July 19, 2013, 10:35 AM

Second 500 merchants consider quality and not just quantity when adding inventory

The average SKU count among Second 500 merchants is about 8,000.

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For smaller merchants, Second 500 retailers can certainly carry a big inventory online. Because of its own inventory and relationships with literally hundreds of suppliers Jack's Small Engine & Generator Service LLC (No. 535), carries more than 3.7 million SKUs for replacement parts for lawn mowers, snow blowers, generators and other product. In fact of the six Second 500 merchants carrying the biggest inventories four e-retailers—Jack’s Small Engine & Generator, LawnMowerPros.com (No. 984), AutoAccessoriesGarage.com (No. 737) and AppliancePartsPros.com Inc. (No. 690)—carry online inventories of harder-to-find parts, tools and related gadgets with counts that range from 1.6 million to 2.8 million SKUs.

But of the 275 web merchants breaking out their inventory numbers for their ranking in the 2013 Second 500, the median SKU count is 8,000. For many Second 500 merchants carrying the right amount of products either through stockpiling their own inventory or drop shipping arrangements with suppliers and distributors is more about quality rather than quantity. “Many web shoppers don’t shop smaller online retailers because they expect them to have a huge inventory,” says Gartner Inc. vice president and information technology analyst Gene Alvarez. “What they expect to find from a specialized niche merchant are the products they are most interested in at a competitive price and products they can’t find anywhere else.”

In the past several years the SKU count at Full Source LLC (No. 673) has increased from 1,800 to 30,000 SKUs and the retailer aims to increase that total to 50,000 through more drop-shipping arrangements with safety product and apparel manufacturers. Full Source began selling online in 2000 with a small range of safety supplies such as glasses and hardhats, says CEO Jim Graham.

Full Source has diversified its inventory over time with new product categories, such as the types of spray paint utility worker use to mark the locations of underground pipes and cables prior to digging. Full Source also has launched new categories, such as certain types of industrial paint, bulk batteries, specialty tools and accessories welding supplies.

Full Source doesn’t see itself as competition to big companies such as W.W. Grainger, which through its physical locations and online, sells $9 billion worth of industrial and office supplies annually to an international audience of corporate purchasing managers. Instead Full Source sees it core customer as workers that may have to supply their own safety glasses or hard hat for their job.

“How we expand our inventory isn’t about carrying the biggest selection, but stocking the items our customers need or want us to carry because they like shopping at FullSource.com,” Graham says. Carrying a bigger but tightly focused inventory was a prime reason FullSource.com was able to grow web sales 28% to $10 million in 2012 from $7.8 million in 2011. “We look to stock inventories that help us capitalize on new business opportunities,” Graham says.

The 2013 Second 500 Guide is available in three formats: print, digital and as part of the all-new and completely updated Top500Guide.com. Information on how to order the brand-new is available here.

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