My Retail Store Inventory Management Experiences and Tips

Data driven inventory management is an essential part of a successful retail store. However, most retailers still buy by feeling rather than using hard numbers. It is logical that many entrepreneurs prefer this. Still, it is better to use the data. Therefore, in this blog post I would like to show you how to do that.

For 10+ years I have been speaking to retailers about stock management. So, I would like to share this experience with you. There are many tactics that can help optimize your inventory, depending on the industry you are in and the size of your store. Hopefully this will contribute to your success.



What does inventory management mean for your retail store

Inventory management is all about the process of ordering, storing, rotating, and selling products. It’s a critical component of the supply chain and a vital part of retail store operations.

It starts with a retailer deciding what products to carry in its stores. This decision is based on what customers want to buy, how much inventory the retailer has on hand, and how quickly inventory can be delivered from suppliers.

The next step is ordering new inventory from suppliers. When you order from your supplier, you need to make sure that your store has enough room for it when it arrives. You also need to make sure that it will sell before it expires or goes out of style.



Retailers have always been faced with the challenge of balancing customer demand with inventory. The goal is to have enough products on hand to meet the demand, but not so many that it goes unsold.

This is a constant battle.

Inventory discrepancy is a major issue for retailers, and it can result in lost sales. Retailers need to keep inventory levels at a sustainable level to avoid the risk of having too much or too little inventory.

When retailers have too much inventory, it might not sell quickly enough and they will have to sell it at a discount. This means that they are not making as much money as they could be if they had sold the items at their original price. When retailers have too little inventory, customers might not be able to find what they are looking for and will end up shopping elsewhere.



After many tries and conversations, I like to share the ideal process for a retail store to organize its inventory management. For this, it is essential to use a good system. View the steps below and choose software in which this is possible.

The fundament

1. Make sure every product is in the system properly

Proper product management is the backbone of any successful business. If you're not keeping track of your inventory, chances are you're going to run out of stock and lose out on potential sales. Therefore, make sure you can save various product details.

• Purchase price
• Sales price
• Average number of days in stock
• Barcode.
• Supplier name
• Supplier number



2. Make sure every product is in an article group

An article group is a group of articles that are related to each other. The main purpose of an article group is to organize and display articles in a way that makes it easier for visitors to find what they are looking for. You can give them any name you like, but most of the time it is best to make the groups as specific as possible.

In this way you can see in one overview what you have sold per group. That is why it is essential to subsequently link the article groups to so-called subgroups. These can then be subdivided into main groups.

An example of article, sub and main groups in case of jewelry:

• main group = Gold jewelry
• Subgroup = rings, necklaces, bracelets, earrings
• Article group = Gold ring without brand, Gold ring brand 1, Gold ring brand 2

This way you can easily see what you have sold in a specific group. You can then easily zoom in per category to quickly find out what is selling well and what is not.

3. Write off products when they are sold

When you sell an item, you need to write off the stock. This is important because it ensures that you have accurate records of your inventory. It also helps you to manage your expenses and revenue more accurately. This is of course very basic, but for good stock management it is essential that this is done quickly and without errors.

If you have this fundament right, you can better choose what to buy. Let's look at that now.



Choose what to buy strategies

Start with what you know. With a wide range of products, it can be hard to decide what to buy. You should first check your inventory and see what you already have. This is the best way to not waste money on buying things you already have. Furthermore, if you find it difficult to choose the right brand or supplier, here are 10 more tips to select the right one.

1. Export the stock and sales per main group, subgroup and article group

The first step is to make an export of the current stock and sales per main group. This already gives an idea of the category that sold well. Then view the turnover of the various subgroups in this main group. Finally, you can further investigate this subgroup by subdividing it into article groups.



In this way you can quickly and easily funnel where the most important turnover and profit came from in a specific period. By then looking at the current stock, you can see what you need to order.

2. Order based on minimum stock level

It is also interesting to have a minimum stock for products that you always want to have in stock. You can then easily make a printout of these products that need to be reordered. Purchase orders based on minimum stock level is an inventory management strategy that ensures that the product is purchased before it runs out of stock.



This strategy helps to minimize the risk of running out of a product, which can be disastrous for any business. It also minimizes the need for purchasing products that are not needed or wanted by the customers.

3. Export an overview of sales in the coming period of last year

A seasonal product is defined as a product that has different demand or supply at different times of the year due to changes in weather, climate, holidays, etc. This means that there will be periods where this type of product might be more popular than others and thus require more inventory on hand to meet the demand. For example, during the winter months, a seasonal item such as snow shoes might be more in demand than other products.



It could also be interesting to calculate the period of demand. This metric is calculated by counting the number of days per month in which this product was sold during the year and dividing that number by 12. That metric is then multiplied by 100 to give an average number for how many days per year this product was sold.

4. What does the consumer want

In order to keep up with demand, retailers must be able to predict what customers want and when they want it.

The process starts by analyzing customer data and trends to see what products are trending. This helps retailers anticipate what products will be in demand in the future and plan accordingly. For example, you can find out which products are viewed a lot online or what is searched for in the retail webshop.

In the physical store you can also do good market research into the needs of the consumer. Write a short report of each conversation with the customer. This way you will learn more about your target group and its needs. You can then discuss these notes with your colleagues.

Choose which products to sell

Overstocking is an unnecessary risk that can result in lost revenue and wasted money. If your inventory is too high, you may not have enough cash to pay for the items you need. An excess of inventory also takes up space, which can lead to a higher rent rate or more expensive storage fees. Therefore, it's important to take the necessary steps to avoid this situation by monitoring what you need on a regular basis.

So check per item how long it is in stock on average. The desired time varies, of course, per product type. However, remember that if a product is in stock for 180 or even 365 days is really a long time. Unfortunately, this is not uncommon for many retailers. In that case, make sure you highlight the product or create a discount promotion for it.



How to replace slow sellers for bestsellers

If you keep track of inventory management, it's easy to find out what's selling well and what isn't. However, it is much more difficult to replace the poorly selling items with bestsellers. If you buy products that look a lot like your bestsellers, it can get in the way of these runners. Furthermore, you can also sell out products that ultimately add value to the sale of bestsellers. What is the right approach for this?

I like the idea of this study that most of the time, customers are looking for a bundle of attributes rather than specific products. For example, people often think about things like screen size, resolution, price, and type when they're planning to buy a new TV. By using this technique, you’ll be able to better understand why customers are abandoning items, why they’re settling for second best and tailor the assortment accordingly.

In this way customers may not find their "perfect" product, but they will likely choose another one of your products. This means that you might be able to make a sale even if they don't find what they are looking for.



Understand which attributes matter most to customers

There can be many different types of attributes for a product, such as size, color, price, or any other feature that is important to the customer. The customer will typically rank these attributes from most important to least important. Attributes can also be ranked by importance in relation to each other. For example, a customer may rank color as more important than size because they care more about how something looks than how large it is.

Attributes should be selected based on what type of customer you are targeting and what their preferences are. If your target market is men who care about style over anything else then you should focus on colors and styles when building your product list. If you are targeting women who care about quality over anything else then you should focus on products that have the highest quality.

Then think about what the customer will do if you don't have the right product in stock. For example, if you sell clothes, size is a crucial attribute. If it does not meet, the customer will not buy. While the customer may want to opt for a different color or a different material.

Finally, calculate the total sales per most important attribute (in this example size). By ranking the various other attributes and grouping them, you can create the correct article groups.



Two important factors that can affect sales data

The first factor is that upselling and trading down counts as well. Therefore, try to find out how many people bought a more expensive or cheaper product if the product in another category was not in stock. This ensures that you can make a better estimate of the needs of the consumer. Customer information is important for this. For example, the income can have an influence or the condition of other products (you do not install a new kitchen in a house that you will be moving out of in 2 years).

The second factor is the stock level. If there was little stock, little may have been sold. For example, if you offer a limited selection a cheaper category, because you think you could trade customers up to a higher priced category, you may be missing out. Not 100% of your customers will be willing to pay more for what they need.



Next is decide on pricing

Ultimately, the prices are also important for the number of pieces you can sell. So calculate the turnover and profit that you can make per item. Also try to do this for items that you don't have in stock yet. Then you can multiply this by the forecasts you have made. This gives you the data to further expand the range. Keep in mind that including one product may affect the sale of another product. Ultimately, it is also important that you can find the right alternative. Otherwise it does not immediately make sense to replace a product.



Does clustering products in your store or per location works?

Retailers find it very complicated to have a unique inventory list for each store, which is why they more often decide to buy things in bulk. Clustering can be defined as the process of grouping together products in a store or per location. The idea behind clustering is to make it easier for shoppers to find items that are related.



However, it is interesting to also apply the above method to various locations. It allows you to discover specifically per location what the customer's needs are.

Conclusion: How to stock up inventory for your retail store?

You can stock up the inventory of your retail store by looking at what customers want and what you currently have in stock. Furthermore, analyze what you sold and what upcoming trends are. This will help you better predict your inventory needs.

It's important to know what customers want so that you can make sure that your store is well stocked with the items they're looking for. You also need to know which products are selling well in order to predict future inventory needs and make sure that there is enough on hand at all times. There are a number of ways to gather this information, including conducting surveys or asking customers directly about their preferences. Once you've done this, it's time to take a look at your current inventory.



Use all available information

So make sure that you have all products clearly listed in a system and that it is well noted when something is sold to whom and for what price. Furthermore, make the right division of products into article groups based on the product features that are most important to the consumer. This is the foundation of inventory management in your retail store. Then, by analyzing the different groups and the wishes of the customer, you can find out what you can sell best.



What are the best wholesale products to sell?

Also include the wholesale products that you do not yet have in stock in your inventory management system. So make an overview of the products that you currently do not have in stock. Include the purchase price, margin and sales price. By including these product properties in the analysis, you can add and them to your current article groups. You can then make a better comparison, which products are interesting to replace in the range.



How do you inventory a small store?

As a small store, you may have less sales data and opportunities to take up a large inventory. That is why we recommend building a stronger cooperation with the supplier. By having a good insight into the stocks of suppliers, it is easier to make this analysis for the products you want to purchase. It is useful to be able to purchase products in smaller numbers and to choose a supplier with fast delivery times.

Furthermore, by choosing to cover a certain market, it is possible to grow your revenue with fewer products. You can also build up your market share by expanding the range of products you offer. However, this is not always easy as you have only limited time and sales data from which to make conclusions.



Collaboration with suppliers

Suppliers are an essential part of the supply chain and good inventory management. Collaborating with suppliers can be beneficial for both parties, as it allows them to share risks and reduce costs. A company can also use this collaboration as an opportunity to create a long-term relationship with their supplier, which will allow them to learn about each other's capabilities and needs.

However, for the best results, it is essential that systems from both the supplier and the retailer are seamlessly connected. This makes it possible to share stock and sales in real time. That is why it is possible with Retailgear for industries to create a single standard in the field of product information. This can then be used to make better decisions to put together the perfect range.