As the commerce landscape increasingly shifts toward digital, retailers operating both online and brick and mortar stores are facing challenges keeping their inventory in a state that maximizes revenue and keeps customer satisfaction high.
Considering out of stocks, overstocks and returns cost retailers $1.75 trillion a year, according to CNBC (a number that’s undoubtedly higher now given the most recent data is from 2015), it’s clear that no brand should have a higher priority than optimizing their inventory management.
Let’s look at the pain points of current retail inventory management and what dual-retailers can do to close the gap.
Inventory Management Woes
Retail wasn’t always so complicated. A single structure for goods to be bought and returned allowed retailers to forecast their next inventory shipment and avoid over or under stocking products. But those days are history.
Static tracking systems like spreadsheets or inventory database systems that require consistent manual input and tweaking aren’t built to withstand today’s dynamic commerce environment. Not only does it require more human bandwidth to keep running, it guarantees oversights and errors, which ultimately means lost revenue.
The challenge becomes streamlining a way to track and account for returns against existing inventory and future manufacturer shipments to end up with enough—but not too many—products in stock. Then there’s seasonal demand to forecast and prepare for.
Needless to say, there’s a lot going on:
Navigating a World of Returns, Overstocks and Dead Inventory
The growing “buy it to try it” sentiment causes chaos for disorganized retailers. Returns can be a major margin eater for any business, but it’s especially costly to retailers already juggling to balance both online and in-store inventory.
Each time an online order is returned to a physical store, it gives that store one more unexpected quantity of an item. Because stores can’t control where shoppers decide to return their online orders, this makes it challenge to keep a balanced stock of products throughout their in-store ecosystem.
A percentage of returned products also become dead weight. Considering that even well-managed companies typically have between 20 and 30 percent of dead or obsolete inventory, the problem is only exacerbated when a company is operating several physical stores and a large online presence.
Online Orders Picked Up in Store
According to the CNBC report above, 40 percent of consumers who elected to order online and pick up in-store encountered issues with the store’s employees along the way, such as the employee taking a long time to find an order in the computer system or locate the physical product in the store.
Likewise, without proper tracking and integration between online and in-store order systems a customer could purchase a product online that’s listed as in stock at the store, only to learn it’s out of stock when they get there. Any hiccup, no matter how minor, could be enough to lose that customer’s future business.
Keeping Popular Items In Stock
It’s good news in theory when a product sells out, but it’s also lost revenue, since there’s no guarantee a consumer will wait for the product to be back in stock, especially if another store stocks it.
When doing promotions, it’s even more costly to run out of product. Per 2011 data from ResearchGate, 15 percent of promoted sales ($19 billion) were lost because of out of stock issues. Again, this not only loses what would have been an immediate sale but may potentially result in the loss of the customer’s future business.
How to Be Proactive with Inventory Management
Smarter inventory management makes too much sense to disagree with, but how does a retailer go about implementing such a thing, especially when operating several brick and mortars and a busy website?
User-Friendly Database Searching
When it comes to things like forecasting demand, keeping popular items in stock, and assessing dead weight through returned products, it’s hard to gain insight from inventory counts unless you’re a data analyst.
That’s why keeping a database that leverages artificial intelligence is an efficient way to mine insights to better optimize retail inventory management for all times of year. You can easily search all kinds of metrics and trends and adjust manufacturer shipments accordingly.
Tedious jobs like inventory counting are best left out of human hands. Dual-retailers need an inventory management stack that communicates seamlessly across all point-of-sale surfaces. When returns, defects, amount of online orders picked up in store, etc. are automatically tracked, more accurate inventory numbers are kept without draining bandwidth.
A lot of money is being spent online and dual retailers stand to benefit from multiple selling avenues, but only with automated inventory tracking and user-friendly database platforms can retailers stay ahead of the curve and keep customer satisfaction high.