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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, how badly it can impact your online business and how to combat it.
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.
Such situations are not only undesirable for customers but also for ecommerce sellers. Why? Let’s see the impact of overselling!
In the beginning, demand exceeding the supply may sound good, but in reality, it’s an ecommerce disaster as it:
70% of customers prefer to switch to a competitor rather than wait for their backorders.
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 can be due to not updating the stock in real-time
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:
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:
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:
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.
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.