You’re running a Shopify store. You’re managing everything from inventory to marketing and making sure the right deals are reaching the right customers. But what if all the inventory you stocked up on doesn’t sell? What if the bundle deals you created don’t really resonate with what the consumers want? Well, it happens more often than you think and that’s why you need product analytics for better inventory management.
What is inventory management?
Inventory management is the process of keeping track of the goods a company has kept stock of. The idea is to be able to monitor their weight, dimensions, amounts, and location to minimize the cost of holding the inventory.
Simply put, with inventory management, a Shopify store owner knows which products are selling out fast and need to be replenished, which seem to be held up too long.
What is product analytics?
As we explained in our eCommerce Analytics masterclass – product analytics is an application of business intelligence and analytics software. It includes digging into data to analyze service reports, product returns, warranties, feedback from customers, hot-selling products, and other product-related data.
The goal is to turn the data into actionables that help businesses identify improvements they need to make to products, understand consumer usage – and more importantly, plan their inventory better.
Here’s a simplified definition – product analytics shows you which products are performing the best, which are not selling out, what you can do to increase sales and which inventory can help you maximize your profits.
Which product segments can help with better inventory management?
Now pulling in your inventory information, marketing, and store data to create segments out of product analytics, can be tough and way too time-consuming.
That’s where Shopify analytics apps like RevTap come in.
Connecting with your Shopify store and Google Analytics, the app pulls in all your product performance data onto one dashboard. It then creates smart segments, categorizing products and pulling in their performance details to give you a clear overview.
1. High volume products
One of the biggest concerns for Shopify merchants is overstocking products that don’t sell or sell in lesser quantities. With this product segment, you can identify the products sold by quantity and plan out their inventory better.
It gives you an insight into the quantities the product is being bought in and ensures you have sufficient stock to meet consumer demand – all without risking having to overstock in the warehouse.
2. Hot and cold products
Identify products that are bringing you more revenue over a defined period of time. Also, identify those that haven’t been selling out much over the same period of time.
Using this product segment does three things for you. First, it helps you understand what’s trending in your target consumer market. Second, it helps you single out the under-performing product lines so you can lower their inventory in a timely manner. Third, it helps you ensure you have enough stock of the hot-selling, more revenue-generating products so that consumers are not turning away due to stock-outs.
3. Top abandoned products
The average cart abandonment rate most Shopify stores suffer from ranges from 69% to a whopping 80%. While there may be many reasons for cart abandonment, there are times when it occurs simply to a specific product line. The reason could be that the consumer isn’t sure about the product purchase, doesn’t know how to make an informed decision (size, etc), or simply can’t differentiate it from an alternative being offered by another store.
Such products become hard to sell and get abandoned often, leading to inventory going waste. Knowing which product line and which products in the range are abandoned the most, you can stock up on your inventory accordingly.
4. Top refunded products
Another common challenge that Shopify stores face is returns and refunds. In this case too either the consumer is not happy with the purchase, or they made the wrong purchase, leading to the product making its way back to your inventory.
So you end up first spending on getting the product delivered to your customer and then bringing it back to be stored again in the warehouse, taking your profits in negative. Product analytics can help you identify the top refunded products so that you can understand the reason behind the consumer’s request and plan your inventory better.
5. Top discounted products
Another important product segment to look into is the range of products that get you a lot of revenue – only when they’re on discount. This is an important segment to look into as it helps you understand which inventory is more likely to be sold when combined with a discount.
So you can ensure that these products have enough stock available during the sale season, and at other times you can plan the inventory based on the consumer demand.
6. Nearly out of stock
One thing that your Shopify store does not want to face is a stock-out. Imagine having to turn away a potential customer simply because you weren’t prepared to make as many sales.
By identifying your hot-selling products and creating a segment for those that are nearly out of stock, you can prevent having to leave money on the table. Knowing which products out of the hot-selling ones are nearly out of stock, you can request a replenishment well in time.
How does product analytics help with inventory management?
Product analytics looks into your store and marketing data to identify which product lines are performing the best. It also gives you a better understanding of the consumer purchase behavior and market trends, helping you optimize your marketing campaigns – but more importantly, your inventory.
Think about the holiday season and how Christmas trees are in so much demand. Now think what happens when your store simply runs out of trees and decor even before Christmas?
You start to lose out on all those consumers who are doing last-minute shopping for the holidays. But what’s worse is that you let down the expectations they come to your Shopify store with. All because you didn’t know what the demand for Christmas trees would look like or didn’t know when to replenish the stock for the tree’s decor!
Similarly, think about how you stocked up on a lot of Halloween masks during the season. Now it’s Christmas and all those masks are simply lying in cold storage. But what’s worse is how those masks will no longer be in demand the next year – so that’s a complete product line inventory going waste!
Understocked or overstocked – poor inventory management is often caused by a lack of data or not being able to draw actionables from product analytics.
Simply put, product analytics for inventory management helps Shopify stores:
1. Avoid spoilage
This is critical for stores that are selling products that have an expiry date. Take, for instance, food or makeup. If these products don’t sell in time, they get spoilt and can’t be sold. So your Shopify store ends up losing inventory investment to spoilage.
With product analytics, you get an insight into fast-selling products and those ranges that move slow. The data can help Shopify brands selling such products, plan their inventory at the pace the products are being consumed.
2. Avoid deadstock
Deadstock refers to products that can no longer be sold. But this doesn’t just include products that get spoiled or have reached their expiry date. They could have simply gone out of fashion or become irrelevant in the ever-changing market trends.
3. Save on storage cost
Warehousing is a variable cost that Shopify stores incur. The cost fluctuates based on how many products they’re storing. So if you’re storing too many products in one go or holding a range of products that aren’t selling, your storage costs skyrocket.
Combining inventory management tactics with product analytics, you can identify your hot-selling products, most returned and low-selling items. By planning their stocks accordingly you can save on their warehousing costs.
4. Improves cash flow
Inventory consists of products a Shopify store has already paid for. So if the product is only lying in the warehouse, you’re not earning anything from the purchase you made. If the product doesn’t sell over a prolonged period, you only end up paying additionally for holding stock.
By using product analytics in inventory management, you can identify products that sell more and those that give you the highest profit margin. This helps improve the cash flow in managing your Shopify store.
Do you need product analytics for inventory management?
No matter how big or small your store. Irrespective of the number of sales your Shopify store is making in a week or a month, product analytics is for you.
It helps you understand what works best for your store. Pretty much similar to the marketing reports you spend hours analyzing.
So instead of guesswork, let data tell you which of your products sell the best. And which bring you more sales and revenue, while cutting out the losses!
Want to learn more about optimizing your store inventory with product analytics? Read our lesson on product analytics from the eCommerce Analytics Masterclass.