Why inventory accuracy should be the top priority for retailers in 2024
The rapid adoption of AI has already started to change the way companies interact with customers, delivering greater personalisation at scale and freeing up employees to focus on more personal, truly human interactions. Unfortunately, the downside of using AI is that customers will find it increasingly difficult to determine the difference between real content from brand influencers or via social channels and what is fake, resulting in customers relying on the people and brands they truly trust.
Trust is the most fundamental component of any customer relationship, and this extends to retailers. To fulfil a promise – of sending an item to the customer they have ordered and paid for in the agreed timeframe.
Despite this, a recent survey found that almost 40% of retailers have to cancel at least one in ten customer orders, primarily due to inaccurate inventory data. Simply put, poor inventory visibility means they are selling products they no longer have (known as overselling), which not only impacts customer trust but also reflects deeper operational inefficiencies and lost revenue.
Inaccurate inventory data doesn't just cause overselling, either. It can also lead to existing stock sitting in locations where customers can't access it, which can be just as problematic, if not more so. This is because the retailer misses out on valuable sales, the customer is disappointed at not being able to buy something they want, and the inventory is left to gather dust, resulting in a lose-lose situation.
Digging deeper into the stats reveals how endemic this problem has become. Just 6% of retailers and direct-to-consumer brands have a cancelled order rate under 1%, while almost six out of 10 have less than 80% inventory accuracy. The main reasons for this are outdated data from POS and ERP systems, legacy system integration issues or siloed inventory views.
Changing customer expectations is adding further fuel to the fire for retailers. Gone are the days when payment security was the primary focus of trust – customers now demand total transparency across both product availability and delivery commitments. The frustration that results from cancelled orders can cause irreparable damage to a retailer's reputation and erode hard-earned customer confidence.
Technology holds the key.
With the negative impact of poor inventory management clear to see, forward-thinking retailers are turning to technology to resolve these issues. In fact, the leading 7% of retailers are now using data-driven solutions to ensure their inventory is updated every five minutes or less. Doing so keeps their inventory data as current as possible, which significantly reduces the chances of inadvertently overselling (or underselling) products.
The leading order and inventory management systems go even further by maintaining real-time synchronisation of inventory data across all warehouses, platforms and stores, resulting in unprecedented levels of accuracy and reliability. Real-time insights can also be used to align online advertising efforts with actual inventory levels, reducing wasted ad spend and ensuring customers can purchase items they see in adverts.
By automatically updating sales channels with current stock levels, these technologies allow retailers to quickly identify trends, manage inventory effectively, and optimise stock allocation, all of which are key to maximising revenues. During peak sales periods like Christmas, this approach becomes even more valuable, helping retailers balance aggressive advertising efforts with rapidly changing stock levels. A real-time view of inventory also helps increase conversion rates, which is key for retailers looking to grow.
In a world where customers are only too willing to share their shopping experiences online – both positive and negative – even small inventory issues can quickly translate to long-term reputational damage, impacting bottom-line performance and customer loyalty. As such, avoiding these issues is more important than ever.
A data-driven future
It's clear that data-driven solutions are where the future of accurate inventory management lies but achieving this won't happen overnight. Integrating modern inventory systems with existing legacy technologies and processes can be complex, requiring a strategic approach that balances technology upgrades with effective staff education/training and process optimisation. However, when done correctly, the result is a seamless flow of accurate data across every channel, ensuring that customer interactions are always informed by real-time information.
