Virtual Inventory: The Growing Game Changer for Retailers
Today’s retailers use more channels to reach their customers than ever before. Consumers shop from local stores, marketplaces, resellers, mobile apps, kiosks in physical stores, over the phone, and on social media. And 90% of customers expect consistent interactions across channels.
Yet, multiple channels lead to increased fulfillment complexity.
Why? Customer orders may be fulfilled with inventory sourced from multiple physical supply channels—including stores, warehouses, drop-ship vendors, and third-party logistics providers.
Striking a good balance between digital and physical channels is essential. However, it is an issue many retailers struggle with.
How can you accommodate customer expectations when there are limited warehouse resources—or new brands that need to be introduced but have unknown demand?
That’s where a virtual inventory comes in.
Keep reading to learn the ins and outs of virtual inventory and how you can incorporate it into your ecommerce business strategy.
What Is a Virtual Inventory?
Traditional retailers have had difficulty adapting to customer needs and staying stocked with new direct-to-consumer products.
The typical replenishment process begins with a shipment of products from the brand warehouse to the store location, followed by storing them in the backroom before displaying them on the sales floor.
The size of the retailer can influence its product assortment, inventory amount, and availability. If a product doesn’t sell quickly or well, then there could be excess stock taking up space, or customers may not get what they need due to a lack of available items.
A virtual inventory is a record of a retailer’s entire stock of products stored digitally. Virtual inventories can combine SKUs in a retailer’s physical stores, warehouses, and distribution centers with those held by partner brands that are not stocked in-house.
Virtual inventory provides modern retailers with opportunities unavailable in the traditional setting, enabling them to make products accessible everywhere. Creating a virtual inventory helps you stay competitive, as well as build loyalty among your customers.
Utilizing a virtual inventory allows you to provide customers with diverse delivery choices. You now have the capability to fulfill customer requirements via buy online, pick up in-store (BOPIS) or reserve online, pick up in-store (ROPIS), same-day delivery, and overnight shipping without needing to scale physical stores.
Benefits of a Virtual Inventory for Ecommerce
The needs of consumers are continually evolving. In recent years, retailers have had difficulty meeting customer demands due to supply chain issues, as well as sudden interest in specific items gaining attention on social media.
Crafting a strategy featuring a virtual inventory is an essential tool for retailers today. Breaking the boundaries of traditional retail shopping and stocking a variety of products or brands is an effective strategy for retailers who hope to expand and meet customer needs.
Let’s take a look at some of the advantages of having a virtual inventory.
Larger Product Inventory Without Additional Retail Space or Storage
Holding too much or too little inventory, regardless of product type, is the greatest danger for ecommerce and other retail companies. Invariably, you fail to get it right, which is costly.
By using virtual inventory, you are no longer limited to just what is physically stocked in your stores.
Increase profits by selling items with higher margins and popular, new, and trending products without taking up more space on shelves or in storerooms. As your business grows, so do the costs and potential losses. Virtual inventory eliminates this inventory risk completely. Whatever decision you make, you’ll be safe.
Ensures Product Availability
Many things can interfere with a successful stocking of products on time, such as global shipping challenges, goods that are highly sought after, and inaccurate inventory forecasting.
By utilizing a virtual inventory and leveraging offsite solutions, you can save the sale and get products to shoppers even if they’re not in the store or have them delivered directly to their homes.
Reduced Reliance on Inventory Forecasting
Retailers reap the benefits of having a virtual inventory due to its ability to accommodate consumer needs. You can incorrectly estimate demand, resulting in overstocking or understocking products. This leaves you vulnerable to inventory issues that can negatively impact your profits.
By eliminating the costs associated with purchasing items and stocking them, you have more room to be creative when adding new products to your stores.
Empowered Sales Associates
Store associates can save a sale by suggesting online items when an in-store item is out of stock, giving the customer an alternative solution.
Omnichannel shopping is also enabled through virtual inventories. Shoppers choose the way of accessing products that best suits them, which can lead to them becoming loyal to the brand and returning for more purchases.
Challenges of Virtual Inventory
IT infrastructure is key to successfully managing virtual inventory.
Setting up a virtual warehouse necessitates several compatible systems, such as ERP, inventory management, and warehouse management. If warehouses aren’t connected to inventory management systems, it can cause problems and could lead to excessive inventory stored in each location.
Utilizing multiple vendors requires that all systems be seamlessly connected and share data in real time, a venture that requires implementing the right technology.
Plus, if too many virtual warehouses are created, you may experience inventory management issues. It is possible to establish different virtual warehouses for particular channels, areas of sales, or even significant individual clients. Conflicts may occur as multiple virtual warehouses access the same physical inventory data.
Conflict resolution requires the implementation of effective business processes and rules—or ecommerce automation software that can prevent this from occurring.
Incorporating a Virtual Inventory Solution
Adding virtual stock to your strategy can mean the difference between increasing sales and becoming stagnant. Experts believe retailers should focus on curating emerging brands that will appeal to their customers, as this is the key to getting ahead in drop-shipping partnerships.
Every year, retailers must add new brands and thousands of items to keep their customers engaged. But how do you effectively manage all that inventory? You can’t. That’s why you should look for ways to provide more products with less physical stock.
It typically takes traditional retailers several months to link up with vendors to make new products available to customers. By the time a retailer can establish links to other vendors, the opportunity to meet customer expectations has either passed or been reduced.
That’s when a dropshipping strategy comes in handy.
Building a Dropship Program
Establishing a virtual inventory efficiently entails leveraging technology for a faster result. Retailers wanting to stay competitive must think about implementing a dropship strategy to broaden their product selection and satisfy their customers.
In essence, a dropship program works in this way:
- Customers can purchase items from a retail store or online.
- Retailers send the order information to an external vendor.
- The vendor is responsible for fulfilling the order and sending the items directly to the customer.
- The order is delivered to the shopper.
For retailers hoping to have a wide range of different products on their shelves without worrying about storage or infrastructure, dropshipping programs are the way forward.
A thriving dropship program can increase revenue, ensure correct stock levels, and respond to consumer needs quickly. It assists with sourcing, onboarding, merchandising, and other crucial ecommerce operations.
Develop Your Virtual Inventory Strategy With Flxpoint
Virtual inventory enables you to add more sellers without straining your warehouse storage capacity or slowing down your website.
Why not increase your product catalog size by two or three times? Why not promote new product drops every week? Why not try out different product lines, advertisement methods, or target markets?
If your current inventory management system lacks this flexibility, it’s time to explore alternatives.
Luckily, Flxpoint offers all of this and more. When you’re ready to launch a virtual inventory strategy, talk with an expert.
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