What is Slow Moving Inventory? What Are the Risks?
Slow-moving inventory refers to items that linger on shelves due to factors like inaccurate demand predictions, seasonal changes, or product issues. Such inventory not only occupies space but also ties up capital, risking obsolescence. While strategies like price reductions and promotions can help move these items, addressing the core issues in inventory processes is vital. By identifying and tackling the root causes, retailers can enhance inventory management and set their businesses on a path to long-term success.
Let's explore ways to efficiently manage slow-moving inventory:
1. Offer Omnichannel Retailing
Omnichannel retailing involves capturing customer orders through multiple sales channels and fulfilling them through stores or warehouses. To offer omnichannel retailing experience, it is essential for retailers to have access to a unified inventory visibility, which then enables retailers to identify their slow-moving inventory and make informed decisions accordingly. Some steps retailers can take to combat slow-moving inventory are through leveraging omnichannel fulfillment options like:
Buy Online Pick-Up In Store (BOPIS) - Offering same-day Buy Online, Pickup In Store (BOPIS) services enables customers to personally collect their orders quickly, free of added shipping charges. This strategy can boost the store's overall inventory turnover rate. Furthermore, retailers can strategically opt to offer same-day BOPIS for products that have slow inventory movement to boost sales.
Additionally, retailers should invest in a dedicated BOPIS Product Display Page (PDP) application. This app allows retailers to display same-day order availability and offer customers a user-friendly way to choose convenient pickup locations, increasing customer conversions.
Ship From Store - Modern customers demand prompt delivery. Small and midsize retailers can offer faster delivery by properly leveraging their store’s inventory. Faster fulfillment options create a positive customer experience while increasing the turnover rate of inventory. Retailers can utilize smart order routing engines to set routing rules specific to their business needs. This enables retailers to route their eCommerce orders to locations with the highest inventory counts when shipping from store.
Ship To Store - Retailers typically keep all products every store location, but customer preferences may vary by region. Therefore, certain items may not be in high demand in certain areas resulting in slow inventory movement in those areas. To address this issue, retailers can provide services like endless aisles and Ship-to-Store to satisfy the needs of customers without keeping all products. Retailers can ship products from stores with lower inventory sell-through rates to locations with higher rates to satisfy the customer’s demands.
Providing an Omnichannel experience, coupled with faster delivery and a seamless purchasing journey, enhances customer satisfaction. This leads to an increase in both customer conversion and retention, making them more inclined to purchase other products, including those that are slow-moving.
2. Utilize Pre-Orders
When utilized strategically, Pre-Orders can be a powerful tool for driving sales and long-term brand loyalty. However, the pre-order offering is also an often overlooked strategy for reducing slow-moving inventory. Pre-Orders allow retailers to:
Demand forecast - Retailers determine their inventory based on historical demand, but this can be a challenge for new products. Offering Pre-Orders helps retailers “soft launch” products so that they can gauge interest earlier in the sales pipeline. Accurate estimation allows retailers to procure inventory as per the demand, thereby reducing the chances of slow-moving inventory.
Offer Larger Sales Window - Retailers typically stock their inventory based on seasonal demand, but this can leave them exposed to fluctuations in sales. If their estimates are off and inventory doesn't sell during a particular season, retailers are often forced to either offer markdowns on slow-moving products or risk being stuck with unsold inventory at the end of the season. To avoid these scenarios, pre-orders can be a useful tool for retailers. By allowing customers to order products before they even hit the shelves, retailers can increase their sales window and reduce the risk of underselling at the end of the season.
Improved Inventory Allocation - By analyzing customers' Pre-Order buying behavior, inventory management can be improved by precisely allocating inventory according to pre-order sales. Regions with the highest pre-order sales will likely have a higher demand for regular orders, so stores located in these regions should receive more inventory to meet the demand. While the regions with less demand should receive less inventory to avoid slow inventory movement.
3. Leverage Analytics
While Shopify’s out-of-the-box sales reports provide a useful starting point for understanding inventory analytics, retailers can dive deeper into a store’s flow of inventory with third-party analytics. Retailers need supplemental demand and sales reports that provide more granular and actionable insights to optimize their inventory storage.
Region-Based Analysis - Analyzing sales by region can help retailers identify underperforming areas and take action to reduce slow-moving inventory. This can be done through targeted marketing, discounts, or redistributing stock to more successful regions.
Order-Based Assessment - The "Monthly Sales by Order" report helps retailers identify slow-moving inventory and develop strategies to increase sales of less popular items, such as bundling or promotional deals. It can also help determine if discontinuation is necessary.
Daily Demand and Fulfillment Review - The "Daily Demand Tracking" report spots inventory management issues by comparing demand and fulfillment. Retailers can avoid overstocking slow-moving items to free up resources for in-demand merchandise.
Year-on-Year Demand Trends - The "Annual Demand Performance" Report helps retailers spot declining demand early, allowing them to adjust their inventory strategy to focus on products with growing demand and reducing the risk of slow-moving inventory.
Understanding inventory reports can give omnichannel retailers a competitive edge. Identifying slow-moving inventory early allows retailers to optimize their strategy and mitigate financial impacts. With the right data, dealing with slow-moving inventory becomes easier.
Reduce Slow-Moving Inventory with HotWax Commerce OMS
Navigating the world of retail can be a complex journey filled with various challenges, especially when it comes to managing slow-moving inventory. Omnichannel Order Management System has the potential to convert these challenges into opportunities for growth and optimization. By harnessing the power of real-time inventory visibility, streamlined order management, optimized store fulfillment, and superior customer service, retailers can effectively manage inventory, reducing costs, and enhancing customer satisfaction. Retailers can utilize HotWax Commerce Pre-Order and business intelligence reports to gauge demand of their products which helps in optimizing their inventory allocations and reducing the chances of slow-moving inventory.
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To put it simply, slow-moving inventory doesn't have to be a stumbling block. With HotWax Commerce's Omnichannel OMS, it can be your stepping-stone to greater retail success. If you're ready to optimize your inventory management and transform the way you operate, we invite you to contact us. Discover the difference that HotWax Commerce's Omnichannel OMS can make in your retail operations today.