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Small Businesses: Using Virtual Inventory to Compete with Amazon

As a consumer, you love the low prices and the vast inventory Amazon offers on a daily basis. On the other hand, if you are a small business, Amazon's enormous warehousing strategies place a large hurdle in your company's path to success. Most small businesses have little choice but to be drawn into competition with such mega-retailers - as we discussed in our previous blog post 3 Ways Small Businesses can keep up with Amazon. While they could stock shelves with as much product as possible, most simply don't have the floor room or warehouse capacity to offer such a wide selection. In addition, they are at the risk of having shelves filled with slow or non-moving items that affect warehouse capacity and drive up operating costs.

Adopt Amazon's Philosophy of Virtual Inventory

Sometimes the best way to compete with a company is to adopt similar business tactics. One such tactic is virtual Inventory. Virtual inventory allows a small business to offer consumers a variety of products without storing in-house; instead, the inventory is kept in various locations such as warehouses, third-party fulfillment providers, distribution centers, and different store locations. When a customer places the order, an employee checks the stock to determine the product’s location. Based on the product's location, the employee can offer different delivery methods such as overnight, same day delivery, or in-store pickup. This tactic increases a company’s warehousing options without forcing them to purchase or rent commercial property for additional warehousing space.

Benefits to Virtual Inventory

Small businesses can gain major benefits by “carrying” virtual inventory. Rather than purchasing additional warehouses, a company can increase and redefine the products they offer to consumers. By increasing product lines and by offering a wider range of products, businesses are able to expand their business models.  A business that may have only offered the basics of kitchen supplies -- such as utensils, cutting boards, dinnerware and small appliances -- could now offer larger appliances, custom cabinetry, and commercial kitchen products to their offerings and, in turn, draw more customers and increase profits. In addition to adding more products to inventory, small businesses can also offer more brands within each product category. Instead of offering only two or three brands of a specific product, the company can offer five to ten different brands—not only appealing to customers who are brand loyal but to customers who want to see the same product across different manufacturers for feature comparisons.

Obstacles in Switching to a Virtual Inventory

As with any new operating strategy, the hardest part is developing a working infrastructure to accommodate the increased inventory. All inventory management systems must work together to offer real-time, accurate warehousing data so employees can instantly access product information and current stock levels. Additionally, shipping strategies must be adjusted to meet the increase in customer demand, especially during peak sales. If even one supplier fails to deliver a product, alternative strategies must be in place to handle shipments so operations continue to run as smoothly as possible. Smaller businesses can compete with large, virtual retailers, like Amazon.  The way to level the playing field of supply and demand may just be in adopting similar warehousing strategies like a virtual inventory. Are you taking advantage of virtual inventories currently?  Tell us about it in the comments.