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.

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

How much paid traffic will I be driving to the site?
Paid traffic examples are AdWords, Facebook Ads, Instagram Ads, and Paid Influencers. If its paid traffic then what conversion benchmarks should I be shooting for? I like to use the conversion breakdown of: 100% > 10% > 15% > 30%. That’s of the 100% of the people who see your ad, 5% of them click, 3% add to basket at 30% checkout. To simplify this – if your ad showed to 10,000 people you might end up with 45 customers checking out. Your numbers might be better or worse than this depending on your site navigation, strength of advertising budget and graphics, as well as desirability of price and product. In essence it’s unpredictable in the beginning.

Based on the checkout of 45 customers we can assume at least 45 units will be sold.

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.

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.

You will know when you need to start implementing a more robust system of tracking (i.e. software) once you are moving about 100 units or more per month. Until then, use your trusty spreadsheets and sales reports. Lastly, remember that inventory management is part of having a successful business. Getting familiar with it early on will save you headaches later.