Shopify merchants work diligently to ensure they are getting the most return out of their inventory and avoid overselling.
They will pre-plan, forecast the demand, create an assortment, and place Purchase Orders in order to increase their sales. Any discrepancies within their inventory can ultimately affect their sales bottom line. Within the retail industry, only 65-70% of the inventory count is accurate. Inventory inaccuracy can be due to many different factors, such as damaged inventory and theft. Because of this, there is always the opportunity for a mismatch count between physical inventory and inventory counts within the system.
Inventory inaccuracies lead to overselling, which results in disappointed customers. In order to combat these inaccuracies and avoid overselling, Shopify merchants can implement an Inventory Threshold.
Below, we will go deeper into the concept of Inventory Threshold and how it will reduce overselling due to inventory inaccuracies.
What is an Inventory Threshold?
Inventory inaccuracy is a common problem in retail. In order to reduce the risk of overselling due to inventory inaccuracy, retailers intentionally reduce the amount of available inventory before promising any inventory to their online sales channels. This amount of inventory reduction is called an Inventory Threshold.
Rather than exposing every unit in stock to eCommerce channels, merchants apply a threshold to reduce the sellable quantity shown on Shopify or other platforms.
Let's look at an example.
A retailer wants to set a Threshold for cargo jeans, a high-selling product. To avoid overselling due to any mishap or inventory damage, the retailer restrains 10 units from the product category to sell online. This Threshold will be set on the product category on the inventory across the company level.
Inventory for Cargo Jeans is available at the Times Square Store and Central Warehouse
Total Inventory for cargo jeans at the Times Square Store = 100
Total Inventory of cargo jeans at the Central Warehouse = 100
Inventory Threshold = 10
Inventory Available for online orders = (Inventory at Times Square Store + Central Warehouse) - Inventory Threshold
Inventory Available for online orders = (100 + 100) - 10 = 190
This way, even if a few units are damaged, miscounted, or delayed in update, the retailer avoids overselling.
Inventory Thresholds can be set at the product level. Still, generally, retailers prefer to set Inventory Thresholds on product categories as a whole. This makes the management of the Inventory Threshold easier.
Inventory Threshold vs Safety Stock
Inventory Thresholds are often confused with Safety Stock, but the two serve different purposes:
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Inventory Threshold: used to prevent inventory, at the company level, from being available for sale due to possible inventory discrepancies.
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Safety Stock: used to prevent any facility’s inventory from being available for sale. An example of this is inventory that is specifically reserved by stores for walk-in customers.
Inventory Thresholds are typically used to plan for inventory problems across the company, where safety stock is used across different channels for various reasons.
Managing Inventory Thresholds with Spreadsheets
In online business, inventory numbers are uploaded daily on eCommerce sites. eCommerce uses these inventory numbers to capture online orders from customers. An inventory feed is provided by the ERP which shows inventory that is physically available in a warehouse or a store. This inventory is referred to as the ‘Quantity on Hand’, not ‘Available to Promise’ inventory. The eCommerce may have orders for which inventory is not yet reserved. So merchandisers reduce the inventory of these orders to get the ‘Available to Promise’ inventory. To account for the Inventory Threshold, retailers must manually adjust the ‘Available to Promise’ inventory of each product within spreadsheets. The retailer can then upload the updated inventory file to their eCommerce.
Manually adjusting thousands of product inventories daily takes a lot of time and needs a dedicated resource. Manual processes also leave room for manual errors that result in overselling.
Instead, retailers can use an omnichannel order management system to calculate the ‘Available to Promise’ inventory and automatically upload inventory files to the eCommerce system. Ideally, an omnichannel order management system should also help retailers manage Threshold for products by automatically reducing the Inventory Threshold when calculating ‘Available to Promise’.
How do Merchandisers Set up Inventory Thresholds?
Generally, merchandisers prefer to set Inventory Thresholds on product categories, making the management of the Inventory Threshold easier. Instead of remembering and maintaining an Inventory Threshold for individual products, it can be maintained on a group of products in a category.
For example: In winter, the demand for Sweaters can be very high. The merchandiser would like to set an Inventory Threshold on all kinds of sweaters, such as v-neck, turtle-neck, and oversized. By setting up Inventory Threshold values for Sweaters, the whole sweater category would have a similar Inventory Threshold.
Similarly, merchandisers would like to set Inventory Thresholds for different product categories.
Managing Inventory Thresholds with Shopify
Retailers using Shopify prefer to manage Inventory Thresholds using Shopify tags. There are a number of tag-based rules that allow retailers to set more specific Thresholds on product categories. The complexity of these rules can vary depending on the inclusivity and exclusivity of different products. The table below shows how tag-based rules are used when setting Inventory Thresholds:
Managing Thresholds with HotWax Commerce's ATP App
HotWax Commerce Order Management System provides an ATP (Available-to-Promise) App that simplifies Threshold Management and gives merchandisers direct control. Since the HotWax OMS already syncs all product data, including tags and features, from Shopify, Thresholds can be configured directly from the ATP App.
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Enables merchandisers to set Inventory Threshold rules using Shopify tags
- Inventory Thresholds are automatically set for new products when they are downloaded from Shopify and fall under a category where rules apply
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Automatically adds Inventory Threshold to products under the predefined rules
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Update thresholds in bulk across the catalog
These Thresholds are factored directly into the ATP calculation, which determines how much inventory is available to sell across each channel. Retailers can control how much inventory is visible online while protecting stock for in-store purchases or preventing overselling during high-demand periods.
Here’s how it works:
Retailers can define a rule by naming it (“Shopify Plum Top Threshold”) and assigning a specific buffer quantity, say, 13 units. This means that when inventory levels fall below that Threshold, the product won’t be available for sale on that channel.
What makes the app especially powerful is the flexibility it offers in targeting products. Merchandisers can apply Thresholds based on product tags, attributes like size or color, or even exclude certain variants from the rule.
For example, a merchandiser may choose to apply a Threshold only to the S size of a limited-edition Plum Top, while excluding L and XL sizes that move more slowly. This allows the retailer to protect availability where it matters most, without over-restricting stock across the board.
With the ATP App, Inventory Threshold Management moves out of spreadsheets into a purpose-built interface that’s faster, clearer, and built for scale.
A Better Way to Handle Inventory Buffers
Setting an Inventory Threshold can be time-consuming and difficult without the proper resources. It can be challenging to set Inventory Thresholds on thousands of products while keeping your inventory up-to-date.
HotWax’s ATP App transforms Threshold Management into a smart, rule-based process that stays aligned with real-time inventory. Once rules are created, OMS handles updates automatically, removing the need for daily intervention.
By using the ATP App, Shopify merchants gain better inventory reliability, fewer cancelled orders, more confidence in their inventory data.
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To learn more about how the ATP App supports smarter inventory planning and protects your bottom line, get in touch with the HotWax Commerce team.
