5 Best Practices to Prevent Overselling for E-Commerce Brands
With today’s volatile trade landscape and unpredictable global supply chain disruptions, e-commerce retailers can’t risk alienating customers — or leaking profits — through stockouts. Yet overselling remains a serious problem, with 40 percent of sellers cancelling one in 10 orders and the cost of out-of-stocks estimated at $1.2 trillion in 2024.
Overselling occurs when demand exceeds available inventory, leaving consumers facing the dreaded “out of stock” notification after being charged for an item. As a result, overselling erodes consumer confidence, creating serious brand reputation and bottom-line issues for e-commerce retailers as consumers abandon their purchases, turn to competitors, and potentially share negative reviews. Notably, nearly 70 percent of shoppers claim their perception of a business is damaged when an item is out of stock after being told it was available online.
For those retailers selling on a marketplace like Amazon.com, overselling can decimate rankings and threaten “Featured Offer” positioning, translating to lost sales and damaged relationships with marketplaces that are, unsurprisingly, not fans of sellers that frequently cancel orders.
In fact, recent data revealed that when products in positions one to 10 on Amazon went out of stock for even one day, their rank fell by more than 28 percent; after three days, rankings dropped by 83 percent, and after more than 10 days, they fell by nearly 150 percent — a crushing blow to the revenue stream.
5 Best Practices to Prevent Stockouts
Overselling occurs due to both unforeseen (e.g., viral social post) and predictable demand spikes (e.g., seasonal peaks), infrequent or slow inventory syncs, and insufficient safety stock — exacerbated by inaccurate forecasting and multichannel and marketplace tracking complexities.
To mitigate the risk of stockouts, e-commerce retailers should prioritize inventory management best practices, including:
1. Adopt an inventory management system (IMS).
An advanced IMS is the best line of defense to prevent overselling. By updating inventory in real time and unifying sales data in a single system, e-commerce retailers can track stock levels across all channels, marketplaces, and shopping carts — whether Fulfilled by Amazon (FBA), their own website, or marketplaces like Walmart and eBay — and make sure consumers always see accurate inventory availability when shopping online.
2. Continuously monitor inventory.
Constant inventory monitoring helps catch potential stockouts before they become an issue. With real-time inventory tracking, e-commerce retailers can react quickly to low stock levels, while helping spot recurring patterns and taking proactive steps to prevent them.
3. Conduct frequent cycle counts.
Even with a reliable warehouse management system in place, damaged or misplaced items can occur, causing a mismatch of physical inventory with recorded levels. By conducting regular cycle counts in different warehouse areas, retailers know what they have on hand and where they have it and can investigate discrepancies to keep stock levels accurate.
4. Adopt robust forecasting tools.
A data-driven approach to demand forecasting is critical for eliminating stockouts. With sophisticated forecasting tools, e-commerce sellers can forecast how much stock to order — including inventory for fulfillment services (e.g., FBA, WFS) — based on a variety of factors, including current aggregate inventory, product velocity, purchase order ETA, and historical sales data.
5. Establish reorder points.
Reorder points act as a signal to restock before inventory runs out, creating a buffer between inventory and the amount of stock sent to channels. By calculating the rate at which items are sold, retailers can order in advance to ensure stock arrives before current inventory is depleted.
With brand reputation, customer retention and lost revenue at stake, preventing overselling is crucial for e-commerce brands, especially as they expand to multiple sales channels. By implementing best practices around inventory management and real-time stock visibility, retailers can stay agile, protect margins, and enhance the customer experience, even in the face of supply chain disruptions and unexpected demand spikes.
Johannes Panzer is head of industry solutions, e-commerce at Descartes, a provider of on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses.
Johannes Panzer is Head of Industry Solutions, Ecommerce at Descartes, the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses.
