The smell of pumpkin spice in thick in the air! 2023 is already in Q4 and it’s time for retail brands to let in the holiday shopping surge. And “surge” is not an understatement, as reports out of Deloitte indicate that holiday retail sales are expected to increase by as much as 4.6% this season compared to 2022. Not only that, especially ecommerce sales are expected to grow between 10.3% to 12.8%.

We’ve provided tips before on how to maximize holiday sales for your business by leveraging more first-party data, or by launching targeted SMS campaigns. This year, we want to dive into better retail inventory management. With consumers poised to shop more than last year, the significance of streamlined inventory management cannot be overstated.

Don’t believe us? Last year, Walmart misjudged their own inventory and ended the year with stock that far outstripped consumer demand. “That led to a 25% drop in quarterly profits, after it sharply discounted clothing and general merchandise, eroding its profit margins.” - Reuters This year, Walmart is investing heavily into better inventory management via software and automation to make sure that doesn’t happen again.

Let's dive deep into how your stores can avoid a retail inventory management problem like Walmart, and how better management could be the game-changer for your holiday season sales.

Less Dead Stock

One of the most tangible benefits of efficient inventory management is increased profitability by having less “dead stock,” or inventory that is no longer sellable and will never be sold. Perhaps those boots are out of season and you should have ordered 50 pairs instead of three hundred. Dead stock eats into profits and is a waste of every type of resource: time, effort, materials, and more.

Having a firm grasp on the actual inventory your stores need means they can better balance stock to ensure your stores are not squandering resources on storing excess items or missing out on sales due to stockouts. This can be especially problematic for perishable products such as makeup and other beauty supplies. In fact, according to Bloomberg 8% of surplus stock globally is wasted, which translates to $163 billion worth of goods down the drain.

Conservation of Time and Resources

Speaking of wasting time and effort, a well-oiled inventory system streamlines operations. The result? Fewer frantic stock checks, reduced emergency orders, and more focus on enhancing the shopping experience for your customers. Furthermore, having to tend to over- or undersupply can be a huge contributing factor to retail worker burnout during the holidays, which are already stressful enough!

Some retail managers report spending up to a third of their time on just inventory. Cutting that even by 30% means hours saved that can be allocated to actually providing customer support to drive more sales. Better inventory management means that resources are spent more judiciously, leading to overall savings.

Precision in Forecasting

Knowledge is power. Inventory knowledge is like a psychic power. With a detailed overview of past sales and inventory data, retailers can literally predict upcoming trends so that they end up with a near perfect amount of inventory at both the start and end of the holiday shopping season. This foresight is invaluable, allowing for more effective planning and strategy development that can push your brand to be more profitable this year.

Skyrocketing Customer Satisfaction and Loyalty

At the end of the day, retail success hinges on customer satisfaction. With products available when and where they're wanted, shipping hitches become rare, and the overall customer experience is elevated. You might even say that better inventory management frees your team up to provide clienteling levels of service. Happy customers are not just repeat customers; they become brand advocates who can be invaluable during the competitive shopping season.

Keep in mind, if shoppers can’t find what they’re looking for at your store, they won’t hesitate to go somewhere else. Gen Z loves their brands, but they are known to try another brand at the slightest hiccup. Keep your shoppers happy with the right amount of inventory, while keeping your profits happy as well.

So we’ve explored the why. Let’s get into the how.

Understanding the significance of inventory management is just the beginning. The key lies in the effective implementation of strategies that can transform this understanding into tangible results.

ABC Analysis – The Cornerstone of Inventory Prioritization

ABC Analysis is more than just a system—it's a philosophy. By categorizing inventory based on its significance and turnover rate, retailers can channel their attention where it's needed the most. It’s triage and prioritization that is important to get right.

At its core, ABC Analysis is simple: divide your inventory into three tiers of importance – typically defined by how profitable they are to your business. A tier means these products are essential, B tier means they are moderately important, and C tier products are the least essential. Divided this way, it helps your team focus on the inventory that moves the needle the most when given limited time to oversee the warehouse.

Furthermore, since this triage system is based on margin, focusing on your A tier products will account for the majority of your profits (ie the Pareto Principle). If resources are limited, analyze customer demand accurately for your A tier products first. Negotiate with suppliers to lower the cost of your A tier products first. Ensure that you have just the right amount of A tier products first.

In an ideal world, you treat all product inventory with equal amounts of care and scrutiny. That’s why we’re providing these insights now. But we all know how busy the holiday season can be, and sometimes you just have to focus on the best bang for your inventory buck.

Of course you could always invest in technology to help you…

The Digital Advantage: Automated Inventory Management Systems

Modern problems require modern solutions. Automated inventory management systems, armed with AI, provide real-time data, predictive analytics, and automated restocking options. Investing in these systems isn't just advisable; these days it's imperative when keeping up with increasingly efficient competitors.

Automating your inventory management may be worth it for the time savings alone, but its real power comes from scaling up with your business while keeping inventory errors to a minimum. These systems make it hard to oversupply, saving you money, while giving you accurate stock numbers by the hour, in case a surge in holiday shopping necessitates a speedy reorder.

Luckily, some general inventory software is probably already built into your ecommerce store. Shopify, for example, has an inventory page where your team can view inventory, adjust counts, create transfers, and view history.

Lightspeed is another platform to provide you with inventory management insights (and Lightspeed integrates with Endear to boot) for both physical and online stores, while also providing a robust Point-of-Sale solution as well.

Know Your Brand’s (and the Industry’s) Holiday Retail Trends

Be it through the aforementioned automated inventory management software, or manually, an important part of predicting just how much stock you’ll need is to understand the trends in your past holiday sales, as well as current retail trends that are set to surge in popularity.

Track your metrics from previous seasons to get a good gauge on what product types will pop off when Black Friday rolls around. But also take into account your current numbers; are you seeing an uptick in certain sales right now? What products are languishing on your shelves this past month? Take stock, literally, of what’s proving to be popular as we head into the holidays for a clue on what products to order more or less of.

Also keep an eye on the zeitgeist of social media as well as the promotions your peers are running. All this can provide a good idea of what items you have in your store will be popular gifts this season.

Audit, Audit, and Re-audit

It's a given—mistakes happen. But in the world of retail, even minor errors can have cascading effects. A robust auditing system for stock receipts can nip these errors in the bud, ensuring that inventory data remains pristine. And at the end of the day, repetition of an established auditing process is the best way to prepare not just for the holiday shopping season, but throughout the year.

That’s right, practice and preparation are key to inventory bliss. Better inventory management stands tall as the backbone of a successful holiday season for your brand. It's the unsung hero ensuring shelves are stocked, customers are delighted, and sales figures reach new heights.

The holiday season isn't just about selling; it's about delivering unforgettable experiences. By embracing and implementing the right strategies, retailers can not only navigate the holiday season but truly shine, setting new benchmarks for success and customer satisfaction. Let superior inventory management be your secret weapon this year.