How To Improve Retail Inventory Management in 5 Easy Steps

Inventory management is more than a process — it’s key to your retail store’s success. More than that, every day your business is operating without a solid inventory strategy, it costs you time, money, and customers.  

Once your store is up and running, changing your retail inventory management processes can feel daunting. After all, you and your staff already have a way of doing things — and a total redo of your inventory counting methods might seem impossible. 

But implementing a few inventory best practices can have major benefits for your business.

In this post, we’ll provide you with a basic overview of inventory management for retail, the biggest benefits, and five practical steps you can take to improve your processes and boost revenue.

What Is Retail Inventory Management?

At its core, retail inventory management is the process of ordering, organizing, and storing your products to ensure you meet customer demand. Put another way, it’s how you make sure you don’t have too much or too little of something when you need it most.

While it sounds simple enough on paper, it can get pretty complicated, especially as a business grows. When inventory isn’t managed correctly, even larger, more established retail stores can face the consequences in the form of missed sales, overpaid warehousing costs, and more. 

Benefits of Effective Retail Management

Many retail stores don’t have a consistent method or set of tools for inventory management. However, following best practices will help your business:

• Save money and increase profits
• Reduce warehouse storage costs
• Increase efficiency
• Reduce shrinkage and losses
• Better anticipate customer needs

Also, with a solid process in place, you can onboard new people, spin up new stores, and grow your business more efficiently overall.

Steps for Improving Your Retail Inventory Management

Rolling out these retail inventory management strategies at your store is a cost-effective way to improve profit margins and drive growth. Here are the key steps to follow:

1. Invest in Inventory Management Software

Many retailers track inventory on a simple spreadsheet or a combination of programs. Unfortunately, these manual data entry methods are time consuming, error prone, and might lead to shrinkage (accidentally or otherwise). 

Adopting a software solution for your inventory tracking is a solid first step toward increasing your overall efficiency and accuracy. Modern software helps small businesses streamline inventory management with a variety of helpful features, such as:

• Mobile inventory scanning
• Automated reordering and invoicing
• Real-time visibility and tracking
• Case break tracking + mix and match pricing
• Custom label printing

Having a centralized source of all your inventory-related data also enables you to build reports that help find useful patterns and trends. These reports are invaluable and help you proactively anticipate your customers’ preferences and inventory needs in the short and long term.

Related Read: 7 Top Digital Marketing Solutions for Small Businesses

2. Create Consistent Processes 

Inventory management is an incredibly detail-oriented process, and your processes should be detailed enough to match. Ensure you set up consistent processes and train staff appropriately for all critical parts of the inventory management process.

A few of the things your team should have carefully outlined processes for are:

• Purchasing: You need to set up processes and triggers for ordering and reordering. Each item in your inventory should have a specified stock level where it needs to be reordered. This can also be set up automatically on a POS system. 
• Receiving stock: Your team should have a standardized process for truck deliveries. How is the stock added to your inventory system? Who communicates with the vendor? These are questions your processes should answer.
• Discounts and promotions: What is the minimum price you can charge for a given piece of merchandise without taking a loss? You should have this ironed out for every product and logged in your system. Additionally, if there are any practices regarding automatic markdowns on old inventory, your entire staff should be trained on them. 
• Returns: Every store needs a solid return policy! Ensure you have a clearly outlined return policy that is advertised to customers and available for all staff to reference. Stick to this policy once it’s in place. 

3. Invest in Loss Prevention Measures 

It’s difficult to talk about effective retail inventory management without talking about loss prevention. But if items are vanishing from your shelves unpurchased, they won’t be accounted for in your inventory tracking system, and your counts will be thrown off. 

This is why many retailers choose to invest in a loss prevention tagging system. A loss prevention system refers to the plastic tags that attach to your products, which are then removed at the register when purchased. If a customer attempts to leave the store with a tagged item in hand without paying, the tag will trigger an alarm at the store exit. 

It’s likely not feasible to tag all items in your store, but it might be prudent to attach them to the pricier items you stock.

Another source of losses is employee theft, which accounts for more than 33 percent of all retail theft. This is another area where modern technology can help, thanks to features like employee tracking and real-time inventory tracking.

Related Read: What Is Inventory Shrinkage in Retail? 8 Ways To Prevent It

4. Utilize Discounts and Promotions

Offering discounts and promotions can be an excellent way to move underperforming items and clear out space for top earners. Discounts and customer loyalty programs can also turn one-time visitors into repeat customers — but you need to make sure you’re ready for the extra demand.

Mix and match pricing is another great way to move sluggish inventory by pairing it with more popular items. Many modern retail POS systems support flexible discounts and pricing, so don’t be afraid to try new ideas.

No matter how you’re using discounts, make sure your inventory management strategy supports them. While discounting items to move inventory may feel like losing money, spending money on warehouse space can be much more expensive in the long run.

5. Use Reports To Evaluate Your Product Offerings

Customer preferences change all the time. But if you keep a close eye on what’s selling and what’s not, you can make smarter decisions. Use this data to find patterns and downtrends in sales of certain products, so you can make better choices when it comes time to stock the shelves.

Another way to improve your inventory management is to track key performance indicators (KPIs). KPIs are metrics like sales, profit, or inventory turnover that give insight into store performance and customer behaviors.

Most importantly, tracking inventory-related KPIs using software can help you make changes proactively instead of trying to play catch up.  

Related Read: 4 Point of Sale Reports You Can Use to Grow Your Small Business ASAP

Enhance Your Store With Digital Retail Inventory Management

A lot of changes are coming to the retail world. But change is tough. You may wonder if it’s worth the effort to switch up the processes you and your staff are accustomed to.

While it might seem intimidating at first, the advantages of implementing modern retail inventory management software and best practices far outweigh the small roadblocks you might encounter. With more automation and better visibility, these systems will save your small business time and money.

Put another way, partnering with the right technology partner can help you stay competitive and unlock the full potential of your business. That’s why small businesses nationwide are adopting digital solutions to help them excel.

If you’re looking for a modern, user-friendly inventory management solution, schedule a demo with POS Nation today.