Shopify is a go-to online platform for opening an online store. However, most young or veteran entrepreneurs need clarification on the inventory management system.
There is a valid reason why selecting the correct amount for inventory matters. For one, if the entrepreneur decides to maintain a low inventory stock, it will most likely disrupt the working of their online store. And it can also affect their reputation for repeatedly going out of stock.
On the other hand, if the inventory stocks are higher irrespective of the sales, then the IMS or the Inventory Management System will consume most of the budget. Maintaining or starting with the most effective Inventory is vital for any online store.
Choosing the correct inventory amount has always been challenging. Whether new online businesses or traditional retail stores, Inventory has always been a problem for merchants.
However, there is nothing to worry about. In contrast to this topic, the solution to this problem is mentioned below. Check the article to find answers to your questions and learn how much Inventory you should start for an online store on the Shopify platform.
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How many items should I start with for an online store?
Choosing the number of items for your online store can take time and effort. There are thousands of niches to choose from, which is a tough task.
Many statistics suggest that online stores attract customers who offer various niche products; however, with these statistics, you should refrain from jumping to conclusions directly.
Offering thousands of products from your online store without researching your audience requirements and finding your budget will do no good to your online store. Hence, you should identify the minimum number of products for your online store.
Learn about your audience sources and prepare data identifying their requirements. Once you know various related data on your customer’s requirements, you will understand which products were most searched for.
Choose your niche of products, and you can start with 10-20 products during the initial days of your online store. There is no wrong in starting with small numbers.
Once you learn about your product’s demand, you can increase or decrease the number of products accordingly. However, while you are a beginner in e-commerce, you can always start with 10-20 items on your online store.
Related: Do I Have To Buy Inventory For Shopify
How do I calculate how much Inventory I need?
Inventory should be checked regularly. It should be checked at regular intervals and updated repeatedly. Using the same metrics each time helps a merchant identify the average requirements with greater consistency and accuracy.
However, it would help if you learned a few golden rules while determining your online store’s inventory. Below mentioned are the five rules.
1. Calculate Something Every Day
This is an unnecessary requirement. But this action is more important when we speak of finding your inventory storage.
Calculating something every day, especially for new online stores, will help you to learn about recurring trends. This often helps merchants to identify by what amount they should fill in their Inventory.
Items that are in high demand will always be on focus. However, measuring sales for other products in your Inventory will help you to optimize your Inventory by reducing other products with lesser demands.
The IMS or Inventory Management System software benefits the most in such cases. You can track your sales, monitor your stock at regular events, and complete order fulfillment.
2. Learn More About the Demands
Not all online stores sell some niche products. And even not all products have the same trends all the time.
Different product categories have different strategies. For instance, selling fashion products is a pretty tough business.
The Inventory needs to be refreshed every time with different trending products and sizes, and even at times, the colors might need to be changed. You must check on the sales volumes of your products.
This is vital since it will increase your budget if you keep changing your products and refreshing your Inventory. Most importantly, you need help identifying or planning your Inventory for the upcoming months.
Thus, you need to find your demand trends and organize your Inventory based on them. Follow this rule, even if you are not ordering the sale items.
3. Analyze the Risk Factors
Changing items in Inventory comes with risk. As an inventory holder, you must find if the potential rewards from your updated Inventory are worth the risk and if they will outweigh the risk.
You must identify what your company’s requirement is. Limiting your risk by limiting your stock investments will benefit your company, or investing in your potential stocks will help you with your company’s revenue.
You must be peculiar when choosing risk vs. reward. In both cases, it must be a win-win situation for your company. You can only learn if you can go for stock investments or limit your risks. Hence, it is crucial to find out your budget.
Find When and How You Need Inventory
Several formulas help to learn how much Inventory you should carry. So, it would help if you backed down from using those formulas.
Here are some inventory calculations that you can use to find the exact number for your Inventory.
Inventory Turnover Ratio: This is one of the most used inventory formulas to find the inventory turnover ratio. It is done by considering the overall sales divided by the average Inventory.
This calculation is fast and will denote the sales strength by alerting you of the excess Inventory when the ratio is low and the under-ordering Inventory when the turnover ratio is high. To find the average Inventory for your online store, you can average both high and low turnover ratios.
Moreover, when you get a consistent turnover of full-price Inventory, you can go for a few higher investments in your Inventory.
I have a full guide on Inventory Turnover Ratio (With Calculator) here!
Inventory Value: You can use this method to find the actual cost of your Inventory. You can convert the retail price of your Inventory to a cost value.
This is the retail method of finding the inventory worth. You can use this method for accounting and financial projections.
Average Day Sales of Inventory: DSI or Day Sales of Inventory is defined as the total number of days required for your Inventory to get completely sold. This calculation is the most relevant for any company since the turnover of different products varies from company to company.
The three calculations mentioned above are the most commonly used forms to find how much Inventory a merchant should carry. However, the CEO of Veeqo, Matt Warren, also proposed two additional formulas.
He admits that these two formulas are the most effective and accurate for finding the actual number of inventories. Let us take a look at these two calculations.
1. Safety Stock
Several products have event or season-based demands. Safety stocks are a good option for team merchandise and emergency weather items.
If you need to know the sales record of seasonal items, then you should check some data to help you identify the minimum numbers for these seasonal items.
Use this formula to find how many seasonal items you should carry in your Inventory.
- Consider the first three-day sales volumes from the previous sales quarter/season.
- Find the difference between your average sales volume within the same period.
The equation of this formula stands out to be:
Safety Stock = (Sales volume of top 3 days/3) – Average daily sales volume
2. Reorder Point
If you have an idea of the products you order each month or every other season, then you can set a reorder point for your products. This will save you from running low on stocks.
This is one of the best ways to avoid void stocks for a longer period, especially for your top-selling items. To use this formula, you will have to learn the following things.
- Find the average time required to reorder your stocks and the time your suppliers take to fill your Inventory with the stocks.
- Find the product of your average time required to fill your stocks with your company’s average daily sales volume from the previous quarter or season.
The equation of reorder point stands out to be:
(Lead time (Average time to refill your stocks) * Average daily sales volume) + Safety Stock
With this calculation, you will learn the exact time to order your items so you have enough stock.
Click here to check out our free reorder point calculator.
What Percentage of Sales Should Inventory Be On the New Shopify Store?
There is no minimum or maximum requirement for percentage sales on Shopify. Merchants of Shopify are independent of this factor. They do NOT need to worry about the minimum sales for their Inventory.
Even dropshippers from Shopify have nothing to worry about regarding Inventory. They even don’t need to set up Inventory for their store.
Additionally, Shopify depends on how many items you sell from Shopify. So, there is no specific sales percentage for your Shopify store inventory.
What Is Startup Inventory?
Startup Inventory can be best said as startup inventory cost. This is a cost term defined by the quantity your company must produce so your project can be taken to further heights or successfully run your online store.
For any business, finding the startup or inventory cost is crucial since most startups out-stock their Inventory without even learning the final amount of orders they will receive.
You can use this formula to find your business’s startup inventory.
Startup Inventory = (COSGS + Ending Inventory) – Inventory Purchases.
How Do I Calculate How Much Inventory I Need for My Startup Shopify Store?
To calculate Inventory for your online store, you can check the records of your competitors. Find their average sales, and you can plan your Inventory based on that.
However, when it comes to startups, it is best to go with lower numbers at first. Once you get a little data on your store’s sales, you can use any of the formulas mentioned above to find your average sales, and based on that, you can fill your Inventory.
How Many Products Should I Start with Dropshipping On Shopify?
Foremost, dropshippers on Shopify do not need an inventory to start selling from their online store. They can directly transfer the order to one of their suppliers, and they will complete the order request.
However, once you start your online dropshipping store on Shopify, you should accept quick orders. So, to cover up that, you can hold a few products. It will help you to advertise and meet the requirements of the order.
Based on this fact, starting with a low inventory will be best. The optimal range of products for your dropshipping startup on Shopify will be around 5 to 20 products.
It would help if you started with low numbers and later increased them based on the business performance. It is okay to start with low numbers. It will be best for maintaining your budget.
Does Shopify Have Inventory Management?
Yes, Shopify does have an Inventory Management System or IMS. This feature helps owners to track their Inventory efficiently and notify them immediately whenever they run out of stock.
Related: Do I Have To Buy Inventory For Shopify
Since merchants have no requirements to hold Inventory, you can always use it. Moreover, Shopify provides users with IMS or Inventory Management System. There are several reasons why every merchant holding an inventory should use an inventory management system.
Here are some of the reasons
- It improves the cash flow
- Lowers storage cost
- Helps in reducing spoilage
Click Here To Get The Best Available Shopify Trial + Discount! (Trust me no one has this.)
How Do I Organize My Inventory On Shopify?
To organize your Inventory on Shopify, you need to enable your inventory tracking system. Once you have done that, you can easily set and maintain your inventory stock records and manipulate them accordingly.
First, you will need to set your Inventory for your products. For that, you can follow these steps.
- You have to head toward your Products section from your Shopify Admin page.
- From there, go to “All Products.”
- Click on the products for which you need to organize your stock record.
- If the product has variants, you can click on the variant and then click on the Track Quantity option.
- Now, you can track your quantity and set your product’s stock.
- Click on save so all your changes to your product inventory are saved.
Now to organize your Inventory, you can follow these steps:
- Go to your Inventory page, and search for variants of your products.
- Filter out your Inventory if your store products have variants generally based on availability, manufacturing, and quantity associated with that product.
- You can even set and remove tags to identify your products faster.
How Can Shopify Handle Large Inventory?
Since Shopify was mainly built to organize and run large-scale and small online stores, you can handle your store on an enterprise level. The advanced plan of Shopify provides all the features a merchant can easily keep their store in check and, most importantly, handle their Inventory efficiently.
Furthermore, the Shopify IMS feature provides advanced tools that are powerful enough to handle modifications, making it far easier for merchants to handle. Shopify even provides third-party applications, a plus point for merchants to maintain their online store and its Inventory.
What Is the Best Program To Keep Track Of Inventory On Shopify?
Many third-party applications can easily handle and keep track of Inventory. Below are some of the top-notch programs that can help you maintain your store’s Inventory.
1. Stock Sync
A powerful application you can find in the Shopify App store and integrate with your online store without paying any extra fees. This application can send updates to merchants when the stock runs low, helps control product price range, and many other features.
Check out Stock Sync On App Store Here
2. Stocky
One of the best programs to handle your Shopify inventory, Stocky provides some advanced features which can help you as a merchant update your stocks at regular intervals, even forecast your product’s demands, and help you perform stock transfer-like actions.
Check out Stocky On App Store Here
3. Sellbrite
This application has an auto-sync feature which is available for multiple channels. The best feature of this application is that it can reduce the probability of overselling. Moreover, Sellbrite can even work with multiple warehouse locations.
It means you can set your warehouses on priority. This is a huge advantage for any merchant running an online e-commerce store with multiple warehouses.
Check out Sellbrite On App Store Here
Click Here To Get The Best Available Shopify Trial + Discount! (Trust me no one has this.)
Online Store Inventory FAQs
Below are frequently asked questions regarding online store inventory:
How many products should I start with on Shopify?
There are no limitations or criteria on Shopify that you need to meet for selling products on Shopify. Thus you can start with any number. However, if you are new to e-commerce, then it is recommended you start with a low number.
10-20 products displayed on your online store can be a great choice.
How much Inventory should I have to start a small business?
It depends on your customer’s demands. It would help if you had enough stocks to meet your customer’s demands. For instance, if 100 products need a week to sell out completely, and your customer orders your product twice a week, you need to double your products.
However, going with 50-100 products before you have tracked your customer demands can be a great option.
How Much Inventory Should I Start with a Shopify Online Boutique?
If your online store needs to be established, 6-12 items might be enough for your Shopify online boutique. First, you will need to showcase your products.
But you even have to expect to get orders fast. So, it would help if you had suppliers to back you up with immediate orders.
How much Inventory should I have for a pop-up shop?
20-30 items should be enough for a pop-up shop at the beginning. You need to utilize the space to collaborate with another brand. So 30 items should work for a pop-up shop startup.
How much Inventory should I have for a Retail Home Decor shop?
Retail Home Decor Shop demands can fluctuate depending on the season and, most importantly, customer demands since it will be useless to pile up your Inventory with extra stocks and waste your resources.
However, 6-12 items in your Inventory should do the job.
When Do You Need a Lot of Inventory to Open A Shopify Store?
Once your online store is well established and your sales are increasing weekly, you will need to increase your investment in your Shopify store. Before that, wasting your resources and stocking your Inventory with extra resources can indulge a huge amount of risk.
How Do I Repair My Inventory On Shopify?
To repair or adjust your Inventory on Shopify, you will have to move to the inventory page of your products from the Products page. From there, you can adjust your product Inventory and save the changes.
Once you save, your Inventory will be fixed.
How Can Shopify Handle Large Inventory?
To handle large Inventory on Shopify, you can use the advanced or enterprise plan, providing advanced tools and features. Besides this, you can even subscribe to Shopify Plus to handle your enterprise-level Inventory.
Can I Hire Someone to Build the Shopify Store?
Yes, Shopify allows third-party developers to build the Shopify store on your behalf of you. You can reach out to some Shopify Partner Programmers for hiring some Shopify store builders.
Final Thoughts
When you start an online store, irrespective of the platform, you should always go with a lower Inventory. Since you can only expect to receive orders after launching your store, wasting your resources over Inventory is not worth it. Instead, you can get a minimum number of products, like 6-10 items, to display in your online store, and raise it later, based on your sales record.
Click Here To Get The Best Available Shopify Trial + Discount! (Trust me no one has this.)
