To count or not to count
To Count or Not to Count: Understanding the Impact of Inventory Counting on Retail Sales and Loss

June 14, 2021
By Adrian Beck

I recently took part in a Datascan Roundtable with Adrian Thomas, President and CEO of Datascan, and David Erasmus, their Director for EMEA, to discuss developing issues around the issue of inventory counting and its impact upon retail sales and loss. For many years, the issue of inventory counting has been much debated – some believing that more counting simply creates more errors and therefore should be kept to a minimum, while others have advocated that regular counting provides a valuable way to ensure retail businesses can maximise their profit potential through enabling them to have the right products in the right place, at the right time, and price.

One of the reasons why this debate has remained active for so long has been the relative absence of independent and verifiable studies to understand the impact of inventory accuracy upon retail sales and the role counting can play in achieving this goal. Another, perhaps more important reason could be that customer expectations concerning product availability have been relatively low in the not-too-distant past. Being told that the item you want is not available in the physical store being visited was not an unusual experience for many shoppers, certainly in apparel. In many respects, this epitomised a shopping environment where dominant retailers essentially dictated the look and feel of the consumer landscape – you can buy what we have to sell.

A Different Retail Landscape, a More Demanding Shopper

How things have changed. Not only has recent research offered concrete evidence to show that having more accurate inventories leads directly to an increase in retail sales, but consumer expectations, indeed demands, have changed dramatically. The acceleration in, and scale of, online/omni channel shopping has really changed the power relationship between the shopper and the retailer. The convenience, and more recently, the sheer necessity of shopping online has empowered the consumer – not being able to make available the products that they want in a timely fashion is increasingly not an option, certainly if a retailer wants to remain in business. The online shopper can move with lighting speed from one retailer to another searching for the products they wish to purchase – physical proximity is no longer a defining issue to the keyboard consumer.

A Different Retail Landscape, the need for Dynamic Inventories

For a large number of established bricks and mortar retailers this change brings many challenges and indeed opportunities – challenges in terms adapting their business models to meet the growing interest in omni channel retailing, but opportunities in terms of better utilising their extensive network of physical stores and distribution nodes. Certainly, there has been a considerable increase in the use of retail stores to double up as online order fulfilment/return centres, which can significantly improve stock optimisation. But, and it is a BIG BUT, this can only work if the retail business has a very clear, timely and above all, accurate understanding of what stock is available in any given location.

For instance, it is unlikely to end well sending an online order request to store that you think has the required product but does not actually have it. Staff sifting through backroom areas looking for stock is not a productive proposition. Equally, having to contact an expectant shopper with news that their desired product is now not actually available, or worse still, giving them this news face-to-face after they have made a special journey to take advantage of Buy Online Pick-up in Store, is not an endearing outcome likely to generate future consumer loyalty. The importance, therefore, of having a means to establish and maintain accurate inventory accuracy has become fundamental, indeed, potentially mission critical, to retailers wishing to operate in an omni channel environment.

Asking the ‘Right’ Question

There of course, many ways in which inventory accuracy can be achieved – various technologies have been developed that can help automate this process, including handheld scanners, video analytics, robots, RFID and so on. But, what needs to change first is retail awareness that inventory accuracy really matters when it comes to securing future business profitability. The days when 60% stock accuracy was deemed perfectly acceptable are long gone, and so perhaps the key question now is no longer whether to count or not to count, but can you afford not to count? The prevailing evidence would suggest not.

My thanks to Adrian Thomas, David Erasmus and Beck Corthell from Datascan for inviting me to take part in this discussion, and Daniel Litwin from Marketscale for ably hosting the event – a recording is available HERE.

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