Want to scale your e-commerce store and avoid the headaches of excess inventory?

If you've been growing your e-commerce store, then you know the problem all too well. You order excess stock and watch your cash flow get tied up in warehouses. Or you understock and watch frustrated customers abandon their shopping carts.

But you know what really sucks?

Retailers lost $1.77 trillion in 2023 due to stockouts and overstocks combined.

Yep, that's not a typo. Over 1.7 trillion dollars in combined losses because businesses were unable to effectively predict what customers would actually want to purchase.

Fortunately…

There's a fix. Smart demand planning is the answer. And it's much easier than you think.

In this post we'll cover:

• Why Demand Planning Solutions Drive Growth

• The Data You Actually Need

• Building Your Demand Planning System

• Red Flags You're Getting It Wrong

• Making It All Work Together

Why Demand Planning Solutions Drive Growth

I want to let you in on a little secret most e-commerce owners are missing…

Demand planning isn't just the key to having the right amount of inventory. It's the difference between hypergrowth and store closures.

Here's the thing:

If you know exactly what your customers will buy next month, you can negotiate better supplier terms. You can plan marketing campaigns that actually convert. You can grow without worrying that your cash flow will catch up with you.

Modern Netstock demand planning software helps e-commerce businesses take the guesswork out of their inventory decisions by analyzing sales patterns across all channels and forecasting future demand with impressive accuracy.

Here's why that matters:

The average e-commerce business has 70-80% of their cash tied up in inventory at any given moment. That's a huge amount of working capital not actively generating revenue.

The beauty of an effective demand planning solution is that you can lower that percentage while simultaneously increasing sales.

Pardon the cliche but…

It's not rocket science.

The Data You Actually Need

Don't overcomplicate this.

The hardest part of building a demand planning system is usually deciding what data you actually need. Spoiler alert, it's not as much as you think.

Here's what to focus on:

Your historical sales data shows you what customers bought in the past. But (and this is important) you need to analyze this data by channel, by product, and by time period.

Why? Because your bestselling item in Amazon may bomb on Shopify and what sells out in December is worthless in March.

Seasonal patterns are incredibly valuable. If you can identify the periods of the year when demand for a product spikes, you can plan and order way in advance instead of panicking at the last minute.

Lead times from suppliers are often overlooked. If it takes 8 weeks for a supplier to deliver, you need to place an order 10+ weeks before you need the inventory. Miss that, and you'll either pay a fortune for air freight or miss sales.

Market trends and external factors are crucial. Economic shifts, competitor product launches, or even viral social media posts can completely change demand in a heartbeat.

Building Your Demand Planning System

Alright, let's roll up our sleeves.

You can't just throw software at this problem and expect it to work. You need to combine the right technology with a healthy dose of common sense.

Here's how to build it right:

Step 1 is to clean up your data. Remove duplicate entries. Correct missing or incorrect information. Make sure that your sales data from all channels can be cross-referenced and compared.

Most e-commerce stores have data silos in Shopify, Amazon, their warehouses, and accounting platforms. Consolidating that information is step one.

Step 2 is to use tools that play nice with your existing tech stack. If your demand planning tool can't automatically pull data from your other systems, you'll only add more work instead of less.

Step 3 is to set up automated alerts when things don't go according to plan. You should be notified as soon as actual sales numbers start to deviate from your forecast so you can correct the situation as quickly as possible.

Step 4 is to train your team. The fanciest software on the planet won't help you if nobody knows how to use it.

Red Flags You're Getting It Wrong

I want to show you some warning signs to watch out for…

If you're constantly running out of your bestsellers, your demand planning system is broken. This should rarely happen once you have effective forecasting in place.

Months of dead stock? Another red flag. Proper demand planning helps you avoid buying products that won't sell.

Rising expedited shipping costs? If you're regularly using costly last-minute shipping options to keep your store in stock, it's because you're placing orders too late. Your forecasts are off.

Here are some mistakes to avoid:

Only using last year's data without accounting for growth trends will leave you understocked all the time. Consumer markets shift. Your business grows. Your demand forecasts must reflect the new reality.

Neglecting seasonal fluctuations is rookie mistake number one. Virtually all e-commerce categories have seasonal spikes and dips. Identify them. Plan for them.

Sticking to spreadsheets for complex forecasting is a surefire way to go wrong. Excel can't handle the sheer volume or complexity of data you need to process once you start scaling.

Neglecting to factor in marketing promotions is surprisingly common. If you're about to run a big sale or marketing push, make sure that gets reflected in your demand plan or you'll sell out within hours.

Making It All Work Together

Demand planning really is a bit of a paradox…

It's a neverending process that improves the more data it has to work with and the more you fine-tune it.

Start with a basic system. Get the foundations right first.

Then add in more advanced forecasting methods as you start scaling.

Focus on your top 20% of SKUs first. These products account for 80% of your sales so it makes the most difference to get those forecasts right.

Do more frequent reviews of your forecasts at first (weekly). As your system improves and you gain confidence in it, you can move to monthly reviews.

Collaborate closely with your suppliers. Share your demand forecasts with them so they can adjust production and shipping to better meet your needs. This benefits their lead times and your success rate.

A final thought for you:

Technology is only half the battle. The real magic happens when you mix smart software with business intelligence and ongoing refinement.

Wrapping This Up

Demand planning solutions are not just for big box retailers anymore.

Every e-commerce business needs a system that will help them accurately predict demand. It's no different if you're doing $100K in revenue or $10M.

Get your data organized. Find the right tools to do the job. Monitor your performance. Learn and adapt.

The e-commerce businesses that nail this are the ones that scale profitably. Their competitors will be overstocking and going broke or understocking and frustrating customers.

Pick one or two of these best practices and start from there. Build on that. Your inventory (and your bank account) will thank you.