Taking Stock

By the Numbers

While WeGotLites deals in large quantities of new merchandise, Nancy Baughman, 43, owner of eBizAuctions (eBay User ID: ebizauctions), sells single items on behalf of her consignment clients. On average, she lists 40 to 60 items per week on eBay and up to 100 per week during the holiday season. "Normally, we're backed up two weeks and have as many as 200 to 400 items onsite," she says. "Onsite" is her two-car garage, which she and her husband, Daren, 42, use as the business' storage area.

The Raleigh, North Carolina, garage is lined with three rows of heavy metal shelves organized into three zones--incoming inventory, listed and returns. Sitting on the shelves are 40 to 50 large plastic tote bins, which hold each seller's inventory. "We put items in the totes and label them by seller when the items come in," explains Baughman, so that the proper seller can be credited.

In addition to methodically tracking inventory by location and owner, Baughman organizes her work flow by week. She lists incoming inventory during the early part of the week and pays an additional 10 cents to schedule the auction-style listings to begin on the coming Friday, Saturday or Sunday--the highest traffic days. Then on the following Monday, Tuesday, Wednesday and Thursday, she ships out sold merchandise from the previous week and begins listing items for the coming weekend. By grouping her closing auction-style listings into a three-day window, Baughman finds it easier to keep track of the status of payments from customers.

Every Monday, Baughman creates an Excel spreadsheet, breaking out everything that sold during the previous three days, including the eBay item number, description, selling price, fees and the customer's profit. "You don't need anything fancy," she says of the Excel report.

Baughman then receives payments from eBay customers during the week, 90 percent of which are through PayPal, and cuts checks for her consignees the following Monday. During a typical month on eBay, eBiz-Auctions sells $10,000 or more, with sales rising to $20,000 per month around the holiday season.

The More Information, the Better
Understanding your market is another important aspect of inventory management, says Bastos. Researching what is currently selling well on eBay and for how much can determine how profitable your business will be. It can also prevent costly mistakes, such as buying too much inventory or paying more for inventory than you can sell it for on eBay. By carefully watching its market, WeGotLites typically sells off its entire inventory more than seven to nine times a year.

The way Matt Hulett, president and CEO of Mpire--a one-stop site for online shopping--sees it, there are two pieces to the inventory management puzzle. One has to do with tools and systems for tracking SKUs and inventory; the other is when to sell and how to increase inventory turn. "We [at Mpire] are more on the inventory knowledge side," explains Hulett. The company focuses on how to get more money for an item.

One of the company's free tools, Mpire Researcher, helps eBay sellers improve inventory turnover by answering the question, "How much can I sell that for on eBay?" It details the sell-through rate for each product (how fast it is selling); what day is best for closing an auction-style listing; the average starting price; whether a one, three or 10-day auction-style listing is best; and which keywords are used most.

Knowing what you have and what you need is critical, says Baruch Goldwasser, senior product manager of NetSuite Inc., which offers an integrated business management suite starting at $99 per month that combines functions such as inventory management, accounting, shipping, CRM and online stores. "You don't want to run out of stock or end up with more than you need," says Goldwasser. NetSuite's system can be set to alert sellers when inventory is low or when it hits a specific reorder point. It can also instantly calculate a reorder point based on your sales history, which can be especially advantageous during seasonal selling cycles.

"If you don't have a good inventory management system, you may have inventory in your warehouse you don't know about," explains Scot Wingo, CEO of ChannelAdvisor. That inventory takes up space and reduces capital available for purchases.

Off to a Great Start
Wingo recommends a simple inventory management system--a process for how you track merchandise, where you put it and how you pull items that have been sold. ChannelAdvisor helps customers develop an "inventory waterfall" that starts with eBay Fixed-Price listings (where margins are easier to monitor), moves to eBay auction-style listings, then to an eBay Store, and finally off eBay to a business's own website. How much time the product spends on each point of the waterfall depends on demand for the product itself. This approach is also called a multichannel strategy, which eBay sees as a "growth opportunity for sellers," says Bastos.

ChannelAdvisor services start at $20 per month for ChannelAdvisor Pro and rise to $500 a month plus a 1 percent commission on sales for ChannelAdvisor Merchant, which is geared toward PowerSellers making $10,000 to $20,000 a month. "The majority of customers who have implemented ChannelAdvisor Merchant have enjoyed growth of 20 percent to 200 percent in the first quarter," reports Wingo, which more than covers the service's cost.

Automate as You Go
As the size of your eBay-bound inventory grows, you may find that the processes and systems you had in place at the outset no longer serve you as well as you need them to, says Bastos, who advocates changing your system, despite the challenges that come with it.

As inventory volume increases, problems tend to increase in tandem, says Lawrence Farbman, who is responsible for partner development at Kyozou Inc. Kyozou offers a software solution that automates every aspect of retailing sales and marketing. "We tend to [get confused] as inventory numbers rise," he says, which causes problems such as shipping products to the wrong destination. His recommendation is to "seek solutions that eliminate the need for employees to use their brains."

"Automation tools are essential for growth," says Farbman. An efficient inventory management system will automatically generate a shipping label, find the package to be shipped, scan the bar code, label it for tracking and reduce the inventory count by one. But in addition to packing and shipping, such tools can also automate listings and feedback.

However, Bastos cautions against scaling your business up too quickly: "Don't take too big a step all at once." He says sellers who have control of their growth, inventory and margins are the most successful.

Marcia Layton Turner's work has appeared in Woman's day, Health and Black Enterprise. She is based in Pittsford, N.Y.

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