When Selling Virtual Inventory Online Makes Sense

by Howard Morrison Nov 14, 2018

Managed correctly, online retailers can take advantage of a unique opportunity to increase sales, avoid upfront cash outlays, and build customer loyalty. They can sell products and quantities of products that are not physically on hand in their brick & mortar store. A common term for this is selling virtual inventory. Today, we present when it Does and Does Not make sense to sell virtually online.

When It Makes Sense To Sell Virtually:  Many online retailers offer products or quantities of products that are not in-stock or assembled, but available with quick delivery turnaround time when ordered. Gift Baskets are a good example. Most retailers wait to receive the online order before assembling the basket.

Typically, non-allocated ON SALE products, which are mainstays with your distributor / wholesaler, make sense to sell virtually, as do Everyday products your customers order regularly. It is also logical to offer products New to Market and Accessories, that should be available from your distributor / wholesaler, enabling you to test the waters with your customers.           

Caveat: Always exercise caution when offering products not in-store. As noted below, there are instances when selling virtually is not a good idea. But the upside of discovering popular new products that fit your marketing strategy could make virtual selling a very shrewd move.

When It Does Not Make Sense to Sell Virtually:  Some retailers believe: the more products the better. They will virtually offer for sale thousands of products not in-store, not concerned with the likely negative consequences that can occur if customer expectations are not met. These consequences range from tarnishing one's reputation, to loss of focus, decreased revenue, and outside search companies taking action to limit your ability to do business online. Bottom line: It can be worse to have more products than less without exercising proper product management.

As successful retailers know, it's important that your products have complete details on them, are competitively priced, and are delivered in a timely manner. An interruption in one or all of these key areas will have a negative impact on your ability to grow your business.

  • Lack of product details: Offering thousands of products with little information about them sends a signal to your customer that you may have trouble meeting customer satisfaction expectations. Imagine a wine with a vintage that retails for $99.00 and the only information displayed is its title and price. Not shown, but available, are an image, description, categorization (country, region, appellation, varietal, attribute, alcohol %), and possible critic reviews & scores. Most customers will search for another store to find more details.

  • Not competitively priced: Managing pricing on thousands of products can be problematic. Unless you have knowledge about these products, you end up guessing what the correct competitive price range is. Some retailers think that they will be ok with a blanket percentage off. With a wrong guess on pricing, you signal to the customer that you are not the most knowledgeable or competitive source.

  • Order Placed, Now Out-of-Stock: Quite damaging to your reputation is to take an online order for a virtual product and then discover that your distributor / wholesaler is out-of-stock. Reality is that distributor / wholesaler inventory fluctuates. Staying on top of daily or weekly swings in inventory on thousands of products is challenging.

SUMMARY

Properly managed, selling virtual products can make sense. In deciding which items to sell virtually online, fine wine & spirits retailers must be mindful of customer and search engine company expectations. Recognize that customers expect to find information on items (image, description, tasting notes, critic reviews) and have their orders fulfilled. And remember that search engine companies, used by customers to find items, expect retailers to sell only items they strongly believe they can deliver. That said, virtual online selling enables retailers to increase profitability without laying out cash upfront.











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