As a result of economic challenges in 2023, which have seen cautious consumer spending, many retailers across Australia are likely sitting on larger-than-usual piles of excess inventory ahead of the upcoming peak retail season.
Retailers who build their strategy on the foundation of data-driven, real-time inventory management will be better placed to make the most of the upcoming retail rush.
That’s because unorganised inventory is like a lead weight on a retail business. Robust inventory management, on the other hand, enables businesses to establish a better handle on their expenses and costs, tackle shrinkage, and optimise the inventory they have on hand. But what is inventory management and why is it important? How can retailers optimise their point of sale (POS) system to unleash the potential of their inventory? And how can they, and their customers, feel the benefit?
Inventory management 101
Inventory management is the process through which stock is ordered, organised, stored and sold. It is much more than just good organisation, though; when effective, it enables retailers to increase their profit margins, decrease excess stock, cut down on inventory costs and work more efficiently.
When effective, retailers can also determine how much of every item is in stock, what and when they need to order, what their best- and worst-selling items are, and much more. With cost-of-living pressures putting the squeeze on consumer spending, inventory management enables retailers to be more strategic and proactive with their stock, making the most of every item in their inventory.
It’s essential all-year-round, but particularly so to help prime retailers ahead of the upcoming peak season and those transitioning from winter to summer stock. But with so much riding on the effective management of their inventory, how can retailers tap technology?
Optimised POS, optimised inventory management
By now, many retailers have digitally transformed and are using a POS system. Not all POS systems are created equally, though, and an optimised POS system and approach can make a significant difference to inventory management.
A dynamic POS system enables retailers to derive deep, real-time insights, for example, to quantify the impact of shrinkage – the amount of stock lost to damage or theft. It enables them to set reorder points, so they can quickly and accurately determine which products have dropped below their desired levels.
Then there’s purchasing stock. When a retailer uses inventory management software to manage purchase orders instead of relying on the eye test, pen and paper or spreadsheets, they’re less likely to make human errors, and more likely to order accurately, driving valuable time-savings.
Built-in purchase ordering means inventory data is easily accessible, so retailers can track important information – like current inventory levels, cost per unit, open orders and inventory on order and the inventory in transit to either a customer or a retailer’s store or warehouse – at a glance. So why, with peak season on the horizon and consumer spending still cautious, can inventory management be a competitive advantage?
Mastering peak season
Having the right products in stock and readily available during peak seasons ensures that customers can find what they want, when they want it. This reduces the risk of lost sales due to stockouts, which can frustrate customers and, worse still, drive them to competitors. At a time when every sale and interaction matters, inventory management is essential.
Effective inventory management also minimises the risk of overstock, which can tie up too much revenue and incurs carrying costs. Retailers that strike the right balance are better positioned to maximise revenue and profitability. Retailers can also use real-time inventory data to optimise pricing strategies to drive more sales, for example, by discounting overstocked items or knowing when to pause their promotion of an out-of or understocked item.
Retailers with well-managed inventory can also provide better customer service; a huge goal for retailers in Australia’s competitive and innovative retail sector. For example they can offer shorter lead times, accurate delivery estimates, and an overall smoother shopping experience that boosts customer satisfaction and, as a result, loyalty. It also enables them to fulfil orders quickly and accurately, which can result in faster shipping times or reduced shipping costs – benefits that are felt by businesses and shoppers alike.
Inventory management, ultimately, is how retailers replace guesswork with insight-driven strategies that help them to maximise profit margins, decrease excess stock, reduce inventory costs, work more efficiently and provide better experiences for their customers. While consumer spending might be cautious as peak season approaches, their expectations aren’t; but through effective inventory management retailers can meet and exceed those demands and set themselves up for success in the retail rush.
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