Investing in your retail business is one of the best ways to help your business thrive. The challenge, however, is having a clear perspective as to how to invest in your business. Pinning your focus on buffing up your inventory management system can help to illuminate your unique path to profit when managing your retail business… yet the question remains, how does this happen?
If you need a stronger understanding why inventory management is critical to your overall business vitality, read on to learn more about inventory management software (aka stock control software) and how it can help to refine your daily business operations.
In this guide, we’ll whittle all of these complexities down into five simple steps that will offer insight on why inventory management systems matter, how to budget and prepare for inventory management software, how to identify which system is right for your unique business needs and much, much more.
As you begin to learn the ins and outs of stock control systems, keep in mind that it’s impossible to cater to your customers’ needs without having the right inventory in stock. Having the right products at the right time can grant your business strengthened customer retention, enhanced product sell-through, stronger store operations and (most importantly) greater retail success!
Ready to rock your retail goals in the year ahead? Look no further than the pointers below.
Step 1- Understand your stock control needs
The first step to finding the best inventory management or stock control system is determining your needs. And to do that, you need to evaluate the efficiency of your existing systems as well as the results that you’re currently getting.
Many retailers are unsure as to whether their business is operating at average or above average efficiency. Of course, every retail business has a unique set of inventory management requirements, but there are specific KPIs (key performance indicators) that apply to the majority of retail and wholesale operations.
To give you an idea of how your business stacks up against the competition, we’ve put together a quick inventory evaluation guide to help you to assess your business processes for efficiency across ten major inventory management KPIs.
Evaluating your inventory performance
This quick guide is to be used after performing a routine inventory audit in order to get a feel for whether your business is functioning at its maximum potential. Additional formulas to use during your seasonal inventory audit include the analysis of GMROI, Shrinkage, Sell-Through Rate, Stock Turn and Product Performance – which you can learn about in more detail here.
Once you’ve done the math, answer the following ten questions quickly and honestly.
Yes, you read that right… quickly and honestly.
Do this without second-guessing yourself, since the goal of the evaluation is ultimately to help you identify where your business excels and where you might need a little work.
- How often do you run out of inventory?
- Do you lose money due to over-ordering or excess stock?
- Have you implemented a barcoding system to track and label your inventory?
- Is your warehouse cluttered, or are the main aisles clear and easy to navigate?
- Similarly, how long has it been since your last safety hazard?
- How much time does your warehouse staff spend in transit?
- Are you pulling sales data from your inventory management system?
- Can you easily change and modify orders, or create bulk packages?
- Does your system automate promotions and discounts, or do you do it all by hand?
- What type of feedback do you receive from customers on the product once it is delivered, such as shipping times, packaging, product damage, etc.?
Use your answers to these questions as reference points, so you can begin to identify what areas of your business are operating at full capacity and where there is room for improvement.
For example, if you find that you’re always running out of inventory, then that indicates that you may need a stock control system that enables you to better stay on top of merchandise movements.
Or, if your existing system requires a lot of manual work, then it means you should look into solutions that can automate your processes.
Don’t get too bent out of shape over a few undesirable answers, however. The opportunity to improve your business operations is available – it just takes your recognizing the need for this improvement to make it happen.
The next step is learning how an investment in the right inventory management solution can maximize your profits and reduce your workload, all while requiring minimal effort on your behalf – something any retailer can appreciate.
Step 2 – Recognize the value of inventory management software
Inventory management is a valuable and necessary investment for retailers, as it can help to streamline every aspect of your company’s operations (insert drumroll please). In addition to maximizing ROI, inventory management software can help to facilitate more rewarding relationships with your customers, vendors and employees alike by alleviating the burden of tracking inventory while struggling to juggle your daily operations.
Expanding on this, let’s explore how the right inventory management system can help your back-of-house activities perform at their best. In fact, you may just even discover these points to be music to your ears!
#1. Forecast future inventory
Out of all of the potential functions of inventory management systems, Statista reports that forecasting future inventory is where retailers invested the most heavily in 2017. As a matter of fact, over half — 61.3 percent — of respondents reported inventory forecasting as their number one investment priority.
Inventory forecasting enables you to make buying decisions based on data versus guessing what items may be most popular in your sell-through. It also allows you to weigh past sales against current trends to identify actionable insights that can help you choose specific products to stock up on for future inventory deliveries. This data can help to strengthen your inventory buying actions so that you’re only ordering the products your customers actually want.
#2. Customize product pricing
It is easy to underestimate the power of personalization, but Business2Community reports that 79 percent of companies that beat their profit goals for 2017 had a working personalization strategy at play. This is particularly important if you have multiple stores or warehouse locations – since you’ll need an inventory management system that is equipped to implement customized pricing strategies per individual business location.
With the right inventory management software, you can implement discounts and/or offer bulk product pricing for specific store locations. Plus, your inventory management software can assist in facilitating automated promotions which can then be programmed to run for a pre-specified amount of time, or adjusted accordingly per each location. This personalized touch is what defines effortlessly successful retailers from those who are constantly struggling with their inventory management systems.
Are you ears ringing yet?
#3. Track & consolidate orders
According to Entrepreneur, “insufficient inventory means lost sales and costly, time-consuming back orders.”
Luckily, you can opt to go with an inventory management system that sends you an alert whenever your stock of a specific product gets below a certain level, or even set up automatic reorders on your most popular products – helping you avoid a lapse in inventory of your best-selling products.
On top of inventory alerts, you can also ease your daily business operations by implementing a barcode-based product categorization system which can minimize warehouse clutter and cut down on travel time for your hourly employees.
The above points should have provided you with some clarity as to why inventory management software is a critical component to incorporate into your inventory management strategy at large. This is especially important as retail continues evolving and customer expectations become stronger with each year that passes. Retailers aren’t in Kansas anymore, so it’s time to hunker down and take action where you can to put your business ahead of the pack. Having an inventory management system in place will soon be a must – if it isn’t already a necessity to help retailers stay ahead in our global, competitive retail landscape.
Step 3 – Figure out the cost of your inventory management system
Savvy business leaders understand that it often takes money to make money. Investing in inventory management software is no exception… but the good news is that this investment does not have to break your bank.
By assessing your company and honing in on where inventory management software can help your business run more smoothly, you’ll be better prepared to identify how much money you need to get software that can maximize your ROI. Sounds pretty nice, huh?
To help, consider the following two factors when making your decision:
#1: Software investment range
Inventory management software prices run the gamut — from $99 a month to $2,000 a month — so correctly budgeting your resources is key to reap maximum ROI from your investment. Yet the questions remains… how much should your unique business pay for your inventory management software needs?
In short, it depends on what features you’re looking for, as well as how many store locations and payment processing points you want to service.
For example, Vend’s pricing starts at $99 a month, but can go up if you require features such multi-store inventory management or stock transfers between outlets.
#2: Insights into your own business
To determine how much your company should be investing annually, measure your profit goals against your annual sales and existing liquid capital. While the cost of an inventory management platform may at first seem a bit daunting, many retailers report seeing up to 75 percent annual growth from their initial investment, plus thousands in profits and up to 100 percent in increased customer engagement.
If that’s not music to your ears, we’re not sure what is.
That said, if you’re still having budget concerns, see if the inventory software vendors that you’re considering offer free trials. If they do, take advantage of your trial period. Use it explore their software and get a feel of how it can help you make up for your investment.
Step 4 – Choose the right inventory software for your specific business
Now that you have a stronger understanding of the costs involved with inventory management software, you’re ready to take a look at the price and benefit of different platform features to determine which type of software is right for you.
Use the following Cost Versus Capabilities Assessment to decide which features are must-haves for your retail biz.
Cost versus capabilities assessment
Use these action-oriented questions to determine what features you need from an inventory management platform.
1. How many employees need access to your inventory management software?
a. Just Me!
b. 2-15 employees
c. 15 + employees
2. How large is your business?
a. 0-1 store
b. 2-5 stores
c. 6 + locations
3. Do you sell and accept gift cards in your store?
a. No, I don’t want to
b. Not yet, But I hope to
4. Does your software need to be compatible with an existing Loyalty Program?
a. I have no intention of implementing a customer loyalty program
b. I don’t have a Loyalty Program in place yet, but hope to in the near future
5. Does your store have multiple locations and need advanced promotional needs as a result?
a. No, I only have one store
b. I have multiple stores, but I’m not sure that they have different promotional needs
c. Definitely – I have different pricing strategies for each store location
6. Do you sell on multiple channels (online, in-store, mobile, social)
a. Nope – I have one store and that’s it
b. I have a store, website, or app, but they’re not really connected to each other
c. I do – and I need inventory support across channels
Analyzing your results
If you answered mostly a’s: Your inventory management needs for your small business are constantly growing. You don’t need a ton of features, but want a reliable platform that consolidates your business operations and leaves room for growth/add-ons as your company continues to expand.
Considering Vend? Our Lite Plan allows small business owners like you to add additional registers, platform users and retail outlets at minimal cost.
If you answered mostly b’s: You run a mid to large-scale retail business and you’re looking for an inventory management platform to help your business level-up. While you may not need ultra-advanced features such as stock transfers between outlets and cross-timezone capabilities just yet, you’re running an advanced retail operation and are ready for a little tech help from the right inventory management platform.
If this is you, feel free to check out Vend’s Pro Plan to get all of the helpful features your business needs.
If you answered mostly c’s: Congratulations! You have an established retail business which already spans across multiple locations, so you’re in the market for an inventory management platform that can help you manage pricing, promotions, stock inventory, and track revenue throughout all of your platforms and store locations.
Vend’s Enterprise Plan might be the perfect fit for your advanced inventory management needs.
Step 5 – Set up and deploy the system in your store(s)
Your communication with your software vendor is one of the important factors in preparing to set up your new inventory management system. It can take anywhere from a few hours to a few weeks to get your inventory management system up and running, so great communication is essential to get a handle on what type of time commitment you are looking at in order to prepare your employees and store operations on the big day.
Contact your vendor before the set-up date to ask for a list of things to do in preparation for your inventory management system to roll out and begin functioning at full capacity right away. If your provider doesn’t have this info available for you, this may indicate they’re not the right provider to be working with to begin with… just sayin’.
Things you’ll need to correctly set up your stock control system
The early bird catches the worm, as the saying goes, and this holds true for how you prepare for your vendor setup appointment. You can speed up this process by preparing your store and your inventory prior to the delivery of your inventory management software – ensuring you’re well prepared and use your time as efficiently as possible once your vendor is onsite at your store.
While every vendor varies, here are the things we recommend you include:
- A list of all of your products
- A list of your product prices and tax information
- A list of your products’ SKUs or barcodes and
- A list of all of the clients in your database.
Once you’ve compiled this information and connected with your vendor, you’ll be ready to put your new inventory management system to work. Soon to follow? Some cha-chings and high-fives thanks to the ease and efficiency inventory management software offers.
The vendor/client relationship
It is important to work with a vendor who will make themselves accessible to you throughout your set-up process… and beyond. You’ll be working with complicated and comprehensive retail technology, so the vendor / client relationship is a critical one to nurture and feel confident in so you don’t end up wasting time on technicalities due to poor communication.
Choose a solution provider who is easy to reach whether online, over the phone, or booking set-up consultations to ensure your inventory management system is always functioning at maximum capacity – you should feel 100 percent confident that no matter what, you’ll have support along the way.
After all, relationships in life aren’t always easy so why create another one that may be difficult? This is definitely something you should aim to avoid.
As you look ahead and plan for the future, take a look at the most important pieces that make up your retail puzzle. Inventory makes up a considerable part of this puzzle and without the right software in place to manage it, your business simply can’t connect the components to become the final masterpiece it’s meant to be. Keeping this in mind, aim to make inventory management your #1 goal to help maximize your retail business.
About Francesca Nicasio
Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.