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Ecommerce overselling: How to combat it
Order fulfilment

Ecommerce overselling: How to combat it

Versha Kamwal
April 22, 2021
mins read

Customer experience is the deciding factor of an ecommerce business' success. Factually, 89% of consumers have stopped buying from an ecommerce brand after one bad experience. As a seller, your end goal is to increase conversions by minimising shopping cart abandonment to grow your business. But what if a potential buyer makes a purchase, and when you start the order processing, you find out that you don't have that product in stock!

Yes, it is a tragic situation! But what's more tragic is that you have to send a dreadful notification to your potential buyer that the 'item you've ordered is out of stock.' Such situations are tremendous sources of distress while you're selling on your own website. But it's more dreadful when you are selling on a marketplace. It brings down the marketplaces' credibility as well. That's why they have stringent policies in place to penalise your seller account for not maintaining 100% error-free inventory levels and ruining the customer experience.

In this blog, you’ll learn about ecommerce overselling, why overselling is bad for your ecommerce business, what are the reasons which lead to overselling, and how to combat overselling.

What is ecommerce overselling?

Overselling is when a customer completes a purchase but you don't have that product in stock. In simple terms, overselling occurs when you sell more than what you actually have.

Despite the product's unavailability in your inventory, the product is displayed on the product page of your online store or marketplace as 'in-stock.' Ultimately and unfortunately, the order has to be cancelled, i.e. an out of stock (OOS) order.

Ecommerce overselling

Such situations are not only undesirable for customers but also for ecommerce sellers. Why? Let’s see the impact of overselling!

Why ecommerce overselling is bad for your business?

In the beginning, demand exceeding the supply may sound good, but in reality, it’s an ecommerce disaster as it:

  • Tampers your brand image
    After rigorous marketing campaigns for attracting customers to visit your online store, you end up sending an email to them "sorry, but we can't fulfil your order" suggests—you're unprofessional, unreliable, and unworthy of a revisit. It not only damages your brand image but their negative feedbacks can ruin your reputation in front of other potential customers. Thus, you lose out on not one but many customers. They head to ecommerce brands that can fulfil their orders. Research shows that once customers switch due to poor experience, 68% of them don't go back. Additionally, overselling is a big mistake while selling on a marketplace as it contributes to a bad reputation of that marketplace. For example, if you oversell on Amazon, it will impose penalties, may suspend your account, and sometimes block you from selling again on Amazon.
  • Causes loss of sale
    When you oversell, it was an opportunity for a sale that cannot be fulfiled as you don't have products in stock. This lost opportunity doesn't imply to just one customer but many customers who will be placing orders in the meanwhile (the time when you are overselling). Therefore, you're missing out on potential sales and customers. Moreover, frequent overselling on a marketplace such as Amazon, Myntra, Flipkart, and more leads to account suspension.
  • Strengthens your competitors
    The customers you've lost won't wait for you to re-stock products. Rather they will look for alternative ecommerce brands who are selling similar or even the same products and order from them. Thus, it gives your competitors a competitive edge over you.
70% of customers prefer to switch to a competitor rather than wait for their backorders.

  • Affects your product ranking on marketplaces
    If you oversell on a marketplace, it will lower down your product’s ranking on the search result page. Even if you re-stock or relist your product, marketplaces will take time to reconsider your product. Moreover, your negative sales history (due to order cancellation or customers’ review) will make it difficult for you to hit the top search result list.

What are the reasons which lead to ecommerce overselling?

  1. Not updating the stock

Overselling can happen when the inventory is not updated accurately or timely.

It can be due to manual inventory management
In manual inventory management, inventory is updated by physically counting the inventory items frequently. Thus, inventory is tracked, maintained and controlled without using a technical system. Here is why manual inventory management is a bad idea as it can lead to overselling:

  • It isn't time-efficient as it takes lots of time to compile data on a daily basis.
  • Real-time inventory update is difficult to be handled manually while dealing with large inventory across multiple channels.
  • It is prone to more human errors, such as inaccurate inventory calculations and discrepancy between actual and recorded stock.

It can be due to not updating the stock in real-time

  • When you choose to go multichannel, it is important to sync your inventory across all channels. However, sometimes you sell a product on Amazon, but your inventory doesn't get instantly updated on other sales channels. Meanwhile, a customer can place an order, resulting in a sale for the product you don't actually have.
  • Promotional campaigns and events like flash sales can result in a sudden spike in order volumes. It means orders can come faster than you or your system are able to update stock levels across every sales channel.
  1. Not getting your inventory on time
    Your method of product sourcing, such as your manufacturer or wholesaler, may not be under your control all the time. This can result in not getting your inventory on time, i.e. days before your actual stock out.
  2. Inventory being damaged or destroyed
    Due to high inventory ageing, your inventory is prone to expiration hassles or becoming obsolete. It is possible that when it comes to picking the order, the remaining stock is damaged and not suitable to be shipped to the customer.

What are the strategies to prevent ecommerce overselling?

1. Forecast the demand accurately

The essential part of inventory management is to predict your product's demand accurately. It will help you maintain the required inventory levels to avoid overselling. However, predicting demand is not an easy task as it considers your historical data as well as multiple factors, such as:

  • Overall economic conditions
  • Market trends regarding your product popularity
  • Your sales data and annual growth
  • Guaranteed sales from ongoing subscriptions
  • Upcoming promotions like end of season sale

Eshopbox's actionable dashboards provide in-depth insights on your historical sales data, best-selling products, slow-moving products, returns, and more. This enables you to calculate your sell-through rate, predict your products' demand, and maintain necessary inventory levels to avoid overselling.

2. Establish standard inventory levels and reorder points

This simply means that you need to have a minimum number of products that you must have in your storage facility at all times. And when the stock goes below the standard level, you need to order more inventory, i.e. reorder level. It will ensure that you have sufficient inventory on hand ready to be shipped to your customers. Thus, you can avoid overselling and dissatisfied customers. For maximum effectiveness, you need to keep in mind how quickly your stock clears and how much time it takes to procure your inventory from your suppliers while calculating the standard level and reorder points.

Eshopbox provides complete visibility of your inventory across multiple sales channels and fulfilment centres. This means, you have the access to a real-time view of your inventory to determine how many SKUs (stock-keeping units) you have in which of the warehouse, and based on your demand forecast and sell-through rate, you can maintain standard inventory levels. With these reorder points, you can plan your inventory replenishment and ensure that you never run out of inventory.

3. Invest in a robust Inventory Management System (IMS)

A powerful inventory management system can help you track your goods, inventory levels and manage your inventory efficiently. Moreover, it can help you:

  • Reduce manual errors: It will help you minimise the manual errors of inaccurate inventory calculations and discrepancy between actual and recorded stock.
  • Low-stock alerts: Once you’ve established standard level and reorder level, you can set a specific threshold in your stock that initiates an alert. This will notify you about depleting inventory proactively.
  • Automated updation of inventory across multiple channels: It will allow you to manage your inventory while selling across multiple channels by synchronising the stock level in real-time simultaneously.

Eshopbox's powerful inventory management system can help you prevent overselling by automating the inventory sync and minimising human errors. Eshopbox syncs your inventory across all sales channels every 5 minutes which enables you to relay accurate inventory levels in real-time.

4. Conduct regular inventory audits

Even though you are using software and reports to ensure accurate inventory levels, it's still important to make sure your reported numbers match the actual quantities of stock. For that, you can conduct regular inventory audits by the following methods:

  • Physical inventory audits by counting all inventory at once every week, month, quarter or year
  • Spot checking audits by doing a check on specific products or certain products that sell frequently
  • Cycle counting audits on certain products so that they are audited within a 12-month period
  • Special inventory counts on products that were prone to inventory errors in the past

Eshopbox conducts frequent inventory audits by taking a physical count of inventory to verify inventory records against actual inventory levels. This ensures that there is no gap between actual and recorded inventory.

5. Use the FIFO method

FIFO stands for "first in, first out" meaning that your oldest inventory (first-in) gets sold first (first-out) and not the newer stock. This strategy is equally important if you sell perishable or non-perishable goods. Let's see how: If you are selling perishable goods, such as juices, it is possible that they can be expired or damaged when you are picking the order. Such inventory cannot be shipped to the customers. If you are selling non-perishable goods like mobile phones, if the goods sit too long on the storage shelves, their packaging can be worn out, and they wouldn't look fresh enough or even obsolete.

Eshopbox uses the FIFO method to make sure that the oldest inventory is shipped out first. This prevents any expiration hazards and creates a positive and creditable brand image in front of your customers. For instance, shelving of cosmetics is also done according to the expiration dates in Eshopbox's fulfilment centres.

6. Maintain a safety stock for emergencies

Unfavourable situations can pop up when you least expect them, and when they do, you need to be prepared. Having a Plan B is all about taking precautionary measures, and it can save you a lot of time and headaches. You can buy more stock than you need and maintain it as safety stock in case overselling occurs. Additionally, you need to ensure that this safety stock isn't listed as part of the available stock. This method is useful, especially if you sell non-perishable goods. However, there's only one con to this strategy —you'll require extra storage space to store the safety stock.

Bottom line

There are a multitude of reasons which can result in overselling and lead to tarnishing your brand image. Proper inventory control and management are not only crucial for ensuring positive customer experiences but also for the success of your online business. Implementing the right strategies can provide you with complete inventory visibility across sales channels and help you maintain adequate inventory levels.

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