Store Inventory Control in Fashion Retail: Methods, Hurdles and Fixes.

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 with RFID. 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. 

Decoding Customer Behavior in Retail Stores - Download Report

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, 
  • Inventory optimization by 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

Why is Store Inventory Control So Important?

Retail store inventory control plays a significant role in the success and profitability of a retail business. Think of it as the behind-the-scenes superhero that improves profitability, customer satisfaction, and overall business efficiency:


  1. Optimizing Stock Levels: Inventory control helps strike the right balance between having enough products to meet customer demand and avoiding overstocking, which ties up capital and storage space. This balance ensures that you’re not losing money on excess inventory or missing out on sales due to stockouts.

  2. Cost Management: Proper inventory control can help reduce holding costs, which include storage, insurance, and potential obsolescence. By keeping a close eye on what’s in stock, retailers can cut down on unnecessary expenses.

  3. Customer Satisfaction: According to one report, one of the top 3 reasons that Gen Z and Millenial shoppers get annoyed is when the size they want is out of stock. Inventory control helps ensure that customers can find what they’re looking for wherever they are.

  4. Sales and Revenue: Having the right products in the right quantities can lead to increased sales and revenue. When you restock fast-selling items and discontinue slow-moving ones, you optimize your offerings for profitability.

  5. Loss Prevention: Inventory control also helps prevent losses due to theft, damage, or spoilage. By tracking and managing inventory, retailers can identify and address issues promptly, reducing losses.

  6. Data Analysis: Item-level stock counts provide valuable data for trend analysis and decision-making. Retailers can identify which products are popular, which are seasonal, and adjust their purchasing and marketing strategies accordingly.

  7. Cash Flow: Efficient inventory control ensures that your money isn’t tied up in unsold goods. This means you have more working capital available for other aspects of your business, such as marketing, expansion, or innovation.

  8. Inventory Auditing: Regular inventory audits help catch discrepancies and errors, preventing fraud or mismanagement.

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. 



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. 


Avoiding Overstocks, Dead Stock and Stock Shortages

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 that take up space on shelves and in the back room, tying up valuable resources. They often need markdowns to be sold. 


The reverse problem, having out-of-stock items, can lead to lost sales in the store. Repeated stockouts coupled with fierce competition in the fashion market can result in the brand not just losing the sale, but also the customer. 

What retailers need is better insight into local customer demand. What they have is a reliance on local sales and historical data.

Retailers have no way to respond quickly to what their customers’ behavior in each store is telling them, because they simply don’t have that data.


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 inventory 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


What is the best method for inventory forecasting?

Guaranteeing you have the right inventory in the right quantity in the right place is a science. Make sure you take the following factors into equation:

-Accurate, up-to-date inventory data 

-Real-time stock counts that monitors actual stock levels and takes into consideration any merchandise in transit (transfers from one store to another, or items in store flagged for BOPIS fulfillment) 

-Unique events that you can predict, like upcoming holidays and back-to-school shopping season. 

For the most accurate inventory forecasting, data accuracy is even more important than the method or solution. The best forecasting uses data on how customers behave with inventory in the store, even before the sales data comes in, to predict demand for each location.

How will you achieve 99.9 accuracy in the inventory?

To reach near-perfect inventory accuracy, you need to use real-time, item-level inventory tracking and remove human error from the equation.  

Implementing next-generation RFID tracking solutions that monitor inventory location in real-time and replacing manual inventory tasks with automating tasks like stock counts, replenishing, and gap investigations can bring inventory accuracy up to 99%. 

What are some reasons for poor inventory accuracy?

Poor inventory accuracy is usually the result of both technical errors and human mistakes: receiving errors, excess stock or lost inventory, missing data, poor stock count processes, and improperly trained or overstretched employees.