Holidays aren’t always so happy for a retailer with empty shelves of fast-selling items and overstocked rows of the not so popular ones. Inventory management is difficult enough all year round but it’s especially troublesome during the holiday season. It’s much easier to understand holiday inventory problems for a bricks-and-mortar store. But, with the advent of online shopping, these inventory challenges are compounded for both the traditional retailer and the online store.
Inventory Challenges: Why It Happens
Unless you’re a Mom-and-Pop store with limited product categories and SKUs, inventory problems for both online and real stores can be caused by:
- Unpredictable consumer demand Tight economic conditions don’t always mean a drop in consumer demand. Sometimes, consumers tend to splurge, especially during holidays. This makes inventory planning almost a matter of behavioral psychology. On top of that, there’s no accounting for consumer tastes.
- Technological changes This is a major concern for stores whose main business is electronics and toys. The launch of products with new technology has an immediate impact on existing inventory. To belabor the point, the launch of a new iPhone model can totally upset any inventory plans that are in place.
- Legislation It’s anybody’s guess what’s going to be banned tomorrow. If you’ve stocked up on toys or foodstuffs for the holidays, all it takes is a news item about some study regarding hazardous ingredients to make your inventory obsolete.
What to do
Market uncertainties notwithstanding, there are several steps you can take to minimize the risks of having not enough or having too much stock during the holidays.
- Study the past Analyze your sales history carefully. Pay close attention to inventory behavior during holidays of the previous years. Try and find similarities between your present economic situation and business environment with periods in the past to help you predict what might happen.
- Do an ABC analysis You can’t keep track of everything so put the Pareto Principle to work. However, 20% of your categories probably account for 80% of your sales. Drill down farther and look for the 20% of SKUs in a category that account for 80% of the sales.
- Make an ITR evaluation Subject categories and SKUs to an Inventory Turnover Ratio analysis. Basically, this entails dividing net sales by inventory to give you a turnover ratio (number of times). The higher the ratio, the more efficiently you’re managing your inventory. BUT, a high ratio also signals a danger of running out of stock.
- Prepare a purchase plan Given the results of your analysis, prepare a realistic purchase plan to the best of your ability. Remember two important things when you do this: a) you’re not the only purchaser in the market; and b) purchases entail financial resources which may require loans, credit lines, warehouse space, etc.
Secure the Links of Inventory Management
Inventory management is a continuous thread that involves the Supplier, the Retailer and the Consumer. Break the thread and you lose control of your inventory. For retail stores, the POS system is the primary tool for managing inventory. It directly links customer purchases to stock on hand. However, this only takes care of one part of the chain.
Purchase orders, delivery commitments, consumer profiles and purchasing habits are the other parts of the link that have to be integrated into one continuous system. Fortunately, there are solutions to handle this for large and small enterprises, real and online.
In essence, the solutions optimize the POS system to secure data about suppliers, customers and your inventory. It is especially helpful in online shopping to obtain customer segmentation to assist you in developing promotions targeted at specific customer segments, using tools like email marketing to up-sell and cross-sell customers. This becomes important during holiday shopping seasons when certain categories perform below planned targets.
Software integration systems offer customized add-on modules that include areas like rentals, repair and service, email capabilities and contact management. They are available for a wide range of store types such as sports shops, music stores, appliance depots, liquor, gun and apparel establishments.
In inventory management, especially during peak selling seasons, time is of the essence. An online retailer will need to connect its various systems so data can be transferred or accessed simultaneously by different POS and eCommerce systems located in different places. To enable this, providers of integration solutions make use of the cloud for cost efficient reliable, data transfer. With good, hands-on inventory management and the latest software integration tools, a retailer is now in a better position to confront the vagaries of holiday shopping.
Lewis Edward is one of the owners of TheOfficeProviders and is a real estate investor, and also has years of experience in the retail industry. Lewis is experienced in the inner workings of both the traditional and flexible workspace industries and has developed close links with various figures in real estate circles, as well other circles. Lewis researches and contributes various written features for TheOfficeProviders in areas regarding real estate, including office space for rent and serviced offices, and general business and economy matters.