The best practices for managing inventory on Shopify help you avoid stockouts, lower costs, reduce returns, and keep customers happy.
Key Takeaways
- Track and update inventory often so customers don’t see “out of stock” when they’re ready to buy.
- Use tools and automation to save time and prevent costly mistakes.
- Clear product details, photos, and size charts reduce returns, which protects your inventory and profits.
Attracting visitors to your store is the hardest part. The last thing you want is for interested shoppers to see the dreaded “Out of Stock” when they’re ready to buy. By following inventory management best practices on Shopify, you can sell more, reduce costs, and make customers happier.
How To Manage Inventory on Shopify
Good inventory management starts with the basics. Refer to this guide any time you need a quick refresher.
1. Set Up Inventory Tracking on Your Dashboard
Regardless of your Shopify plan, you can track store inventory quickly and easily. Here’s how:
- In your Shopify dashboard, click on the Products tab.
- Select a product.
- Scroll down to the “Inventory” section.
- Click on the box called “Track quantity.”
- Repeat this process for each product you want to track.
Your store will now take available inventory into account when selling items. If the inventory drops to zero, the item will say “out of stock” when customers try to purchase it.
2. Assign Products to a Location
By default, Shopify assigns all inventory to your main store. But if you’re juggling several shipping locations, you have to manage the inventory for each warehouse individually.
After creating secondary locations and setting the shipping zones for them (West Coast, East Coast, etc.), you can assign products to warehouses in each product’s “Inventory” section. Simply add the correct count or leave the location’s on-hand stock at zero if it doesn’t carry the item.
3. Understand How To Change Stock Levels Manually
Shopify’s product tracking features automatically adjust inventory as you make sales, but it’s still important to know how to add or remove inventory. Theft, losses, or product damage can require you to make changes by hand.
For small stores, it’s easiest to adjust inventory from the Products tab. After selecting a product, click on the “Available” or “On Hand” field, and enter the correct stock amount. Click “Save” to finish.
You can also edit up to 50 products or variants at once using Shopify’s bulk editor. Go to Products > Inventory. Check the boxes next to the products you want to edit, and then click “Bulk edit.” Change inventory as needed in the fields next to each product, and save when you finish.
4. Use Better SKUs
Shopify assigns stock-keeping units, or product numbers, by default. But short SKUs can confuse employees. They may think that “025” is the inventory amount, not the product number.
It’s better to use a unique SKU system for your products. For example, FT075-45XL-BK could mean:
- “F” for women’s clothing
- “T” for top
- “075” for the unique item number
- “45” for a long-sleeved V-neck variant
- “XL” for size
- “BK” for black color variant
This method reduces the risk of employees mistaking color or size variants, or changing the wrong field in your store’s inventory tab.
5. Track Product Variants
Shopify tracks variants as separate SKUs. Add as many variants as you need to track products accurately and ensure customers receive the correct item:
- Sizes
- Sleeve lengths
- Colors
- Prints
- Materials
The process for adding variants on Shopify is easy. Just focus on the features that make each variant distinct.
Shopify Inventory Management Best Practices for Every Store
Once you know the basics of managing inventory on Shopify, you can save time and money by making improvements to the process.
1. Automate Inventory Alerts With Shopify Flow
Shopify Flow is a free workflow automation app available to store merchants. It lets you set triggers, conditions, and actions for many store events, including inventory checks. To set up stock alerts, you could use:
- Trigger: Product inventory quantity changed
- Condition: Current inventory is less than X units
- Action: Send a low-stock alert to your admin
With practice, you can even automate reordering. It takes time to overcome the learning curve, but you reduce the need to manage every product manually. The process is similar to setting up conditions when you add products to collections, so only in-stock items appear.
2. Invest in a Dedicated Inventory Management App
There are also inventory management solutions on Shopify for business owners who prefer to avoid hands-on workflow programming. Several highly rated apps provide the same features — tracking, real-time updates, low-stock alerts, bulk editing, and multi-location management — but with user-friendly interfaces that only require a few clicks.
3. Plan for Surges, Including Store Sales
Any good inventory management plan should take seasonal trends into account, such as Cyber Monday for tech goods and Mother’s Day for gifts. If you offer special discounts, schedule orders a few months in advance for key items so inventory levels align with sales opportunities.
4. Audit Inventory More Than Once a Year
Annual inventory audits aren’t enough for e-commerce. Too many things can happen to mess up your counts, especially if you have employees. Making sure physical inventory lines up with your Shopify store helps you catch errors or theft quickly.
Tips for Simplifying Inventory Management for Returns
Whether you dropship, stock products yourself, or create custom goods, returns are an inventory nightmare you don’t need.
1. Be Consistent
There are countless ways to handle returns on Shopify, from issuing store credit directly to emailing return labels to customers. In any case, be consistent and clear.
Your return policies should explain:
- When you accept or don’t accept returns
- What happens if the item is damaged
- Who pays for return shipping
- How much you charge for restocking fees (if applicable)
- Which items aren’t eligible for returns
What you decide depends on your profit margins, target customer, available time, and the type of items you sell.
2. Train Your Employees To Handle Returns Correctly
Create a standardized returns process on your end. Every time you receive a return, follow the same routine:
- Make sure the item number and product are the same as the original bill.
- Check the item and package for damage.
- Process the return in Shopify. In your dashboard, go to Orders > Return.
- Follow your returns policy to add fees or charges before issuing the return. You can set these values automatically in Shopify or edit them per product.
- If you are exchanging a product, click “Add product” under the “Exchange items” section. Create a return label, if applicable.
- Place the physical product back into inventory.
Following these steps in order helps prevent your store from showing too many or too few items. Test employees periodically with practice sessions.
3. Reduce Product Return Rates
The best way to limit the hassle of returns is to avoid them in the first place. Do you have product photos for every variant? Do your images show the way items fit real people? If not, customers can easily get confused.
High-quality pictures reduce customer complaints. Avoid AI-generated or stock images. Take real photos of the product, but use good lighting.
For clothing and footwear, accurate size charts are essential. Use specific measurements wherever possible.
Best Practices for Managing Inventory on Shopify as Your Business Grows
Shopify supports large e-commerce retailers. The decisions you make for inventory management at this level have a major impact on your bottom line.
1. Use Barcodes and Scanners
Barcode labels significantly speed up inventory management: supplier shipments, customer returns, Shopify location counts, and audits. Forget about typing by hand or using CSV bulk files to edit inventory.
With the Shopify Point-of-Sale system, your store inventory updates automatically when your team uses the smartphone-based app. There are also Shopify integrations with third-party barcode scanners and apps. Scanners are faster and less prone to vibration issues, but they cost more.
2. Don’t Be Afraid To Change Your Inventory Allocation Model
Low-stock inventory management strategies like just-in-time work well for smaller Shopify stores, but this can change as your sales volume grows. If you experience friction, don’t be afraid to adapt your allocation methods to new store realities:
- Just-in-time: With JIT, you order as needed to fulfill sales. You minimize cash flow needs, but any supplier delays can cause problems.
- ABC: Rules-based inventory systems assign products a rating based on demand, revenue, fulfillment speed, and other factors. Setting up the system takes time, but it delivers significant improvements to efficiency, flexibility, and costs.
- First in, first out: FIFO ensures you rotate stock to ship older inventory before selling the newer items. This prevents damage, especially for time-sensitive goods, but requires extra manual handling.
- Last in, first out: LIFO can help Shopify stores hit by tariffs or rising parts costs. Sell higher-cost inventory first so you can take advantage of tax deductions.
- Push allocation: Multi-warehouse sellers use push strategies to move inventory regionally as seasonal demand shifts, such as moving sunscreen or beachwear before summer hits.
Many Shopify merchants reorder only when stock levels fall below a target. This approach saves you money, but it gets riskier as your sales volume grows. Shifting strategies can be important for your biggest-selling products.
Find Effective Solutions to Shopify Inventory Management Challenges
Between Shopify’s built-in features and versatile apps, the tools you need to improve inventory management are at your fingertips. Your goal is to find and fix the underlying cause of issues, such as too many returns.
With a Shopify size chart app like Kiwi Sizing, you can improve the customer experience and follow best practices for Shopify inventory management at the same time. Kiwi helps shoppers find their best fit using smart size recommendations and easy-to-use size charts tailored to your products. That means fewer sizing mistakes, fewer returns, and more confident buyers. Request a demo today.
