Store Inventory Control: Where Retailers Go Wrong, and How to Fix It

Connected Merchandise | In-store Technology

Store inventory control is crucial to your business, and optimizing it is essential to running a successful fashion brand. Yet optimization has been challenging as brands never had real-time visibility into their inventory location and performance down to the item level. Instead, they had to rely on methods that did not provide the critical solution they needed. 



New inventory management technology enables retailers to gain real-time store inventory control. With clear visibility into every piece of merchandise and data continuously flowing to a dedicated cloud platform, fashion brands can achieve the ultimate goal of having the right products at the right store, in the right quantities at the right times – every time, driving growth and improving the bottom line. 

What is Retail Inventory in the Fashion Market

In the fashion industry, retail inventory management is about tracking and managing all merchandise to ensure it meets your brand’s needs and growth. 


Retail inventory management encompasses many processes, including:


  • Keeping records of all incoming and outcoming stock 
  • Monitoring stock levels across retail stores
  •  Tracking the location of goods in stores and warehouses
  • Taking action to maximize inventory value and increase inventory turnover 
  • Moving items across sites to best meet consumer and brand needs and minimize shipping and fulfillment costs, 
  • Forecasting future demand and ordering the right assortment of new merchandise in time.                                              


Optimized inventory levels and assortment help increase total sales while being closely tied to serving in-store shoppers and promoting a better customer experience.

store inventory control

What is Store Inventory Control? 

Store inventory control is the management of a brick-and-mortar store’s stock levels to ensure that the right products are there to always meet customer demand while avoiding both excesses and shortages, and keeping strong margins. 


Store inventory control should provide retailers with a complete overview of all goods – their location and performance, so they have real-time data on every item in stock, enabling them to work more efficiently and make better decisions.    


E-commerce visibility and control capabilities can be critical for fashion retailers big and small. But up until now, stores have faced obstacles that made it impossible for them to achieve automatic, real-time retail inventory control.

RFID vs NanotBT

The Challenges of Store Inventory Control

In the fashion market, store inventory management needs to address multiple challenges:

Lack of real-time visibility into item location


Each fashion store has numerous items on the sales floor that store associates can’t track in real-time. When a customer asks for this style of black jeans in size 4, it’s impossible for store staff to instantly know whether the item is on the shelf or rack, lying in the fitting room, or is still in the back room.

It makes it hard to quickly and efficiently finalize the purchase, provide excellent customer service or use stores as fulfillment centers for hybrid options such as click-and-collect and ship-from-store. 


Lost goods 


Not all goods in a store’s inventory are available for sale for various reasons. When stock arrives in stores, some goods are damaged, but not necessarily recorded. Other items are lost or misplaced in the warehouse, en route, or in store, without anybody knowing. Then there’s the issue of theft, with organized retail crime, employee theft, and shoplifting reaching unprecedented numbers. 


All types of lost goods should be brought down to a minimum and accurately recorded for brands to have effective in-store control. 


Overstocks and Dead Stock


In a volatile industry with demand fluctuations and cutthroat competition, stores that lack real-time store inventory control resort to other means, and this often involves ordering safety stock – extra products to prevent running out-of-stock on high-selling items. The excess can then turn into dead stock or result in unplanned markdowns. 


Overstock and dead stock reduce inventory turnover, take up space, and tie up valuable resources.     


Stock shortages


The opposite of excess stock is stock shortages which result in items being out-of-stock, sales lost, and customers looking elsewhere. Repeated stockouts coupled with fierce competition in the fashion market can result in the brand not just losing the sale, but also the customer.


Retailers must ensure on-time item replenishment and avoid shortages. 


Individual store localization


With no real-time store inventory management, fashion retailers don’t have the complete data to make informed decisions about merchandise allocation to specific stores: styles, sizes, color assortment, and quantities required to fulfill in-store demand as well as e-commerce sales.


Store localization is particularly significant for chain stores, which can curate their product selection to different geographical locations and local tastes. 


Demand forecasting

Fashion retailers need to make manufacturing and purchasing decisions in face of demand uncertainty, seasonal trends, and lack of data. Various factors, such as current inventory levels, customer engagement with items, and seasonality all affect demand forecasting.


Without accurate demand forecasting, businesses cannot make the right decisions and prosper.


Markdown optimization

With no current data applied to decision-making, markdowns can be counterproductive. Now imagine the timing and depth of price drops as an informed, strategic decision taking customer behavior into account: Markdown optimization can increase inventory value, reduce dead stock, and drive customer engagement. 


The problem is that complete, accurate, real-time retail inventory has been practically impossible to accomplish. Too many retailers are left without answers to important business questions:


  • Are items actually on the shelf?
  • Did customers see it?
  • Did customers engage with the item?
  • Did customers try it on?
  • If the price was lower, would more customers purchase it?
  • When would lower markdowns trigger sales as much as higher markdowns?


If these questions could be quantified and turned into engagement metrics with KPIs, it would create better business understanding and better use of markdowns –  (only when they are absolutely necessary). 


In the absence of a real-time store inventory overview, however, fashion brands opt for physical counting or estimates, starting with the retail inventory method. 

fashion store inventory control

Examples of Current Store Inventory Methods


Calculating Retail Inventory


Today, many fashion businesses still work with the retail inventory method, an accounting method used to estimate the total value of a store’s merchandise also called the ending inventory value.

It is one of the most common methods to measure the ending inventory balance of a store. Knowing your estimated retail inventory can help with decision-making, such as when to replenish your stock or offer markdowns and how to deal with overstock. 


The Retail Inventory Method is easy and fast compared to physical counts and even more so in the inventory-intensive fashion sector, where retailers have numerous items that make manual counts much more time-consuming. However, it gives brands an estimated retail inventory value rather than an accurate number.


It also does not take into account various factors, such as goods that are damaged, stolen, lost, or otherwise not sold. In addition, it gives an overall inventory estimate that does not reflect individual items, popular styles or sizes that can support quality retail analytics and insights. And this is not all. 


The Retail Inventory Method has additional accuracy issues, such as relying on a consistent relationship between the cost of merchandise and consumer price. As for the results, they are problematic when the markups are volatile, such as due to seasonality or when retailers run sale events on certain products, resulting in an inconsistent cost-to-retail ratio. 


Counting Retail Inventory


Physically counting stock is another way to monitor your inventory. After all, estimations cannot replace the counting and recording of each item. It may seem like a straightforward way to keep track of your actual inventory. However, according to the Auburn University RFID Lab, the average level of inventory accuracy for U.S. retailers is only 65%.  


To improve store inventory accuracy, retailers can increase the frequency of manual counts. But inventory counting is time-consuming, increases labor costs, and can disrupt business operations. Hours spent on tedious inventory counts could be better spent providing excellent customer service or performing other in-store duties.


Labor-intensive tasks also make it hard to deal with post-pandemic labor shortages. Retailers should make an effort to minimize labor hours and, at the same time, retain employees. Eliminating manual counts and giving store staff more meaningful work can prove to be part of the solution. 

Next-gen Store Inventory Management  for the Fashion Market

New Retail Inventory Methods rely on advanced technology to take store inventory management to the next level. By connecting all physical merchandise to the cloud, these solutions provide real-time inventory and in-store intelligence. 


Advantages of Store Inventory Management Technology:


  • Automatic store inventory control with visibility into inventory locations in real-time
  • No manual labor, no scanning, no barcodes, no QR, and no need for physical inventory counts. 
  • A continuous flow of inventory location and movement data, so store and headquarters instantly know if it is on the shelf, in the fitting room, or was just purchased or returned. 


Connected merchandise is when each item of merchandise becomes a communicator that automatically streams data to an online platform. When this data is available in real-time, across all merchandise, it’s easy to view product performance over time, giving retailers more control of their business. 


For example, using real-time analytics on customer engagement with merchandise, executives can take action and decide to move slow-moving items to a different location in the store or transfer them to another store, optimizing assortment in individual stores to increase inventory turnover.


Even discounting becomes a more strategic decision to liquidate stock or increase customer engagement with data-driven markdown optimization.


Connecting your merchandise to the cloud for better inventory control

For fashion brands, using connected merchandise for retail inventory control has numerous advantages:


  • Increase profits. Advanced store inventory management can reduce inventory costs, increase inventory turnover, and drive sales – resulting in an improved bottom line. 

  • Drive automation & Operational efficiency. Automatic inventory, zero manual labor, and zero time-consuming tasks, so the store and headquarters always know exactly what’s in stock. Automatically detect and add incoming stock, track lost goods, update purchases and returns at POS, promote self-checkout, and greatly contribute to loss prevention.
  • Achieve inventory balance.  With a complete inventory overview, retailers can have less inventory lying around just to make sure nothing is missing while also not losing sales over missing items. Instead, inventory corresponds to customer demand.
  • Optimize markdowns. Accurately identify the right markdown for your merchandise based on customer behavior and inventory levels.

  • Leverage stock. With better store inventory control, brands now have the power to optimize inventory selection and positioning, such as optimizing floor space and shelf performance.

  • Improve fulfillment. With complete inventory visibility, ensure shipping from the closest location, and promote omnichannel fulfillment options. 

  • Localize store inventory. Retailers now have the tools to make sure each store has the inventory that best fits its customers and their needs.

  • Enhance Demand Forecasting. Current inventory data and real-time data on customer behavior and in-store sales funnel analytics can improve demand forecasting, planning and budgeting, giving brick-and-mortar e-commerce capabilities.

  • Apply retail analytics. Quality analytics and insights support better decision-making and drive optimization across the value chain, from better demand forecasting to inventory planning and replenishment, from allocation to store localization, markdown optimization, revenue maximization and more.  

Real-Time Inventory Data with Nexite

The pioneering Nexite technology creates a new retail inventory method that’s transformative and even existential for some retailers. The first-of-its-kind patented technology gives fashion retailers the power of exact, error-free store inventory control displayed automatically and in real-time, blurring the line between digital and physical in more than one way.


It provides in-store intelligence aligned to customer behavior and enables completely frictionless shopping, including seamless checkout and returns, and EAS anti-theft protection. 


Equipping your brick-and-mortar with Nexite’s scalable and cutting-edge capabilities can power your fashion business to maximize merchandise performance and drive efficiency, profitability and growth. And that’s the bottom line. 

RFID vs NanotBT