When it comes to retail profitability, a significant factor that’s often overlooked and under-optimized is inventory management. Your inventory is your greatest asset, but it can easily become one of your biggest liabilities.
Annually, retailers lose $1.75 trillion due to overstocks, out-of-stocks, and preventable returns, and the combined impact of these inventory cost drivers typically results in up to 11.7% in lost revenue for individual retailers. That’s an 11% total revenue loss across the board – for companies big and small, omnichannel to single channel, from apparel to sporting goods.
Getting to the Core of Inventory Control Challenges
Why is inventory management such a persistent challenge for retailers?
Antiquated systems are pervasive, redundant, and error-prone – Legacy systems, spreadsheets, and other antiquated inventory tracking methods are ingrained in the processes of many retail businesses and are proven to cause time-consuming redundancies as well as costly productivity losses and errors. In a recent survey, 62% of respondents reported human error from manual processes as the top root cause of inventory fulfillment issues.
Omnichannel complexities hinder operational scalability – The more sales channels and fulfillment centers you operate to respond to omnichannel demand, the more difficult it is to accurately track and manage stock quantities across all those distributed locations and systems. These complexities coupled with the inefficiencies of the outdated systems cause out-of-stocks, overstocks, and overselling that cut into companies’ profit margins and ultimately hurt their bottom lines.
Siloed data contributes to a lack of visibility – While some seasonal and promotional demand patterns are predictable, the more channels you sell through, new products you launch, or new markets you enter, the harder it becomes to forecast demand. In fact, most companies only analyze a mere 12% of their data because for most retailers, the data needed to inform these important purchasing and merchandising decisions live in disparate systems.
The Future of Retail Operations
While front-end retail systems have kept pace with technology, the back-end operational systems that support eCommerce sites and online marketplaces have fallen behind. Many retailers have resigned themselves to dealing with these inefficient operational systems, but there is a new breed of cloud-based, multichannel operations platforms that are bridging the gap to bring retail operations into the 21st century. Modern retailers shouldn’t have to settle for manual and redundant processes, siloed data, and a lack of visibility that contributes to poor inventory management and unnecessary costs.
You need the agility, flexibility, and interoperability of tech-forward inventory and operations platforms, like Stitch Labs, to gain the supply chain transparency and operational efficiency needed to maximize profitably while meeting the demands of today’s omnichannel customers. By syncing all your accounting, purchase orders, sales channels, POS systems, warehousing, shipping and fulfillment technologies, Stitch can streamline your existing tools into a customized, automated, and scalable workflow.
This kind of automation and centralization are enabling rapidly growing multichannel retailers – like Chubbies, Flash Tattoos, and Nomad Goods – to accurately track inventory and business data across all sales and fulfillment channels. Having purchase orders, stock counts, sales data, and shipping and fulfillment information in a single location has helped Stitch customers improve inventory and operational efficiencies by an average of 39%.
In the case of consumer electronics retailer, Nomad Goods, 90% of operational duties and tasks are now automated and “off the team’s plates” thanks to Stitch and the integrated technology stack it’s enabled. This new level of streamlined efficiency has significantly reduced the popular company’s costly out-of-stocks. Nomad co-founder, Brian Hahn, said, “The cost of an inventory solution like Stitch Labs paid for itself immediately by allowing us to avoid being out-of-stock for even just one day per month.”
Do you know how much your current inventory processes are truly costing you?