Omnichannel Inventory Management: Guide for Retail Brands
Posted by Julia Morrissey on Apr 15, 2024
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For some retail brands, undergoing an omnichannel transformation may seem daunting. This is especially true for brands that haven’t yet blurred their physical and digital shopping channels. While omnichannel transformations encompass many elements, one remains critical to achieving success: omnichannel inventory management.
Today’s consumers toggle between many shopping channels, and mixed-cart transactions continue to rise in popularity. Therefore, it’s more important than ever for brands to invest in and optimize omnichannel inventory management.
Read below to learn how omnichannel inventory management helps brands drive full-scale omnichannel transformations.
We cover:
Omnichannel inventory management is a strategic approach to overseeing and controlling inventory across multiple sales channels seamlessly. It involves centralizing inventory data to ensure real-time visibility into stock levels across physical stores, online platforms, and other distribution channels.
By synchronizing inventory levels and optimizing order routing and fulfillment processes, retail brands can provide customers with a consistent shopping experience regardless of the channel they choose. This approach also facilitates offering various fulfillment options such as ship-from-store and in-store pickup to enhance flexibility and convenience for customers.
Investing in omnichannel inventory management offers several key benefits for retail brands.
Inventory accuracy, which measures inconsistencies between recorded and physical inventory, is key to providing seamless omnichannel shopping experiences. Consumers expect to see real-time product availability across all retail channels.
They also want the option of ordering products through various channels. As a result, inventory accuracy leads to more order fulfillment and better customer satisfaction. It also helps with loss prevention by ensuring it accounts for each product.
Putting more data into the hands of sales associates better equips them to do their jobs. Staff that has access to inventory management tools can guide in-store shoppers directly to their preferred products.
Sales associates can also cross-sell and upsell other pieces of available stock. The clienteling data that inventory management yields helps associates better anticipate customers’ demands, especially for top-selling items.
With strong inventory management platforms, brands can lower amounts of excess stock. They can also only order the exact amounts of items they need from the manufacturer.
If a product isn’t selling well, the platform will flag that information. Staff members can then adjust their purchasing accordingly. Stores can also transfer inventory between locations to achieve more optimal stock levels.
Sell-through rate calculates the amount of inventory a retailer sells as it relates to the number of items purchased from the manufacturer. Brands frequently examine their sell-through rates to ensure they hit their sales goals.
Brands that invest in inventory management platforms can calculate more accurate sell-through rates. This helps them identify which products are selling well and which are not meeting sales goals. Sell-through rates can also help forecast trends if a particular item is exceeding expectations.
Brands that deploy inventory management tools can gain a more holistic understanding of their ordering strategies. The tools can help uncover inventory shrinkage, find opportunities for tax write-offs, and more effectively manage inventory turnover. This enables brands to maintain better liquidity.
Not only does inventory accuracy enhance in-store experiences for customers, but it also improves the post-shopping experience. When stores can track and allocate orders in real time, they can then fulfill the orders promptly and send them to customers more quickly. Inventory accuracy also reduces the potential for errors in labeling and shipping orders.
And even more importantly, it gives shoppers more control over how they would like to receive their orders. If a nearby store or warehouse has the purchased items in stock, customers can use buy online, pickup in store or reserve online, pickup in store options to retrieve them at their leisure.
While omnichannel inventory management offers numerous benefits, it also presents several challenges that brands must navigate effectively.
Maintaining accurate and real-time visibility of inventory across multiple channels can be challenging, particularly without the right technology. Discrepancies in inventory data between different systems or locations can lead to stockouts, overselling, and customer dissatisfaction.
Fulfilling orders from multiple channels while optimizing inventory allocation and fulfillment routes adds complexity to logistics operations. Balancing inventory levels across warehouses, distribution centers, and stores requires sophisticated algorithms and efficient processes.
Likewise, managing returns across multiple channels poses challenges in terms of processing, restocking, and reconciling inventory. Different return policies and procedures for online and offline channels add complexity to reverse logistics operations.
Integrating diverse systems and technologies, such as inventory management software, POS systems, and ecommerce platforms, requires seamless data exchange and interoperability. Compatibility issues and data silos can hinder operational efficiency and data accuracy.
Maintaining inventory across multiple channels incurs additional holding costs, including storage, insurance, and depreciation expenses. Optimizing inventory levels to minimize holding costs while ensuring product availability is a delicate balance.
Customers expect consistent and seamless experiences across all channels, including product availability, fulfillment options, and returns processes. Failing to meet these expectations can result in lost sales, negative reviews, and damaged brand reputation.
Consolidating inventory data into a single platform will help you achieve a competitive advantage. By investing in omnichannel inventory management, you can significantly improve the shopping experience, while also minimizing costs.
Inventory management platforms maintain accurate records of all goods across all channels. This allows retail brands to leverage cycle counting to pinpoint any discrepancies and ensure stores display all available products. Brands can also ensure they are making necessary adjustments for missing or damaged items.
Use historical sales data, market trends, and other relevant factors to forecast demand accurately. This helps in optimizing inventory levels and reducing the risk of overstocking or understocking. With accurate forecasting, retail brands can strategically transfer products between locations to match varying supply and demand.
Having an accurate view of inventory will allow brands to develop intelligent algorithms or rules to route orders to the most appropriate fulfillment location based on factors such as inventory availability, proximity to the customer, and cost-effectiveness. This will get shipments to customers faster, while reducing costs and promoting sustainability.
Provide customers with various fulfillment options such as ship-from-store, in-store pickup, and curbside pickup to optimize inventory utilization and enhance the customer experience.
It’s almost important to develop a standardized returns process that allows customers to return items purchased online to physical stores and vice versa. This ensures a consistent and hassle-free experience for customers across all channels.
A mobile point of sale (mPOS) is crucial for omnichannel inventory management success. With a mPOS brands can fulfill orders more efficiently and provide a superior customer experience. Additionally, leveraging POS data for inventory management enables retail brands to gain valuable insights into sales trends, customer behavior, and inventory performance, empowering them to make data-driven decisions.
To be successful, it’s critical to regularly monitor key performance indicators (KPIs) such as inventory turnover rate, sell-through rate, and order fulfillment time. By analyzing these metrics to identify areas for improvement, brands can optimize inventory management strategies accordingly.
Faherty Brand’s Global Operations Lead Mark Engebretson recently discussed the symbiotic relationship between inventory management and omnichannel success in an interview for the Endless Aisle podcast.
According to Mark, strong inventory management helps brands meet customers however – and wherever – they prefer to shop. It also mitigates any potential supply chain challenges, which impacts brands’ ability to serve customers worldwide. Mark also emphasized how inventory management tools enable brands to keep track of serialized inventory. Most importantly, he discussed the tool’s ability to save sales associates time, so they can spend more time assisting customers.
Ultimately, by investing in omnichannel inventory management, brands can take a big step forward into their omnichannel transformation journeys.
To learn more about how a single inventory management solution can fuel your brand’s omnichannel transformation, check out NewStore’s Inventory Management fact sheet and speak with one of our experts today.
