Why Inventory Precision Will Help You Drive Sales (and How to Achieve It)
Midsized retailers lacking an accurate inventory run the risk of losing customers, especially if a competitor has the same or a similar product. According to an IBM study, if an item is out of stock, and the store can’t find the item in another location, 72% of customers will switch to a competitor. Keeping an up-to-date inventory is vital, especially as the retail industry continues to evolve. Simply put: If you don’t have it, customers won’t stick around to buy it.
An Auburn University study found that the average retail store’s inventory accuracy sits at a whopping 65%. Customers may stick around the first time an item is out of stock, but by the second incident, they’ve likely run out of patience. Low inventory accuracy often leads to lower sales, frustrated or lost customers, disorganized stores, damaged reputation, and lost sales.
Across the retail industry, stores can feel the effect in their registers, as retailers lose nearly $2 trillion from out of stock items each year. The best way to prevent this from happening? Make sure your inventory is accurate, regularly updated, and visible for all employees.
Retained Customers Equal More Sales
Today’s consumers are accustomed to getting exactly what they want and need, especially in this era of Amazon. Customer retention is a significant sales driver. Losing your existing customers for any reason has a big impact on your bottom line. In this fast-paced retail world, midsized retailers must do whatever it takes to attract new customers, yet also retain customers as well. Acquiring a new customer costs five to seven times more than retaining a customer.
After you manage to get new customers through the door, you need to sell to them. The probability of selling to a new prospect is 5%-20% compared to the 60%-70% for an existing customer. Deliver the goods your customers want, and they’ll come back. Continue to market to your existing customers for a higher ROI than when you market to a new customer.
Inventory Precision Helps Forecast Demand
Having a precise inventory also lets you forecast demand and reduce your ship-to-store wait time.
Say you have a pair of sneakers that are selling really well. Your inventory management software shows you the sales figures at Store A and Store B. You have 100 pairs left in the warehouse, and customer interest seems high. If you know how many you sold previously as well as how many you have in stock, you can forecast exactly how many you need to allocate for each store and how long before you run out of stock in-store.
Like any midsized retailer, you likely have a warehouse of inventory, and an accurate inventory lets you minimize those long waits for warehouse products to ship to the store. You’ll be able to see when you’re running low, forecast how many pairs of shoes you need, and get the products to the store quickly before you run out.
Empower Associates for Better Sales
When your staff assists customers, they want to find the desired item quickly, and let the customer know if it’s in stock at the current store or another location.
Having an accurate inventory powered with software means that your numbers are updated with each sale and lets your staff be aware of current stock numbers at just a glance. Employees can easily identify which store location has the customer’s requested item or if it’s due for restocking in X days. This in turn lets them upsell an item or offer to order it for the customer.
The above IBM study also found that if staff can locate the same item at a different location, 79% of customers will buy it at the out-of-stock location.
Turn Slow-Moving or Old Inventory into Cash
An accurate inventory can drive sales in other ways. What if you have too much inventory at the warehouse?
Slow-moving inventory takes up valuable space. If you need to move it, then you have a labour cost. Add in storage costs and you can quickly see how stale inventory is a costly expense. Inventory precision software lets you pinpoint slow-moving stock or excess stock.
You can then create a promotion, bundle it with a high-selling item, or reposition it in your stores. Using warehouse management software will also keep you updated on how to handle end-of-season distribution, so that you free up valuable space on your shelves.
Final Word: Get the Right Technology
Inventory precision is one of the best ways a midsized retailer can compete in this on-demand world. As you look for ways to improve your inventory accuracy, your attention must turn to your warehouse and supply chain. To help with that, Magstar Total Retail offers automated processes for reordering, distribution and inventory tracking, so that you can effortlessly manage your inventory levels across your entire store chain.
If you’d like to check it out, Magstar President Steven Greenwood would love to give you a quick online demo at NRF 2020 (Jan. 12-14).
Can’t wait? Book a chat with him right now!
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