The importance of integrating inventory and sales management into an e-commerce website

For the majority of retailers with a traditional store, selling products through their own e-commerce site goes far beyond creating a set of products with descriptions, photos, and prices.

The core of retail operations usually lies in a specialized operational system that allows:

management of products, prices, descriptions, and photos;
inventory management;
generation of purchase orders to suppliers and receipt of goods;
management of various sales transactions, holds, returns or exchanges, and special orders from consumers;
production of inventory and management reports.

Most of the time, retailers have an incomplete and deficient inventory and sales management system in-store and try to implement an e-commerce site in isolation, without proper integration.

They end up managing more than one computer system at a time, having to maintain data integrity between these systems manually or via connectors that require constant maintenance. Additionally, consolidating sales and inventory data within management reports becomes cumbersome.

There are several advantages to implementing an integrated retail operational system with an e-commerce or online sales site. Here are some examples.

Traditional online store integrated with inventory management

Having an e-commerce site integrated with a retail operational system typically involves product documentation with inventory quantities, descriptions, and characteristics of these products, as well as photos to manage everything centrally without duplication of information.

However, other information and features are required to properly manage online sales, purchases, and inventory management with such a retail operational system. Here are some examples of important functionalities:

Ensuring real-time updates of information on products, photos, and inventory quantities based on goods receipts, inventory adjustments, as well as sales or returns both in-store and on the online site;
Integrating web sales invoices with consolidated store management reports;
Allowing analysis of web sales results to adjust product orders to suppliers and better manage stocks.

These basic functions are often missing when setting up an isolated e-commerce site. This leads to selling out-of-stock products or poorly managing orders to suppliers and inventory levels.

It is not uncommon for a retailer with an isolated e-commerce site to realize afterwards that the workload is too heavy to maintain up-to-date product information and that online sales levels are not as good as they could be. Energy is directed towards information management tasks rather than focusing on inventory management, which represents a significant cost for the company.

Supplier product catalog accessible to all your customers

Taking the opportunity to sell products online that are not in-store inventory but available from the supplier can be a very profitable choice. This involves allowing consumers to purchase products that are not necessarily in stock but easily accessible from the supplier via special orders.

A retail operational system simplifies the management of special consumer orders and thus generates sales of products without bearing the inventory cost.

In this special order example, it is important to combine supplier purchase orders with all other in-store product orders to offset transport costs and possibly reach a minimum purchase threshold from the supplier, entitling them to volume discounts.

By using a specialized retail inventory management system, the supplier purchase order will include all information on special consumer web orders as well as in-store special orders and regular product orders required for in-store inventory.

Upon receiving goods, it will then be possible to see on the purchase order to whom the products are intended and minimize delivery times by promptly proceeding with shipment.

Leveraging manufacturers' online catalogs

Some suppliers or manufacturers have understood how to better support their respective retailers when a consumer visits the product online catalog on the corporate website.

For example, a large North American bicycle manufacturer made the decision not to sell directly to consumers and instead integrated its retailers' real-time inventory levels into its web catalog to direct the consumer to the nearest retailer.

Thus, as soon as the consumer browses the bike manufacturer's web catalog, they see the product's current availability at each of the retailers in their region. In real-time, the product page includes the list of retailers with the bike in inventory since a direct search is made in each of their inventory management systems. The consumer can see where the product is available and decide to order it directly from that store, visit the retailer's online store, or go there directly.

By standardizing these real-time accesses, the manufacturer avoids supporting inventory in its warehouses and boosts sales for its retailers by providing essential information in the consumer purchasing process.

Without an adequate inventory management system, the retailer cannot benefit from this direct advertising and thus attract potential customers to their store or online to their e-commerce site for their full range of products and services.

Centralized web order management at the manufacturer

Another interesting form of web order centralization is that of a sporting equipment manufacturer who handles consumer purchases through their corporate e-commerce site. Once the consumer's order is paid for, it is submitted to retailers through a private web portal in the background.

The first retailer to handle the consumer's order ensures the sale of products that have already been paid for by the consumer. They only need to ship the goods to receive payment for that order from the supplier.

In this example, it is the retailer who takes responsibility for the order and must ensure they have the items in stock (or can quickly order them from the manufacturer as a special order) and ship them directly to the consumer.

Taking on such orders involves knowing if the products are in-store inventory and if the order has been processed or shipped to the consumer. Hence, the importance of having a retail operational system that can manage such processes and ensure no sales are lost while responding quickly to consumer needs.

When selling online becomes more important than selling in-store

It is not uncommon for a retailer to significantly increase their sales through their web store. Some retailers see their online revenues become more significant than traditional in-store sales due to their ability to quickly order required stocks or simply offer a wider product catalog.

Setting up a web store should be considered as if opening a new traditional store. Even if visits are virtual, interactions are not necessarily less frequent. Managing product exchanges, returns, or delivery tracking are tasks that require proper order and stock management.

Inventory and supplier order management system are at the core of a retailer's operation and can represent a significant strategic advantage not only for selling online but ensuring the right information is disseminated to consumers.

Trusting an online retailer means that the consumer can order the right product, easily interact with the store if they have questions about their order, and have all the details about product shipping and tracking with the carrier.

We can see that integrating an e-commerce site with a complete retail operations system becomes so important that retailers are increasingly opting for a fully integrated solution under one roof. Managing multiple systems means having to manage the connection between these independent solutions and their evolutions or updates.

It is therefore crucial to carefully choose and implement a retail operational system before investing in an e-commerce site. This is a key success factor for many retailers when deploying their e-commerce site.

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Patrice Derome

Patrice Derome has been working as a computer consultant for over 20 years. He has completed more than 200 projects in the retail sector as a Lightspeed expert for retailers throughout Quebec and Ontario.