How Optimizing Inventory Management Increases Profitability For Retail Stores
The amount of profit your business will achieve depends largely on how well you manage inventory, from the purchasing of inventory and inventory control to the shipping of goods and post-sales activities such as customer service and returns management.
Inventory management can be your business’s competitive advantage and the key to financial gain. Here are 4 reasons why:
1. Good inventory management Improves accuracy
Keeping a watchful eye on your inventory, as well as performing regular stock counts, helps you avoid potential inventory errors that can lead to a loss of profits.
Proper inventory management helps you determine how much inventory you need to have on hand so you can avoid product shortages and keep just enough inventory without having too much stock sitting around in your storeroom or warehouse.
When you exercise inventory control, you’ll have accurate data that tells you whether or not you can meet customer demands with the inventory on hand. You can also review the inventory records to identify product trends and make predictions about inventory that might run out faster than usual.
That’s why it’s imperative that your small business uses a reliable inventory management system to track products, from the day they arrive at your store until the day they are purchased.
Having accurate inventory records will give you the information you need to better plan and strategize. This is critical to good cash flow management and future growth.
2. Good inventory management saves time and increases efficiency
Business owners spend hours upon hours trying to decide which products to reorder and which ones to hold off on. In fact, studies show that 70% of shopping decisions are made in front of the shelf.
Keep in mind, too, that time is money. The greater the inventory, the more time you and your employees will need to spend managing that inventory.
So, how are you supposed to know which items to keep in stock?
Rather than taking a stab in the dark at which products to feature and which ones to relegate to the clearance section, use a POS that tracks your sales and reports, letting you know which items are popular and which ones you can wait to restock.
Your POS should alert you when items have low inventory so you can order those items to avoid the possibility of them going out of stock. This will ensure that popular items are always on hand, thus preventing you from losing sales. Additionally, your POS should make you aware of items with excessive inventory so you can manage those items accordingly.
Having a POS that automatically runs the numbers for you, telling you sales by item, which inventory is low or in excess, and what your inventory value is, will not only save you several hours of time spent with a calculator, it will also help you make wise inventory management decisions.
3. Good inventory management drives in-store traffic
National retail chains such as Best Buy have learned that the Internet is a powerful force in the quest to draw customers in-store.
The electronics retailer decided to reallocate its broadcast budget to digital, where they could leverage the benefits of local inventory ads that showcase their products and store information to nearby shoppers searching on Google.
Impressive results. But can smaller retailers really improve their foot traffic through digital media when their brand is significantly less visible than large retailers like Best Buy, Walmart, and Target?
According to Techopedia they can:
“The phenomenon of webrooming [the process of researching a product online before going into a brick-and-mortar store to make the purchase]…shows that physical retailers still have a role to play in the future of commerce.”
Mounting evidence suggests that despite the rising number of purchases that actually take place online, an even larger percentage of sales is influenced by online product content, ratings and reviews, and more. In fact, a 2015 Deliotte study revealed that “digital influences 64 cents of every 1 dollar spent in-store.”
That’s promising news for small retailers wanting to leverage ROPO (Research Online, Purchase Offline) to drive traffic and increase their store’s revenue. If the growing number of consumers who rely on online research for their shopping needs makes you nervous, take heart. Pew Research Center points out that 64% of Americans say that all things being equal, they’d prefer to purchase in-store over buying online.
In fact, according to Techopedia, consumers engage in webrooming (or ROPO) because it allows them to make more informed decisions about products before buying them, it helps make returns easier, doesn’t come with shipping costs, and it supports local businesses. Plus, some research indicates that webrooming is an essential consumer practice that will help support physical retailers for years to come.
4. Optimizes the Mobile Shopping Experience
According to Small Biz Daily:
“Today, 64% of Americans and a whopping 80% of online adults now own smartphones. And for some, smartphones have even replaced PCs, as these devices have become the sole way they access the Internet.”
…[T]he prevalence of mobile devices has created a sea of change in the way consumers make the majority of their shopping decisions, representing a real opportunity for small businesses.”
Advertising Age also shared these revealing statistics on mobile shopping trends:
- 50% of consumers using their smartphones for local searches end up visiting a store within a day, while 18% of those searches result in a purchase.
- 82% of shoppers say they consult their phones on purchases they’re about to make in a store.
As consumers rely more and more on their smartphones to “window shop” for the products they’re looking for prior to visiting local stores to make their purchases, the need for an integrated inventory management system that perpetually keeps websites up to date is more important than ever.
When consumers are confident that the inventory items they see on a brand’s website are represented accurately, they’re more likely to visit their store and make a purchase. This helps build trust and drive more foot traffic.
A Google report indicates that:
- More than two-thirds of smartphone owners use their devices to purchase products or services weekly.
- 92% of people who search on a smartphone make an offline or online purchase related to the search within a day.
- 70% of consumers take an action on their smartphone, such as conduct a search, look at images online or use social media before making an in-store purchase.
As these numbers point out, modern-day consumers are more inclined to use the Internet to gather information before they make a purchase. For SMB’s, this represents a promising opportunity to increase brand visibility and drive foot traffic to their physical locations.
Maintaining an accurate and updated inventory management system will allow customers to “window shop” for the products they want on their mobile devices while encouraging them to pay a visit to local business establishments to make their purchases in-store.