How Much Inventory Do You Need To Launch?

Syama Meagher is the CEO of Scaling Retail– the consulting company globally for startup and growth stage fashion business. She specializes in sales, marketing and merchandising for wholesale, ecommerce and brick & mortar.

How much inventory do you need to launch your line online?

The #1 question I get asked when a client is launching online is “how many items will I need to produce to open?” followed by “what if I don’t have enough?” The answer is that it’s a lot less than you think and the number is driven by your marketing and sales strategy.

Launching a new product or business requires careful planning, and one of the most crucial elements is determining how much inventory you need for a product launch. Without proper inventory planning, you risk either overstocking or running out of stock, both of which can be detrimental to your success. 

To assess a marketing and sales strategy for inventory projections you need to ask yourself:

How to Calculate Inventory for a New Business

Understanding how to calculate inventory for a new business starts with analyzing your sales projections, marketing plans, and customer traffic. Here’s a step-by-step approach:

1. Estimate Sales Volume: Look at projected sales from both organic and paid traffic sources. Consider your website’s conversion rate, traffic volume, and advertising reach.
2. Assess Marketing Strategy: Are you relying more on organic traffic (SEO, social media) or paid channels (ads, influencers)? Paid campaigns might drive faster sales, whereas organic growth may take time.
3. Account for Lead Times: Factor in how long it takes for your inventory to be replenished. If your production takes longer, you might need to hold more stock.
4. Plan for Safety Stock: Always plan a buffer to avoid stockouts. This ensures you can continue selling even during unexpected demand surges.

Paid vs. Organic Traffic and Its Impact on Inventory Planning

To accurately plan your inventory, it’s essential to consider your traffic sources. Here’s an example to illustrate:

For paid traffic, assume your ad reaches 10,000 people. Using a standard conversion funnel:

• 5% of people click on the ad.
• 3% add items to their cart.
• 30% of those who add to the cart complete their purchase.

If 10,000 people see your ad, you can estimate that around 45 customers will complete a purchase. Therefore, for paid traffic, you would plan to stock at least 45 units.

For organic traffic, growth is slower and more unpredictable. Plan for smaller volumes initially, as building brand awareness through press releases, social media, and events will take time.

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How much organic traffic will I be driving to the site?
This includes press, social media, friends outreach, event marketing and anything else you will be doing to drum up businesses. Keep in mind that studies report a customer needs to have 5-7 touch points of a brand before purchasing. This means that all of your marketing activities need to be reverberated at least 5 times to close the sale. The same message not fragmented ones. As you plan out the organic traffic and activities think in groups. How can you take one message to social media, your press, your event, your homepage and your paid advertising? Don’t be fooled by remarketing either. As a small brand remarketing ads won’t be as effective since your traffic will be low.

In the first 12 months expect the traffic to be sporadic but building. Eventually you should be able to have a planned sales turn from each activity. In essence plan for very little, you are building your presence.

Inventory Management for Startups: Balancing Costs and Availability

One of the biggest challenges for startups is balancing inventory costs with demand. Inventory management for startups should focus on minimizing upfront costs while ensuring that sufficient stock is available for launch.

• Minimum Inventory Requirements for Launch: Start small. If you have multiple product variations (such as colors or sizes), aim for a basic 1:2:1 model (e.g., 1 small, 2 medium, and 1 large per variation).
• Optimal Inventory Levels for New Business: For startups, holding inventory costs money, so it’s crucial to keep inventory lean. Consider tools like inventory forecasting for startups to help project demand and plan for restocking when necessary.

Are you doing Consignment? Gifting?
An excellent distribution platform for brands is to launch in stores and online. Doing consignment can help your brand gain visible distribution, even if you are not actually sold wholesale to the retailer. If consignment is on your radar pick a couple stores and present to them the assortment you would like to test. This way you can plan inventory out from the get-go. Gifting is another part of successful launch- editors, press, and influencers. I suggest outlining your strategy for gifting before going into production on your collection. This way you know exactly how many pieces you need.

So then….How much Inventory?

I tell clients to have 5 of each color style in the beginning just for inventory to sell. If you have size runs then plan your size runs based on a 1,2,1 model: Small (1), Medium (2), Large (1). Everything else you produce is for marketing purposes. Your first few seasons you are testing and investing a lot into marketing and getting the word out there, don’t bog your business down with inventory if you don’t know how you are moving it.

Keeping Track of Inventory

With inventory in hand its important to start keeping track of it. You would be surprised how many small brands carry an excess of inventory without knowing exactly how much or where the backlog is. I suggest starting off simply with MS Excel. Keeping track of what you have produced by style, sku and downloading your monthly selling reports from whatever ecommerce provider you are using. As your business grows and your products are being sold through multiple channels inventory management becomes critical. You will want to know how quickly certain products are selling though season after season, plan your mark downs to ensure a healthy margin and determine what excess product you have for that sample sale.

The following inventory management systems are affordable and will grow with your business. I suggest doing your research on each as they differ depending on the number of sku’s, channels of distribution and other factors.

• >Stitch Labs
• >Unleashed Software
• >Megaventory

Final Thoughts

Ultimately, how much stock to launch a product will depend on your marketing efforts, target audience, and traffic. Start small, track your sales carefully, and adjust your stock levels based on actual data rather than guesswork. By focusing on inventory planning for a product launch and using smart forecasting tools, you’ll be in a better position to optimize your inventory without overextending your resources.

Key Takeaways

• Plan for both paid and organic traffic to determine how much stock to hold.
• Use conservative estimates and hold minimal inventory at the start.
• Utilize tools to manage and track inventory as your business grows.

By following these steps and understanding the intricacies of inventory planning for a product launch, you can ensure a smooth, cost-effective launch without the risk of overproduction.

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Read these blogs as well;

• Why You Should Make Tracking Inventory A Priority
• How Do Shipping and Inventory Models Affect Your Bottom Line?
• How to Go Ultra Lean: Reduce Wasted Inventory with Fashion Crowdsourcing