June 25, 2024

How to Prepare Inventory for Black Friday and Cyber Monday as an Ecommerce Brand

Gurman Sihota

Black Friday and Cyber Monday (BFCM) are a critical time of year for direct-to-consumer (DTC) ecommerce businesses. In 2023, Cyber Week (U.S. Thanksgiving Friday through to Cyber Monday) drove $38 billion in sales across the U.S., with Cyber Monday’s $12.4 billion sales representing a record for a single day. That equates to customers spending $8.6 million per minute! This extended weekend-long event is an incredibly important pre-holiday sale time for ecommerce brands and it’s important that your brand’s inventory, marketing, and logistics are set up for success.

The Stakes for Ecommerce Brands on Black Friday Cyber Monday (BFCM)

With BFCM representing the highest sales week in a year for many ecommerce businesses, the stakes are high for founders with respect to managing inventory. Vendors who cannot accept additional orders during their busiest season, delayed shipments, and/or missing items can derail a company’s BFCM strategy, leading to lost sales and frustrated customers. This underscores the importance of having early discussions with vendors to minimize risk.

Some founders have caught on to the need to prep early for BFCM, and Clearco is already seeing founders reach out to discuss funding inventory orders, despite BFCM being five months away.  

The Keys to Effective Inventory Planning for BFCM for Ecommerce Brands

The keys to effective inventory planning are accurate demand forecasting, strong supplier relationships, and capital planning.

How to plan for BFCM as an ecommerce brand: Demand Forecasting

Demand forecasting relies on having accurate and comprehensive historical sales data to help determine what products and how much of each need to be ordered to optimize BFCM sales. Order too much of a product that typically doesn’t sell well during BFCM and founders will end up sitting on inventory that doesn’t sell through or doesn’t sell fast enough, locking up precious capital that could be used to reinvest in the business. Ordering too little of a product and having it sell out too fast during BFCM means founders miss out on potential sales. 

Lost sales in the latter scenario are known as stockout costs. They are estimated to have cost businesses around the world over $1 trillion dollars in revenue last year. The impact is not just limited to lost sales, however; customer satisfaction drops when desired products are not available, driving brand dissatisfaction and hurting long-term customer relationships.

Demand forecasting supports founders in making more informed, data-driven decisions around product mix and inventory numbers, helping find the sweet spot of products selling very well, but also not selling out too quickly.

How to plan for BFCM as an ecommerce brand: Strong Supplier Relationships

Strong supplier relationships are critical to timely delivery of inventory ahead of BFCM. The leading driver of stockout costs is supplier issues, and one of the best ways to mitigate shortages of product is to build meaningful, productive relationships with suppliers. 

Suppliers are looking for businesses they can partner with in the long-term and founders that communicate transparently. It is often a long-term investment, but making sure invoices are paid on time and that timelines for inventory orders are reasonable and clearly communicated will go a long way. With healthy supplier relationships on a founder’s side, it is much easier to match expected demand with the correct supply of products for BFCM.

How to plan for BFCM as an ecommerce brand: Capital Planning

BFCM inventory orders are often the largest ones of the year for ecommerce companies, requiring significant investment. Furthermore, the spending that goes into a fulsome BFCM strategy goes beyond just inventory, with marketing and logistics expenses also ramping up at the same time, making capital even more scarce during a critical time of the year.  

Given how critical a constraint capital can be for a successful BFCM, founders need to plan ahead of time to secure the funds they’ll need to order sufficient inventory. Negotiating longer payment terms with suppliers (while still prioritizing healthy supplier relationships) can help free up funds, and external funding sources can help fill the remaining gap.

Working With Clearco to Optimize Inventory Planning for BFCM

Clearco’s Invoice Funding provides founders with access to flexible capital that is designed to help businesses pay for inventory orders. Founders only pay for the amount they use, and they have the flexibility to fund a single inventory order, or as many as they need.

Ecommerce businesses that have been planning for the second half of the year have already begun reaching out to Clearco for funding for their BFCM inventory orders. This careful capital planning helps founders preserve their business’s cash for other investments in their company or in some cases helps founders negotiate better supplier terms through larger inventory orders.

Reach out now to learn more about Invoice Funding and how Clearco can help with BFCM preparation.

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Gurman Sihota
Strategic Finance Associate, Clearco

Gurman Sihota is a Strategic Finance Associate at Clearco. Prior to Clearco, Gurman was an Investment Banking Associate at Scotiabank. A University of British Columbia (UBC) graduate, he pursued a Bachelor of Commerce, specializing in Finance. When he isn’t busy diving deep into the DTC ecommerce space, Gurman enjoys trying to learn how to hit a golf ball and trying new fitness classes.