Consumer experiences have become simultaneously fragmented and more connected than ever because of multichannel selling.

At any given moment, your customers may be reviewing your website, comparing products on an online marketplace, or shopping at a physical store, and this array of buying options poses challenges for multichannel inventory management. 

Each of these moments is an opportunity to connect with your audience, but you’ll need to embrace total commerce ⁠— the concept of being wherever your customers want to shop ⁠— and you’ll require robust multichannel inventory management tools to do so.

Customers also demand convenience, including a seamless experience across all sales channels, which can be achieved with tools that accurately track inventory across multiple warehouse locations.

Embracing a multichannel sales strategy comes with its fair share of hurdles, including updating listings and managing purchase orders across different systems, each with distinct requirements.

Responding to these challenges while managing inventory across various channels and platforms can become intricate without streamlining the inventory management process.

Learn more about multichannel inventory management in a multichannel selling environment, the hurdles businesses face, and the perks of using an inventory management system to achieve optimal inventory control across all sales avenues.

What is multichannel inventory management? 

Multichannel inventory management is the orchestrated coordination of a business’s stock across various sales platforms, encompassing marketplaces, direct-to-consumer outlets, and B2B avenues.

This approach ensures accurate, real-time stock monitoring, promoting efficiency and minimizing overselling risks.

Delving deeper, multichannel inventory management involves managing inventory and fulfilling orders across a myriad of sales channels where businesses showcase and sell their products.

Today, customers purchase products from an array of platforms, be it dedicated marketplaces like Amazon, company-owned websites, or even B2B channels.

Effective multichannel inventory management ensures that regardless of where a sale happens, stock levels are updated in real-time across all platforms. This holistic view prevents stockouts, overselling, and aids in maintaining a seamless brand experience for customers. 

What are some challenges of multichannel inventory management? 

Meeting customer demands on multiple sales channels can be challenging but rewarding, especially if your business is growing quickly. 

Here are some of the issues encountered by growing multichannel ecommerce sellers.

Overselling and stockouts 

When vending on multiple channels, it’s paramount to track inventory efficiently. Manual counts can be cumbersome, often leading to overlooking a surge in sales volume, resulting in stockouts and missed revenue chances.

In the US and Canada alone, stockouts cost retailers more than $349 billion every year.

If you’ve tried to make a purchase online only to find out later that the product isn’t available, you understand how stockouts create a negative customer experience. Misrepresenting inventory levels, even unintentionally, can also result in adverse actions from online marketplaces.

Stocking too much inventory 

An issue ecommerce businesses grapple with is overstocking, leading to squandered expenses and augmented stocking fees. This challenge can intensify when selling across multiple sales channels, demanding meticulous inventory control.

US retailers have been sitting on a record $732 billion of inventory as of July 2022 — a 21 percent increase from a year ago.

This problem can be exacerbated by selling on multiple channels.

In that situation, forecasting demand is a more complex process, with careful consideration required when deciding how to store inventory. Other factors to consider when deciding on inventory levels across multiple channels include how marketplace sales are performing against expectations and how other channels are performing. 

Inadequate inventory tracking

Ecommerce retailers need oversight of what products are available on which sales channels, and at what price points. Sellers also must ensure that products are delivered to the customer within the promised time frame.

Without an accurate inventory tracking system in place, you risk a greater number of human errors in every part of your sales cycle.

Big-name brands have been left bare-faced due to inaccurate inventory tracking. Asos, for example suffered a 68% profits plunge due to its new inventory management system failing to account for returned items in inventory for an entire week.

Marks & Spencer suffered a similar fate when the UK brand failed to stock enough clothes in popular sizes. The inventory oversight ended up costing them around £5 million.

Inaccurate forecasts caused by poor data 

High-growth ecommerce businesses need accurate and up-to-date insights and data from all areas of the business to implement an effective supply chain strategy. This data should be easy to obtain, understand and update.

Getting quality, consistent can be particularly challenging when selling across multiple channels because the reporting features, metrics, delivery, and format can vary.

Higher order defect rate 

Order defect rate (ODR) is a metric used by marketplaces to determine the ability of a seller to provide a good customer experience.

For sellers on marketplaces such as Amazon and Walmart, surpassing ODR limits can lead to penalties, including the revocation of selling privileges.   

Inconsistent or poor customer experience

Your customers expect the same level of service wherever they make a purchase.

When you’re selling on a single website or marketplace, this can be easily managed, but every new channel adds complexity to your sales and customer service processes.

To provide the same high-quality experience for every customer, you need a complete view of your business operations and the ability to respond to customer needs efficiently and effectively.

What are the benefits of multichannel inventory management?

As order volumes increase across multiple channels, you don’t want to waste time logging in and out of platforms to list products and manage orders. 

The benefits of using an inventory management system like Linnworks are that you can grow sales, improve efficiency and avoid the risk of overselling while scaling up your business and adding sales channels.

Read on for more benefits of inventory management across channels.

Optimize each sales channel with automation 

Managing inventory across your sales channels can be difficult, especially as you add and test new sales channels. Your time should be spent growing the business, not tracking down supply issues.  

With an automated inventory management platform, you can have real-time oversight across your entire supply chain to ensure customers get their orders in the promised time frame.

This type of software also comes with rules engine integrations so you replenish stock automatically when a product sells out on one channel or reaches a designated supply level. 

Improve customer experience 

The last thing you want is a customer placing an order for inventory that’s not available. But that’s only one aspect of a great customer experience.

Multichannel inventory management can ensure product listings are correct, orders are tracked through delivery, and stock is replenished ⁠— each of which further improves the customer experience.

Utilize demand forecasting 

With the right multichannel inventory management software, you’ll gain data-driven insights that help you optimize your strategy and make profitable business decisions. Demand forecasting, in particular, can ensure you always have the right amount of stock on hand. 

Demand forecasting helps sellers stock the right products at the right levels across all sales channels, minimizing the chance of overselling. In addition, demand forecasting helps you scale inventory levels up or down based on peak season.

Manage product listing descriptions 

Manually listing product descriptions is time-consuming even on one sales channel, let alone multiple channels.

To save time ⁠— and even more importantly, to ensure consistency when the customer engages with a brand ⁠— each listing can be manually written, then automatically shared across all of the online marketplaces where the product is sold.

Make supply chain operations efficient

Automation can help streamline back-end supply chain processes. For example, a single order may include products from multiple warehouses. Automation software can determine the most efficient path to fulfilling the order.

This ensures orders are on time and correctly fulfilled. By contrast, manual processes for such orders are likely to result in partially fulfilled or incorrect orders, lateness, and higher shipping and inventory costs. 

Strategies for effective multichannel inventory management

Let’s take a look at some of the most effective ways retailers can conduct multichannel inventory management.

Centralized inventory hub

In the realm of multichannel retailing, the adage “less is more” rings true, especially when referring to inventory management systems.

Adopting a centralized inventory hub is like equipping your business with a control room. This single repository consolidates stock data from every sales channel, granting businesses a panoramic view of their entire inventory landscape.

Unified vision: a single repository eliminates the potential chaos of juggling multiple, disjointed inventory systems. It provides clarity by displaying real-time stock levels across all channels.

Efficiency: time spent navigating different systems or manually reconciling stock disparities can be drastically reduced, freeing resources for other strategic endeavors.

Minimized errors: centralization minimizes human error. There’s less risk of overselling or understocking since all data flows into a unified platform.

Streamlined restocking: by viewing inventory holistically, businesses can identify restocking needs more efficiently and act proactively.

Real-time synchronization

The retail landscape is fluid.

Stocks deplete at varying rates across channels, and delays in updating inventory counts can be costly. Enter real-time synchronization: the lifeblood of effective multichannel inventory management.

Accurate inventory counts: automatic updates ensure stock levels reflect real-time sales, minimizing the risk of overselling or disappointing potential customers with unavailable products.

Enhanced customer experience: when customers see an item as available, they trust the accuracy of that information, which in turn fosters trust in the brand.

Operational efficiency: time-sensitive decisions, like restocking or rerouting products between channels, become easier with real-time data at one’s fingertips.

Channel-specific forecasting

While a centralized system offers a comprehensive overview, channel-specific forecasting dives deep into the unique sales patterns of each platform.

Each channel attracts a distinct demographic with its purchasing behavior. Recognizing and tailoring inventory plans to these nuances can supercharge sales.

Customized strategies: different channels might have varied peak sales periods. For instance, a B2B platform might see consistent sales, while an ecommerce marketplace might experience holiday surges.

Optimized stock levels: by understanding specific demand patterns, businesses can adjust stock levels accordingly, ensuring each channel has its optimal inventory.

Reduced holding costs: by avoiding overstocking on channels with lower demand, businesses can minimize warehousing costs.

Inventory buffering

Navigating the multichannel retail space isn’t without its challenges.

Unexpected surges in demand, supply chain disruptions, or even logistical snags can throw a wrench into the most meticulous inventory plans.

Inventory buffering, or maintaining safety stock, acts as a protective shield against these uncertainties. One useful metric here is the inventory turnover ratio, which can provide insights into how often inventory is sold and replaced over a given period.

Mitigating risk: safety stock acts as an insurance policy against unforeseen sales spikes or supply chain hiccups, ensuring continuity in fulfilling orders.

Elevating customer satisfaction: when unpredicted demand surges occur, having a buffer means businesses can continue to meet customer expectations without scrambling for stock replenishment.

Balancing act: while buffering is beneficial, it’s crucial to strike a balance. Excessive safety stock incurs holding costs, while too little risks stockouts.

Regularly reviewing and adjusting safety stock levels, taking into account historical data and future predictions, ensures businesses maintain that delicate equilibrium.

With the aforementioned strategies, businesses can not only navigate the complex realm of multichannel inventory management but also thrive, ensuring customer satisfaction, operational efficiency, and sustained growth.

What to look for in multichannel inventory management software

Real-time data and insights

Effective inventory management systems provide consistent updates of real-time stock levels across all sales channels as orders are processed. With a centralized dashboard, you can see historical key sales metrics and important information on shipping performance, inventory, and orders, including sales volumes and refunds.

Optimization of inventory management and improved efficiency

The listing of products in stock should be adjusted automatically as stock is sold on each sales channel. At the same time, the amount of stock available in product listings should also be adjusted as inventory levels replenish. 

Automated purchase orders and supplier relationships 

A multichannel inventory management system should make it easier to manage supplier relationships by storing essential information such as lead times and minimum required order levels.

In addition, good inventory management systems automatically tracks purchase orders, manages the entire purchase order process and automatically generates orders as needed.

Shipping improvements

An inventory management tool can streamline shipping workflows and significantly reduce manual tasks for each order. Additionally, you can manage the pick-pack-ship process more easily and efficiently.

Other important features of good multichannel inventory management systems are the ability to assign the right carrier or fulfillment partner and to track orders after they have been shipped.  

Available Integrations

The functionality of your ecommerce operations can be greatly expanded with integrations. Make sure you review the available selling channels that can integrate with your inventory management software to ensure that you’re not sacrificing functionality for performance.

If you can’t access the sales channels you need, there’s no benefit to using it. Beyond selling channels, consider integrations that improve other aspects of your operations.

Multichannel inventory management in action with Linnworks

Direct Plants, an outdoor plant company, transitioned from a physical retail business to online sales with eBay in 2006, later expanding with a direct-to-consumer website and an Amazon-branded store.

Due to the seasonality of its products, the company had as many as 1,000 stock-keeping units (SKUs) in season at any given time. Manually updating these SKUs was difficult and time-consuming.

Furthermore, Direct Plants was selling products quickly, making it more difficult to maintain accurate inventory levels and leading to oversold products. Without accurate tracking and sales data, the company didn’t know which seasonal plants were popular, which led to missed revenue opportunities.

The retailer partnered with Linnworks to help establish a multichannel inventory and order management system that could help manage products more effectively. Shaun O’Brien, company director at Direct Plants, said, “The ability to quickly update SKUs to reflect changes in our inventory and accurately syncing inventory levels across our selling channels means I don’t have to worry about overselling or underselling, which frees up my time to focus on the business.”

Customers expect convenience. They want seamless shopping experiences in the places where they choose to spend their time. The challenge for brands is managing inventory on multiple sales channels at the same time.

Multichannel selling requires businesses to meet customer demands and provide a positive experience that exceeds expectations. To do this, top sellers make sure back-end processes are connected to multichannel inventory management software.

Case studies: multi-channel inventory management done right

Retro Styler: a journey from passion to multichannel retailing

Founded in 2009 by Luca and Sally Salamone, Retro Styler filled a gap in the market as a retro-themed, one-stop-shop online retailer.

Initially operating as an eBay store with 150 SKUs, they expanded to include 2,000 SKUs and added Amazon UK (and later, international Amazon stores) to their selling channels. With increased sales channels, the challenge became evident: scaling inventory management.

Impact of Linnworks: Retro Styler partnered with Linnworks, centralizing their multichannel inventory management system, order management, and listing.

The inventory management software allowed them to manage their entire stock from one location, avoiding the tedious task of allocating stock to different channels. Not only did this simplify operations, but it also permitted broader product availability.

Future plans include optimizing warehouse operations with Linnworks features and expanding their global market reach.

Turtle Wax: venturing into the direct-to-consumer market

Known worldwide for its auto care products, Turtle Wax decided to tap into the direct-to-consumer market in 2018.

Their main challenge was finding an adaptable solution to drive multichannel sales on a grand scale. They needed effective inventory management software.

Impact of Linnworks: Turtle Wax chose Linnworks for its ability to integrate with key marketplaces, manage inventory, and centralize order processes.

Beginning with Amazon FBA in the UK and Europe, they witnessed a staggering 278% growth on target, prompting them to explore other marketplaces.

By mid-2019, Turtle Wax launched its D2C website, and Linnworks’ support was crucial in handling the added load. The company now aims to expand its presence in multiple countries and diversify its product range to over 600 items.

Linnworks’ efficiency has permitted significant growth with a lean team. Jon, the EMEA ecommerce Manager, praised Linnworks for its flexibility, reliability, and ability to meet their unique needs.

Get multichannel inventory management right

Navigating the landscape of multichannel inventory management presents both challenges and opportunities.

From grappling with the potential risks of overselling and stockouts to harnessing the benefits of automation and channel-specific forecasting, there’s a lot to consider.

At its core, effective multichannel inventory management focuses on creating seamless customer experiences while ensuring efficiency and profitability for businesses.

However, the cornerstone to success lies in selecting the right software. A solution like Linnworks stands out, delivering real-time data insights, optimizing inventory processes, and seamlessly integrating various sales channels.

Witnessing the tangible results through case studies underscores the transformative power of adept inventory management.

As we conclude, we invite you to experience the innovation firsthand. Don’t just take our word for it. Embark on a self-guided product tour of Linnworks and witness how it can revolutionize your multichannel inventory management strategy. The next chapter of your business’s efficiency and growth awaits!