When it comes to performance media for ecommerce, we’re typically instructed to put our efforts into pushing the best-selling or most profitable items. However, as it’s likely rival stores are aware of similar revenue opportunities, this can present real difficulties in growing scale without diminishing returns thanks to the higher costs required to compete. As a result, this can see other products neglected, with potential opportunities to capture customers looking for these items also lost. The solution might be in a place few ecommerce sites think to look: Slow Moving Inventory (SMI).
SMIs are typically categorised as stock that’s not been shipped within a specific timeframe – generally 90 days plus, but this can vary depending on business type. On the surface it’s undesirable, as storage space and capital will likely be tied up in them. And yet you’re likely still to find major ecommerce sites like Amazon and Walmart embracing them, often stocking a wide range of brands that provide the same basic product. They won’t all be best sellers, but if they don’t stock them, customers may shop with competitors who are able to meet their broader preferences. For these retailers, the burden of holding stock is outweighed by the basket (or lifetime) value of those customers.
So how can you make the most of them? Here are a few good places to start.
Identifying SMIs
Obviously the very first place to start is identifying the SMIs in your business. By analysing the volume, frequency and intervals between transactions of individual items within your transaction records, you’ll be able to define benchmarks which can be used to identify SMIs specific to your business.
Fix the fixable
Whether they are SMIs or just low volume, it’s worth investigating whether the naming, categorisation, imagery, keyword tagging or even pricing of your item listings are causing barriers to purchase. If you’re able to resolve issues that may be causing items to be categorised as SMIs in the first place, then you’ve already benefited.
Search for incremental value
Review how many customers are buying the items, looking at their previous purchases and lifetime value. Have they ever bought comparable alternatives before (perhaps in a sale)? Are the products commonly paired with other items, and if so, is this revenue you want to risk losing? If the probability of losing revenue (and the value of that loss) outweighs the benefit of stocking the item, then you’ve likely just identified a SMI you want to keep.
Buy time & attract new customers
If you’re unable to monitor SMIs in real-time, then a perfect occasion to conduct SMI analysis may be pre-stocktake or end of line sales. Just because your business wants to refresh its stock catalogue or upgrade a product, doesn’t mean your customers will welcome the changes. Rather than take a revenue hit by heavily discounting, weigh up the benefit of holding back limited stock in order to service those customers who require consistency. That may not be feasible forever, particularly if products expire or become hard to restock, but it does buy more time to transition customers to alternative products. If products are end of line, this may even present an opportunity to capture new customers who come across you as a result of your competitors not understanding SMIs as well as you do.
Useful examples of potential SMIs
How you ultimately deal with an SMI can depend on unique factors surrounding them. Shampoo and conditioner pairings can sell at a ratio of 2:1 due to customer usage. The conditioner could get flagged as an SMI, however if removed from the store, the retailer could lose all customers who buy the shampoo/conditioner pairings as they’d prefer to make a consolidated transaction at a single store. This could be even more prevalent for an ecommerce site, as buying from multiple locations could really impact the ratio of goods to delivery costs. In this instance, bundling could be a useful tactic.
Another example can be seen in end of life or outdated versions of products. These can sometimes be items pre-emptively classed as an SMI for the future. However, just because there’s a new iPhone, doesn’t mean there aren’t customers who will still want the older version. And maybe that customer might also want the previous generation dongle or ear buds that go with it.
SMIs can even be applied to a service or subscription-based business. Just because a subscription plan or combination of inclusions looks unpopular compared to others, it doesn’t mean it isn’t servicing a need or a unique customer type.
There’s undoubtedly real value in Slow Moving Inventory – it’s just a matter of having the right plan in place to successfully “activate” them, both at an organisational and a marketing level. If you’d like some assistance doing this for your business, the AFFINITY team can help. Reach out to rob.m@affinity.ad to learn more.
