Retailers have long met challenges with inventory accuracy. While technology has provided approaches to improve reliability, the importance of inventory accuracy and its alignment to reduced costs and higher profits is greater now than ever before. In this post, we’ll be unpacking the role of inventory accuracy, pre- and post-COVID, and how it contributes to reducing costs and increasing profitability. At the beginning of 2020, the future looked fruitful for retailers. Many brands were growing, both in eCommerce and brick and mortar. How did retailers view inventory accuracy? They certainly understood its value, especially as BOPIS (buy online pickup in-store) was gaining ground. To assure the sustainability of BOPIS and provide positive experiences for customers, having items in-store was vital.
Retailers were leaning into BOPIS for a few reasons pre-COVID. eCommerce models that delivered goods directly to the customer’s home were becoming cost-prohibitive due to returns and shipping costs. Less foot traffic was also a concern. With BOPIS, they fulfill at the store, so there are no shipping fees, reducing the cost of the transaction. Customers also had to come into the store physically, and there’s a good chance they’ll make an additional purchase.
The push to this model was working. According to Statista, 83% of consumers had used this method pre-COVID. Before COVID, most retailers still only conducted inventory counts once or twice a year. As they moved away from that date, accuracy degraded. Businesses were starting to realize they needed to do more because the cost of not having the product in stock was more than just losing a sale. It could also upset a loyal customer. Instead of focusing on inventory accuracy, the response at that time was simply to elevate BOPIS stock, which meant an increase in inventory, which has its own risks. Once the pandemic hit, most retailers remained open, if essential, but shoppers had significant concerns about shopping in-store. BOPIS was a quick way to fill the gap. Customers also wouldn’t have to come into the store using a curbside pickup model.
Consumer buying behaviors changed rapidly, causing many to try BOPIS in the grocery category. Prior to the pandemic, most shoppers were not adopting grocery pickup. It remained something most wanted to do in-store.
The trend of BOPIS experienced exponential growth. eCommerce platform KIBO provided some key stats. In May 2020, their users had a 554% year over year increase. It was still at 347% in June. For customers to fully adopt and be confident with BOPIS, they have to be able to get the products they expect. Many retailers must restrain what items are available for BOPIS because they don’t have accurate inventory reads. The ability to have more accuracy would help them expand their offerings and meet customer demand.
In the case of BOPIS, it’s likely retailers would be best served to use category counting. Not every subset of their products needs regular counting, just the most ordered items for BOPIS transactions. Another aspect that’s rapidly changing is how retailers view shrinkage and inventory. The idea of shrinkage is evolving from more than just a loss prevention standpoint, looking at risks along the supply chain. Industry insiders have also changed the vernacular, calling it profit maximization. There are four key areas of this new concept: corporate, eCommerce, distribution, and on-premises. There are numerous risk points across the entire journey—managing risk during the pandemic created new challenges. Having access to more accurate inventory numbers can help retailers manage the whole life of the product, leading to a decrease in costs and a boost in revenues. There are several trends in retail you can expect to be part of the story post-COVID. BOPIS will continue to trend up, but there may be a new iteration—reserving online. A customer could reserve an item but not actually pay for it until coming to the store and confirming it’s the right size, color, etc. This model still gets customers back into the store for the opportunity to buy other items.
Brick and mortar stores will rebound once the pandemic ends, but it will take some time. Retailers will need to deliver unique experiences once they do. They also need to know more about their shoppers. If a customer enters your store and uses your app, there's a notification that informs you of this. This knowledge allows you to send push notifications with recommendations or discounts to increase the total sale.
Perpetual accuracy in inventory will matter significantly post-COVID. Many retailers have accepted inventory accuracy degrading over time. You don’t have to and will need to rethink inventory counting strategically. In many cases, this won’t require more full counting but category and cycle counting to satisfy your audience's specific needs. Before COVID-19, retailers were beginning to implement RFID. Prior inhibitors around tag costs and integrating the data with the existing infrastructure were diminishing. Brands like Macy’s and Nike were implementing it.
When COVID happened, the momentum slowed down considerably. Retailers needed to shift their investments. RFID reading of inventory would give you a near 100% accuracy. As a real-time inventory solution, RFID is likely to reawaken post-pandemic, but widespread adoption isn’t likely for some time. The benefits of inventory accuracy are substantial, as detailed. One of the most critical ways it delivers value is the data. When you have more inventory counting, you have more data. You can then analyze the inaccuracies in inventory and track that behavior. Ultimately identifying supply chain or loss prevention issues causing these discrepancies.
Data is the greatest leveler in business. No matter a retailer’s size or market share, collecting and evaluating data provides insights. You’ll learn what categories you need to count more often, which should dive efficiencies. You have in-demand items in stock but at the “right” number so that inventory isn’t sitting. With this intelligence, you can avoid deterioration of operational efficiency. For more insights on the subject, we invite you to view a recent conversation with Datascan CEO Adrian Thomas on the topic. Watch now.