better.
4 Advantages of BIM
With BIM, you can manage and track inventory levels, order fulfillment, and product availability. This makes keeping an eye on your products, orders, and customers easy.
Let's discuss the advantages of BIM in more detail.
1. Access to Bulk Discounts & Wholesale Pricing
By ordering large quantities of stock, you can negotiate with your supplier for a better price. In turn, you can use this extra margin to adjust your own selling prices or run specific promotions that will help your store stay competitive in the ever-changing online market.
2. Reduces Risk of Product Shortages
Perhaps the most obvious advantage of bulk inventory is that your risk of running out of these products decreases. It also means that you're less likely to lose customers and sales to competitors because your products are available.
3. Accelerates Order Fulfillment
Building on the previous point, if stock is readily available, then it's easy and quick to fulfill customer orders. Think of the great impression your store and brand will make if you can deliver a full order on a tight deadline. Customers don't have to wait for backorders or search for another store that can supply them sooner.
4. Enables Swift Replenishment
Depending on how quickly your bulk products sell, it's easy to monitor the stock levels and place another bulk order for these products as your stock levels dwindle. You also don't have to re-order that often compared to single products that you keep in minimal quantities.
» Here's how an automated inventory system can help you
5 Disadvantages of BIM
Despite its above-mentioned benefits, BIM also has drawbacks—particularly when it comes to cash flow and warehousing. Follow along as I delve into this more.
1. No Margin for Error in Sales Forecasts
Without a margin for error, you can't plan ahead if sales don't meet expectations. This can lead to overstocking or understocking, causing your business significant financial losses in the long run.
» Opening inventory: Determine how much inventory you should start your Shopify store with
2. Warehousing & Storage Solutions Become Costly
Warehousing and storage solutions can become costly. Firstly, you'll simply pay more for the space necessary to store your bulk inventory as opposed to the space for a few items because you only order stock as you receive customer orders. Secondly, if your sales forecasts are incorrect, you must still pay to store your products, regardless of whether they're selling or not.
3. Higher Risk of Inventory Becoming Obsolete
Another potential risk is that inventory may become obsolete if you don't sell it in a timely manner. This may happen if you don't effectively monitor and adjust your inventory levels or if you don't properly plan your inventory forecasting, particularly when it comes to products that are seasonal or a temporary trend.
» Learn how to clear deadstock inventory
4. Minimizes Available Cash Flow
BIM can affect your available cash flow greatly. Again, if your sales forecasts are incorrect, you may end up with an overstock of certain products. This means that your cash is tied up in excess inventory that's costing you money because you still need to pay your supplier, storage, insurance, etc.
5. Typically Results in Higher Insurance Premiums
Your inventory is always valuable, but even more so when you work in bulk. Consequently, your insurance premiums can be higher because, as your inventory levels increase, so does your risk. You need to properly insure your inventory against damage, theft, etc.
» Find the best inventory management system for your Shopify store
The Verdict
I recommend bulk inventory management as a strategy for well-established companies. Whenever you work with large quantities, you must be able to capitalize on economies of scale; otherwise, the venture isn't worth it. If you're a start-up or a young company, your risks are far greater at the moment than the advantages you would gain from this strategy. The costs of warehousing and insurance alone might make it unfeasible.
But whether or not you opt for bulk inventory management for your store, having a better grasp on your out-of-stock items can't hurt. For my own store, using the Out-of-Stock Police app by Egnition greatly improved my inventory management strategy.
» Learn more about this handy app in the following Out-of-Stock Police review
InventoryInventory Turnover: Definition, Formula, & Impact on Profitability (With Examples)Does inventory turnover sometimes feel like a mystery to you? Certain products take forever to sell (even after you've discounted them many times), while others just fly off your shelves (figuratively speaking).
Firstly, you must understand that inventory turnover is a balancing act between your sales and stock. Think of a scale: if you increase your sales but don't keep enough stock on hand to fill your orders, then you can lose those sales. But if you have few sales, then your stock levels can remain high and cost you money instead of making it.
Secondly, inventory turnover is a key performance indicator that helps you understand how well you're running your store and if your profitability is healthy.
Keeping these two points in mind, let's try to demystify inventory turnover more.
» Compare the best inventory management systems for your Shopify store
Inventory Turnover Defined
Inventory turnover is the ratio of the cost of goods sold (COGS) to the average inventory value over a period of time.
This ratio helps you measure how quickly your products are selling and how efficiently you're managing your inventory.
High inventory turnover rate indicates that you're selling your products quickly and efficiently.Low inventory turnover rate suggests that there's an issue with either pricing or product availability.
As we've already discussed, this is a balancing act, and you need to find that sweet spot between high and low to ensure your long-term profitability. If your rate is too high, you may not have enough stock available to meet customer demand. If it's too low, you may be carrying too much stock and tying up valuable capital with unsold items.
» Follow these tips to manage your Shopify inventory better
Formula for Calculating Inventory Turnover
Inventory Turnover = Cost of Goods Sold (COGS) / Average Value of Inventory
You can compare your inventory turnover number to industry standards or previous years' results to get an idea of how well your business is performing.
Now, let's break the formula down.
Cost of Goods Sold (COGS)
COGS represents the total amount it costs your business to purchase, manufacture, and deliver all the goods you've sold during a specific period.
Average Value of Inventory
You can calculate average inventory by adding your beginning and ending stock levels over a specific period together and dividing them by two.
Example of Inventory Turnover
Let's put the formula into practice:
Let's say your business has $50,000 worth of cost of goods sold over the past year and an average inventory of $20,000 over the same period. To calculate your inventory turnover rate:
COGS / Average Value of Inventory$50,000 / $20,000= 2.5
In this case, your inventory turnover rate is 2.5, meaning it takes your business two and a half times to turn over its entire inventory during the given period.
The Key to Profitability is Lowering Your COGS
COGS has a direct impact on your profitability because it determines your gross profit.
Gross Profit = Revenue - COGS
Gross profit shows you if you're at least selling your products at a good enough price to make a profit. So, are you getting more out of it than you're putting in?
By lowering your COGS, your gross profit can increase, and you can get a better balance between your inventory and sales.
Strategies to Lower COGS
There are a number of strategies you can use to lower your COGS, including:
Negotiating discounts from suppliers.Bulk buying when possible.Implementing just-in-time inventory management techniques.Utilizing barcode scanning systems to accurately and efficiently track your stock levels.Utilizing software to track purchasing trends and identify potential savings opportunities.Automating ordering processes where possible.
» Can decoupling inventory help your online business?
Don't Toss and Turn Over Inventory Turnover Anymore
It's difficult to determine what a good inventory turnover is because it depends on your industry and whether you manufacture your products yourself or buy them to resell.
By keeping an eye on your inventory turnover ratio and profitability, you can make informed decisions about your business's stock levels and overall purchasing strategy. With a bit of strategic planning and diligence, you can ensure that you are making the most of your inventory and achieving a profitable balance in the long run.
» Explore Egnition's Shopify apps to simplify inventory management
InventoryExcel Inventory Forecasting: Tips, Tricks, & TechniquesAccurate inventory forecasting can help you reduce inventory waste and prevent obsolete inventory in your Shopify store while promoting financial health by ensuring adequate stock levels are always available.
Inventory forecasting, or e-commerce forecasting, helps e-commerce store owners better manage their inventory by predicting future product demand based on real-time inventory trends and historical metrics, such as past sales data.
To reap the benefits of accurate inventory forecasting, such as supply level optimization and refined pricing and sales strategy, you can try what many brands do and use Microsoft Excel to conduct your inventory forecasts.
However, while Excel can give you useful insights into sales trends and demand changes, it can be difficult to figure out exactly how to forecast inventory in Excel—but we bring you useful techniques and tips to make the process easier.
» Supercharge your Shopify inventory forecasting
3 Techniques for Creating an Inventory Forecast in Excel
Excel is a popular tool for demand forecasting because it's cost-effective and can use conditional formatting. Although it can be error-prone and a bit time-consuming, it can still be an effective inventory forecasting tool that can ultimately help you improve your inventory turnover if you know how to use it properly.
1. Moving Average Technique
The moving average method can help you predict your future inventory demand by looking at the average value of past buyer trends and patterns over a given period. This method "moves" because it takes new data into consideration. For example, if you choose to calculate your average over a 3-month period, this method will use the data from January, February, and March. But next month, the data from February, March, and April will be used instead.
Using an average gives you a baseline and helps combat fluctuations that might give you an incorrect reflection of your inventory demands. You can use this formula to calculate your moving averages:
Moving average = Select the revenue earned from the current month + X number of prior months + apply this formula: =AVERAGE(Data Range)
2. Linear Regression Technique
The linear regression technique predicts demand by comparing two different variables—for example, the number of umbrellas sold vs. rainfall amounts. In this example, if you're forecasting umbrella sales, you'd use the rainfall amount as your independent variable and compare it to the number of umbrellas sold over a certain period to predict future demand more accurately.
To employ linear regression in Excel, follow these steps:
Create three columns and choose one to contain each of the 12 months.Fill the other two columns with data related to the variables you wish to examine (e.g., rainfall in millimeters and the number of umbrellas sold).Select the two columns with data and insert a scatter chart into your spreadsheet.Add a linear trendline to the data points.Your finished graph should resemble this.
3. Exponential Smoothing Technique
Exponential smoothing predicts demand by smoothing out historical data, such as seasonality patterns and confidence intervals. Follow these steps to implement this technique yourself:
Go to the Data menu in Excel.Select Forecast Sheet.Pick a suitable chart (e.g., column or line chart).Select your end forecast date.Click Create to generate a worksheet with a sales forecast.
» For more accurate forecasts, consider your pipeline inventory as well
3 Tips to Optimize Excel Inventory Forecasting
When using Excel for inventory forecasting, the data isn't always perfect, as it can only give you static information. However, you can make the most of Excel's features by optimizing your inventory forecasting using the following tips:
1. Customize Visual Data
Excel offers several customization options that you can use to optimize your inventory forecasting and avoid having to get rid of obsolete inventory. For example, you can customize the visual timeline for specific ranges with color coding and other visual cues that make it easier to understand the data at a glance.
2. Choose a Suitable Forecast Function
While creating inventory forecasts in Excel, you'll be able to use different forecast functions to guide your forecast predictions, such as:
FORECAST: Predicts a future value with linear regression.FORECAST.LINEAR: Has the same purpose as FORECAST, just for newer versions of Excel.FORECAST.ETS: Used for exponential smoothing.FORECAST.ETS.SEASONALITY: Calculates the length of a recurring pattern in a timeline to detect seasonality.FORECAST.ETS. CONFINT: Calculates the confidence interval for a forecasted value.FORECAST.ETS.STAT: Determines a specific value based on exponential smoothing forecasting.
3. Rely on Third-Party Apps and Templates
Finally, you can also leverage Excel's existing functionalities with third-party software and pre-made forecasting templates. You can simplify the whole process by using tools like Asana, Salesforce, and Monday.com or downloading free Excel templates like this one from HubSpot.
» Get helpful demand insights by tracking your inventory in Shopify
Simplify Your Excel Inventory Forecasting
While Excel is a powerful tool for inventory forecasting, it can also be tedious. However, you can streamline the process and create a more accurate inventory forecast using techniques like linear regression, moving averages, and exponential smoothing. Excel's customizable visual data and third-party software or templates can help you further optimize your inventory forecasting.
Understanding how to properly use Excel for inventory forecasting can help you make better decisions about your stock levels and ensure you have the right products at the right time.