Given that retail is largely about selling physical goods, the products that you carry in your store serve as your business’ bread and butter. A major part of being a retailer means keeping your merchandise offerings in top shape and ensuring that you have the right products at the right time.
This is where inventory management comes in.
Sometimes referred to as “stock control,” it’s the process of ordering, tracking, and managing the physical goods that go in and out of your store or warehouse.
In this post, you’ll learn the importance of inventory management and how POS systems work to support your stock control efforts.
Let’s get started.
Why inventory management is important
Staying on top of stock control keeps your business healthy in several ways, including:
When you manage your inventory well, you’re able to stock up on products that sell. You can ensure that your store carries items that your customers want and need, which leads to more sales and revenue.
Monitoring your inventory movements and trends enables you to quickly figure out what’s selling and what isn’t. These insights can inform your decisions around pricing and markdowns, so you can protect your profit margins.
Out-of-stocks are a major pet peeve for consumers and they are costing you valuable sales. Research shows that 66.3% of consumers leave stores empty-handed because the retailer didn’t have the items they needed.
Proper inventory management can prevent stockouts, so you can keep customers happy whenever they shop at your store. Consumers tend to favor retailers that consistently carry the products they need, so having a catalog filled with merch that your shoppers want is a surefire way to keep them coming back.
Shrinkage — which is a reduction in inventory due to theft or admin errors — is costing retailers billions of dollars a year. According to the National Retail Federation, shrink reduced retailers’ bottom line by $46.8 billion in 2018.
Inventory management helps you combat shrink. When you have the right stock control systems and processes in place, you’re able to catch inventory discrepancies early and prevent losses.
The benefits of using a POS to manage inventory
There are several methods and practices to manage inventory. Some retailers go the old school route and keep track of inventory by hand using paper records, receipts, and clipboards. Others use spreadsheets. But the most forward-thinking retailers implement stock control using a modern point of sale system.
The businesses that fall in that third group tend to find the most success, and here’s why:
To be successful with inventory management you need to understand how to use your POS system’s stock control features.
Using a POS system with strong inventory capabilities streamlines your processes by keeping your sales and stock data in sync. Whenever you make a sale using your POS, the system automatically updates your catalog so the product quantities you have in your system reflects what you have in-store.
Modern and digital inventory processes eliminate the need to manually update your records and inventory reconciliation becomes much easier.
It also reduces human errors. Since there’s no need to write or type anything by hand, you can minimize the likelihood of discrepancies and mistakes.
Modern POS and stock management systems can produce dashboards and reports quickly. You can get an at-a-glance view of metrics like profit margins and inventory turnover, which means you’ll have a more accurate view of your business performance.
And if your system runs in the cloud (like with most point of sale solutions today), you can access that information from anywhere.
Now that you know why stock control is important and why you should use your POS to track it, let’s look at the specific tools you can use when managing your inventory.
Your catalog or database houses all the information about your merchandise, including but not limited to:
- Product name
- Supply price
- Retail price
- SKU number
- Barcode number
This tool will serve as your main reference when you and your team need to look up information about specific products. To that end, your POS or inventory management system should make it easy to add and update your catalog.
A good stock control system streamlines your product ordering and receiving processes. Most modern POS solutions come with features like purchase order generators, which enable you to create P.O.s to send to your vendors. Then when the items arrive in your store or warehouse, you can simply mark the purchase order as “Received” and update your stock levels accordingly.
Choose a POS or inventory management system that has strong reporting and analytics capabilities. To effectively manage your stock, it’s handy to have information on:
- Your bestsellers
- Your slow-movers
- Your most profitable products
- Items that are running low
The information above can be invaluable when making decisions around what products to order, when to hold a sale, or which items to discontinue.
Physically counting your merchandise is a crucial inventory management practice. It’s important to regularly check your physical inventory against your records to catch discrepancies and other issues.
Ideally, your inventory system has stock-taking capabilities to make this process easier. Some solutions, for example, offer inventory scanning apps or built-in tools that let you conduct full or partial inventory counts.
You need to connect your inventory management system to the other tools that you’re using. If you run an ecommerce site, for instance, your POS system should integrate with your online shopping cart so that your physical and digital catalogs are kept in sync.
And depending on your business, it may also make sense to integrate your inventory software with your shipping platform, accounting system, or helpdesk software.
Inventory management best practices
Having the right inventory management technology is just the beginning. To truly get the most out of the solution, make sure you’re following the best practices below.
As mentioned above, modern solutions give you access to sales and inventory reports with a wealth of information — be sure to put those insights to good use. Regularly monitor your sales and stock reports and use them to make data-backed decisions.
Having a system that automatically updates your stock levels is wonderful, but that doesn’t mean you can do away with physically monitoring your merchandise. Despite your best efforts, it’s difficult to maintain 100% inventory accuracy at all times.
Items can get misplaced, admin errors could arise, and in some cases, issues like theft can come up.
These things can wreak havoc on your inventory, and the best way to mitigate this is to physically count your products on a regular basis. Ideally, you should count your entire catalog at least once every season, so schedule time to either do a full inventory count or partially count your merchandise throughout the quarter.
Timing plays a big role in successful inventory management. Ordering products at the right time, for instance, prevents out-of-stocks, while knowing when to markdown merchandise can have a material impact on sales and profits.
Stay on top of these things by setting alerts and reminders for when to implement tasks. Most inventory systems, for instance, automatically alert you when an item’s quantity dips below a certain threshold, prompting you to re-order the product before it runs out.
Inventory management opens up opportunities for more business
Stock control isn’t just about keeping your products in check. Tight inventory management practices help you stay competitive and meet the needs of modern shoppers. Consider the following.
Buy online, pickup in-store (BOPIS) has been growing in popularity for a while now, but the demand for the service has surged because of COVID-19. Consumers are increasingly purchasing products through a retailer’s ecommerce site or by calling the store, then choosing to physically head to the shop to pick up their items.
BOPIS / curbside pickup simply isn’t possible without a robust POS and inventory management system. And if you think that BOPIS is just a big box retailer’s game, think again. Small to medium retailers can also implement it, as long as they have the right tools.
The independent retailer Vroman’s Bookstore, for instance, allows shoppers to purchase items online and gives them the option to do curbside pickup.
Showcase your inventory on other channels
Aside from allowing you to seamlessly sell in-store and via your ecommerce site, modern stock management solutions can also open up other sales and marketing channels for your business.
Some solutions, for example, enable you to link your catalog to Instagram, so your fans and followers can browse and purchase from your shop without leaving the app.
Meanwhile, Google now lets brick and mortar retailers showcase their in-store inventory on their Google My Business profile. The search giant acquired Pointy, a solution that integrates with your POS system, and automatically displays your real-time inventory on Google. This allows customers to browse your in-store catalog online, so they can check whether you have what they need before heading to the store.
We can see this in action in Dingo’s, a pet suppliers store in Colorado. Dingo’s Google business profile has a section called “See what’s in store” which lets customers browse and search the store’s catalog.
Consumers have higher expectations and the retail landscape is incredibly competitive, so getting your inventory right is more important than ever. Fortunately, there are several tools in the market that can keep your stock in check. We highly recommend exploring the solutions out there and figuring out which POS and inventory system works best for your biz.