Is Inventory Serialisation the solution to your eCommerce inventory problems? Here’s what we learned

A couple of years ago, I was deep in a problem-solving session with Aayush Mattoo . We were working with two brands facing significant inventory challenges. One was an electronics brand dealing with a flood of counterfeit returns—visually identical to the real products and slipping back into inventory. The other was a high-end fashion brand that faced a supplier quality issue and needed to recall an entire batch of SKUs.

What was the silver bullet that solved both problems? Serialization of inventory.

Serialization allowed us to track each item individually, ensuring that counterfeits in the electronics supply chain were easily identified and stopped from re-entering inventory. For the fashion brand, it helped us trace every returned SKU, quarantining faulty items from the first return, preventing them from being resold and potentially worsening return rates.

In the case of fashion brands, serialization also helped us avoid a common pitfall—when an item is returned, re-inwarded, resold, and returned again, due to fit issues that aren't tracked at the item level. Without serialization, you’d only see the return rate increase for a SKU, without insight into the underlying issue.

While serialization worked wonders for these two clients, we quickly realized that it wasn’t necessary for every business.

So, how do you determine if serialization is right for your brand? Here’s the framework we followed to make that decision:

The Balance Between Cost and Operational Efficiency

For eCommerce businesses, the decision to implement serialization should depend on the industry vertical and the specific needs of their operations. If you’re handling high-value or regulated products, serialization is essential for mitigating risks, improving customer satisfaction, and ensuring compliance.

However, if you operate in low-cost or high-turnover categories, serialization could introduce unnecessary overhead. For example, in fast fashion or low-cost home goods, the additional cost of assigning and tracking serial numbers might not justify the minimal benefits gained, especially when batch-level tracking can efficiently handle inventory management and returns.

Why Serialization is Critical for Some Verticals

For certain verticals, the benefits of serialization far outweigh the additional costs:

• Consumer Electronics: High-value products such as smartphones, laptops, and other gadgets require serialization to track warranties, manage returns, and prevent fraud. The ability to trace individual units is essential for both customer satisfaction and cost control.
• High end Fashion & Luxury: Serialization is crucial in preventing counterfeiting, ensuring authenticity, and tracking returns for high-end items like jewelry and designer apparel. Given the high value of these products, the cost of serialization is justified to maintain brand integrity.
• Health and Wellness (Supplements, OTC): Serialization helps ensure product safety by tracking individual batches, managing product recalls, and ensuring compliance with regulatory standards.
• Food and Beverage (Perishables): For perishable products, serialization is vital in tracking batches, managing recalls, and complying with food safety regulations. It ensures that spoiled or unsafe items can be quickly identified and removed from the supply chain.
• Medical Devices: Serialization is mandated in many countries to ensure patient safety, manage recalls, and track product history. Given the critical nature of these products, serialization is non-negotiable.

Verticals Where Serialization May Add Unnecessary Overhead

In some eCommerce verticals, serialization may introduce more complexity and costs than the benefits it provides. For these industries, batch-level tracking or other simpler methods may be sufficient:

• Fast Fashion (Low Value): For everyday clothing items, serialization adds unnecessary costs without significant benefits. Returns and inventory can often be managed effectively using batch or SKU-level tracking, especially in high-turnover categories like fast fashion.
• Books and Media: Since these are low-value items with minimal return issues, batch-level tracking is typically sufficient. Serialization would add complexity without a substantial payoff.
• Low-Cost Home Goods: Inexpensive items like kitchenware, décor, and linens usually don't require individual tracking. Batch-level tracking works well for managing inventory and returns.
• Toys and Games: For most standard toys and games, serialization may not be necessary, unless dealing with high-value collectibles. Otherwise, the cost of serialization outweighs the need for item-level tracking.

Cost Analysis: When Serialization Makes Sense

Let’s consider a scenario where you process 5,000 orders per month. If serialization costs INR 2 per unit, that results in an additional INR 10,000 per month. In high-value industries like electronics or luxury goods, this investment can prevent returns fraud, enhance product traceability, and improve customer satisfaction. However, for low-cost verticals, this additional overhead could be avoided by using simpler tracking systems like batch-level tracking.

Conclusion: Tailoring Serialization to Your Business Needs

Serialization can greatly enhance inventory accuracy and supply chain transparency, but it’s not a one-size-fits-all solution for every eCommerce business. For high-value, regulated, or perishable goods, serialization is a critical investment that offers substantial long-term benefits. But for low-cost, fast-moving items, the added complexity and costs of serialization may not be justified.