Ecommerce Inventory Management Software: Demystified!

Inventory management software (IMS) is vital for most ecommerce businesses. Whether you’re selling through an ecommerce website, or on third-party marketplaces, you need to track and manage all your product lines. With the right IMS you’ll be able to optimize your stock levels, manage sales on multiple channels, and maximize your revenues and profits.

We’ve noticed that there’s lots of confusion about exactly what an IMS is and what it does. That’s why we’ve created this complete guide that tells you everything you need to know. From what an IMS can do, and the main benefits and features, through to advice on choosing the right IMS for your online retail business and any potential pitfalls.

We’ll help you see through the jargon and the marketing to find the perfect IMS for your online retail and marketplace needs. Although there are plenty of IMS products for traditional retailers, we’re going to focus on inventory management software designed for ecommerce, including third-party marketplaces like Amazon and eBay.

Let’s get into it.

What ecommerce inventory management software can do

At its most basic, an IMS is designed to record and manage information about the physical goods in your business. While all IMS products have this core feature, most of them have many additional features and functions.

For example, some will raise purchase orders and reorder stock from your suppliers automatically. Others will hold detailed product information like photos, descriptions and specifications. Some will let you automatically create listings on marketplaces like eBay and Amazon, while other IMS products might include order management, accounting and analytics.

There are a huge range of IMS products available, from those that manage only the core functions, to others that provide a complete back end software solution for your ecommerce business.

Advantages of using inventory management software

There are many benefits that come from working with an IMS:

You’ll save time: You won’t have to manually update stock levels whenever you buy or sell products.
You’ll get insights: Sales, price histories, analysis, and reports will help you track what’s working, and what isn’t.
You’ll sell more: IMS products are designed to keep your stock levels healthy, so you’ll always have enough inventory to meet demand.
You’ll automate: Some IMS products will automatically upload product details, reorder stock, send notifications, and carry out various other functions in your business, all to save you time.

An IMS is especially useful to online entrepreneurs who sell products over multiple channels. A good IMS can track, upload, and manage product lines, no matter where you’re selling. Whether you’re listing on Amazon, selling on Shopify, or using a WordPress ecommerce plugin, a multichannel IMS lets you review and manage everything from one place.

When it comes to ecommerce businesses, an IMS system can easily expand to become your all-purpose business management software. It can help you to administer, report on, and track large parts of your online retail presence. It can be a useful addition to, or replacement for, your back office software that helps you run all your day-to-day retail operations.

There are plenty of terms related to IMS products, including enterprise resource planning (ERP), multichannel management, marketplace management, and more. Although none of these is a perfect description, they all touch on what an IMS can do. Of course, that doesn’t mean you should need your IMS to do everything. Sometimes you’ll want to use a specialized product for niche tasks, in which case you’ll want your IMS integrate easily with other systems.

We list ecommerce inventory management software under Multichannel Management → All-In-One Management Solutions in the Web Retailer directory.

The main features

Let’s dig into some of the key features you might want in an IMS.

Inventory management: tracking and managing stock levels

Inventory management is the most basic of IMS functions and typically includes:

Tracking what you have in stock and adjusting inventory levels as you purchase new or existing SKUs and sell your listed products.
Putting minimum stock levels in place and tracking when you’re going to go below a certain threshold, so you can reorder your products.
Bundling items together to encourage customers to buy due to included accessories or multipack discounts.
Tracking supplier details and purchase prices so you can see the history and work out profit margins.

Warehouse management: receiving, storage, and locating

If you’re storing and distributing products yourself, then an IMS with warehouse management features could be very useful. Features include:

Tracking where products are located so you can pick, pack, and ship items efficiently. This is typically achieved through labeling product bins and shelves within a warehouse.
Barcode integration to make it easy to scan products and log their movements.
Processing incoming shipments from suppliers, by scanning barcodes or entering product SKUs and quantities. This lets you reconcile the goods you’ve received against purchase orders to make sure there’s no shortfall.
Mapping a warehouse and optimizing storage and picking routes for the most efficient stowing and picking of inventory.
Pick and pack management so that workers can use their time effectively for retrieving items from the warehouse and shipping them out.

You probably won’t need warehouse management features if you sell everything through FBA or contract it out to a third-party logistics company.

Warehouse management is built into some inventory management systems, and there are standalone warehouse management systems (WMS) available also. We list those under Shipping & Fulfillment → Warehouse Management Systems in the Web Retailer directory.

Order management: processing customer orders

Order management is focused on receiving orders from customers and processing them so they get their items in a timely and accurate way. Features include:

Providing a single database for orders from multiple channels including your ecommerce website, third-party marketplaces like Amazon, over the phone, in a pop up store or via other means.
Generating pick lists and packing slips to aid with the picking and packing of products in the order.
Gathering customer details like name, address, items ordered, and delivery requirements.
Consolidating and unifying specific types of orders together, to streamline picking, packing, and distribution.
Printing invoices, shipping labels, and international customs forms to make shipping the order as fast and easy as possible.
Finding the best carrier and service for fast and cost effective transportation of goods to the end customer. They may also integrate with specialized shipping tools that provide this feature.

Order management is a common feature in inventory management systems, but as above there are also standalone order management systems (OMS). We list those under Shipping & Fulfillment → Order Management Systems in the Web Retailer directory.

Purchasing management: buying more products from suppliers

Purchasing management is all about ordering and paying for products from suppliers so you maintain enough stock to sell to your customers. Typical activities in purchasing management include:

Identifying items that are likely to go out of stock and alerting you to raise a purchase order with a supplier.
Automatically raising and sending purchase orders to suppliers based on criteria that you specify.
Receiving verifications from suppliers that purchase orders have been received and processed.
Tracking the shipping and distribution of goods to you or a warehouse.
Reconciling a purchase order against actual goods received.

Inventory management software varies widely in the sophistication of their purchasing features. In some tools, there is a simple minimum stock level and an alert is sent when it is reached. In other systems, there are sophisticated algorithms for predicting future stock levels, and fully automated reordering.

We have Analytics & Reordering tools in the Web Retailer directory that specialize in the forecasting of stock levels and calculating recommended reorder quantities. These can supplement or replace the purchasing features of your IMS.

Multichannel listing: uploading and managing product listings

Listing features allow your IMS to take your product information and upload it to various shopping carts and marketplaces so people can purchase your products. Here’s what can be included:

Capturing details about the product like name, category, selling price, images, or descriptions.
Providing marketplace-specific details like bullet points on Amazon or item specifics on eBay.
Adapting product information to specific ecommerce channels and marketplaces, then listing the items through those channels.
Amending and updating existing listings with new information or changes.
Delisting items that you do not wish to sell through a particular channel.

Listing is a core feature for many ecommerce inventory management tools, but others focus only on post-sale operations and don’t include listing at all.

Some tools do provide listing as well as post-sale features, but not necessarily both for every shopping cart and marketplace they support. They might be able to create eBay listings, for example, but not be able to add new items to the Amazon product catalog.

Reporting and analytics: track performance and more

Analytics and reporting are vital to understanding the success of your ecommerce business and how you can optimize and improve your online retail operations. Useful features include:

Setting targets and thresholds for “key performance indicators” and tracking how you’re meeting those targets over time.
Looking at historic trends to help you plan for the future, for example, product sales and how they’re impacted by seasonality.
Reporting on revenue and sales to help with areas like forecasting, accounting, and financial management.
Understanding the costs associated with your business, including product costs, and helping you to set good profit margins.
Identifying your top sellers, low sellers, and other products so you can manage stock levels or run promotions effectively.

Reporting has long been a weak area for ecommerce inventory management software, but some tools have improved considerably in recent years.

The Web Retailer directory does not currently list any standalone multichannel reporting tools, but there are marketplace-specific analytics tools for Amazon and eBay.

Other useful features of inventory management software

The six areas we’ve covered are the main modules covered by ecommerce IMS products overall. In addition to that functionality, some tools can do even more including:

Marketing and promotions through managing email offers, advertising, social media marketing, and other channels.
Repricing of items based on competitors, promotions, sales velocity, and other rules.
Product information management such as a full archive of product photoshoots and providing a workflow for creating and approving product data.
Returns management for tracking and refunding items that have been sent back.
Customer relationship and customer service management so you can provide the right level of service to the people buying from you.
Integration with other specialist software tools that may provide more functionality in their specific niche.

Now that we’ve covered the main features of inventory management systems, let’s explore what your requirements might be and provide advice on choosing the right IMS.

Finding the perfect inventory management system

Every ecommerce retailer and entrepreneur is different. It’s important that the IMS you choose meets your exact business needs, and honestly, that’s a big job to undertake. Everyone has their own unique requirements, but it’s not always easy to figure out what you actually need. So we think the first step in finding the right IMS is to ask yourself the right questions.

We’ve provided some suggested questions below. As you go through them, document your answers honestly and objectively. Don’t just think about where your ecommerce business is now, but where you realistically expect it to be in one year, three years, and maybe even five years.

Once you’ve answered all of these questions, you can research some IMS systems and see how well they align with your needs. That will help you create a shortlist for further review and testing.

Where are you in your business?

The first thing you’ll need to establish is where you are currently with your ecommerce selling, and where you want to get to.

What you sell

What types of products do you sell and what are the main niches they fall into?
Are you a private label seller, a brand or a reseller of existing products? Or are you selling clearance, collectible, crafted, vintage or used products?
How often does your product lineup change? Is it important to be able to upload brand new products regularly, or do you have reliable products that you sell month in and month out?

The answers to this section will help you choose an IMS designed for your specific business model and the type of seller that you are.

Where you sell

Do you just sell through your own store, through third-party marketplaces, or through some combination of channels?
Do you need to be able to track listings and make amendments across many different areas and channels?

The answers to this section will help you choose an IMS that has the right multichannel listing and order management capabilities.

Services and software that you use

Which parcel carriers or fulfillment services do you use?
What software do you use for common business needs like accounting?
What other ecommerce software do you use?

The answers to this section will help you choose an IMS that works with your existing software and service providers.

The success and maturity of your business

Where do you see your business over the next one, three, and five years, and how will that impact on an IMS?
How successful and large is your business, based on quantity of goods sold, revenue, and profit margins?
Will you need to train employees to use the IMS effectively?
How much can you afford to spend on an IMS, both initially and on an ongoing basis?

This will help you choose the best inventory management software that will match your business size and be affordable for you.

What features do you need?

We covered features in detail in the previous section, but it’s worth breaking this down a little more so you can understand your exact requirements.

Inventory management

Do you need the IMS to track and manage stock levels across multiple channels?
Do you need it to handle kits, bundles, or other ways of combining products?
Do you want the IMS to alert you when stock levels are low?

Warehouse management

Do you need a warehouse management system?
Do you want barcode and other scanning integrations for receiving and managing products?
Do you want routing optimization for more streamlined picking of goods?

Order management

Do you need an order management system?
What are your requirements for picking and packing slips, shipping labels, customs forms, and other documents?
Does the system work with the parcel carriers that you use?

Purchase and supplier management

Do you want the IMS to reorder items from suppliers automatically?
Do you want to track supplier prices over time?
Do you want to be able to track products when they’re on their way to you?

Listing products

Do you want your IMS to handle product data including descriptions, images and other attributes?
Do you need marketplace-specific functionality and adaptability for platforms like Amazon or eBay?
Will your IMS work with your shopping cart or ecommerce platform?
Can you easily update, amend, and delist items as required?

Reporting and analytics

What are the key measurements and KPIs that you want to track to understand the success of your business?
Do you want dashboards and reports to help you understand performance?
Can reports be customized and automated to your specific needs?
What other reporting requirements do you have?

Integrations

What other software do you use in your ecommerce business that won’t be replaced by an IMS?
Which software must the IMS be able to integrate with?
What software do your suppliers use, and does your IMS need to integrate with them?

Other areas

Do you want to manage your marketing and promotional activities through your IMS?
Do you require repricing functionality to track and stay ahead of competitors?
Do you want to manage returns and customer service through the IMS?
Do you have any other specific requirements for an IMS product?

Your list of answers becomes your requirements for choosing the right IMS. Once you’ve captured all of your answers, rank each one in terms of how important it is.

It’s time to start researching different IMS products. Read through their features lists, FAQs, and support pages to work out exactly what each one does, and doesn’t do. When you find some that meet most or all of your requirements, you can start shortlisting them and digging into more detail. Many IMS products offer free trials, so you can try them out to see if they’re right for you.

Pitfalls of inventory management systems

Inventory management software is complicated, and it can be very difficult to find the right IMS product for your needs. There are several reasons for this:

An IMS system built with a particular type of business in mind may not fit your specific business problems.
Some software works on a percentage-of-sales model, which can be prohibitively expensive for some businesses.
There are a lot of software providers out there. The choice can be overwhelming, so sellers get tired of the research and go with something that isn’t a great fit.
Managing products over multiple marketplaces is a tough problem, and some systems can be buggy or unreliable in important areas.

We don’t believe that the perfect IMS system actually exists, but with the right questions, answers, and product fit, you should be able to get close for your specific situation. Here are some of the potential pitfalls to watch out.

Most systems aren’t great at everything they do

Inventory management software often aims to be the all-in-one back-office system for ecommerce. But it’s rare that a tool has had an equal amount of planning and development effort poured into every one of its features.

Often, a system that claims to do everything might be excellent in one or two areas but underdeveloped in others. For example, it might be rock-solid at listing but weak at order management. Or it might have fantastic reporting tools, but unreliable marketplace integrations. Don’t assume that the slick and impressive module that you saw first is representative of the entire system.

Researching an IMS can take a long time

It’s easy to be so overwhelmed by all the choices and features of an IMS. That’s why you need to take your time and do your research. A little more effort now will pay you back massively when it comes to the day-to-day operations of your business.

Don’t skimp on the research and make sure you look at all the facts objectively. Remember that you’re not just looking for the most features or the lowest fees, you want to invest in an IMS that will save you time and money, and help you grow your business.

Keep an eye on integrations

Ecommerce has a very rich software ecosystem. When you’re choosing an IMS, make a note of the software you’re currently using to run your business, and the software you’re likely to use in the future.

Some of that software might be replaced by your new IMS. If it’s not, make sure that the IMS and your specialist software can integrate with each other. Some IMS systems may provide this as a “native” integration, and others may offer it through a third-party service like Zapier.

Don’t underestimate your support needs

When it comes to setting up and operating inventory management software, some retail entrepreneurs will be happy to learn, configure, and update everything themselves. Others may want the vendor to help them out, by guiding them through installation, data upload and configuration.

Support can be expensive. Find out what type of help you can get, what’s included at no extra cost, and what you’ll need to pay for. Assume that you will need some level of support, because even if you have years of ecommerce experience you might not find it easy to translate that to the software in front of you.

Understand contracts and fees

If it’s in any way possible, try out an IMS before signing a contract. Once you’ve decided an IMS is the right product for you, read through the supporting information, contract, and pricing agreement with care.

Make sure you know exactly what you’re paying for in terms of setup and subscription fees, support costs, and so on. Be very careful about getting locked into a long contract. If you’re not sure, talk to the vendor and get everything in writing.

Some final advice

Before we go, here are a few other areas to bear in mind to help you choose the right IMS:

Don’t get carried away with needing more and more features. You could end up paying for lots of things that you’ll never need.
Understand exactly what’s covered in the fees you pay and get everything in writing.
Don’t expect any IMS to be completely perfect, just get close.
Time spent on researching an IMS is never wasted.
Never ignore the support offered by an IMS vendor, with software this complicated, you’re likely to need it.
Value your time and that of your employees. An IMS should save you time, and enable you to do more than you could before.
If an IMS has a trial period, then use it. If it doesn’t, ask the vendor for one anyway.

That’s it, it’s time to get out there, do the research, and choose the IMS that will revolutionize your online retail business. Good luck!