January 28, 2016

Common and Costly Inventory Management Mistakes Retailers Make


There are plenty of aspects related to running a retail organization that are unglamorous, but inventory management is probably at the top of the list of things retail managers are least excited about doing.

However, inventory management is a process that deserves your undivided attention because even the smallest oversights can quickly escalate and cost your business a lot of money. Moreover, making a habit of keeping sloppy and inefficient inventory records can literally cripple your business.

Remember 15 years ago when Nike’s poor inventory management cost the company nearly $100 million in losses? It just goes to show that no one is immune to such problems. If a multi-billion dollar international retail giant can fall victim to this problem, so can you.

Here are some common pitfalls that often lead to poor and costly inventory management in retail.

Your Process Isn’t Automated

If there’s one thing that is really worth the money in retail, then it’s investing in good inventory management software that will help you to automate the entire process.

It doesn’t have to be that expensive either. You’ll notice that there are complete point-of-sale software solutions that include inventory management options, which are a bit more expensive. But there are also stand-alone inventory management tools that don’t cost as much.

If you’re still using Excel to track your inventory manually, there’s a good chance that you’re making mistakes and losing money. Using spreadsheets to track inventory is just as ineffective as using spreadsheets to schedule employee shifts. It’s inefficient, takes far too much time and energy, and is prone to human error.

Invest in a quality inventory control system that’s based on barcode technology and automate the process so that you don’t get left behind. Many retailers assume that small businesses don’t need software to monitor their inventory, but that couldn’t be farther from the truth. In fact, making the investment right off the bat gives your retail store a better chance of not only surviving but growing.

You Lack Expert Leadership

Certainly, when you are using some type of automated inventory management software, the learning curve is not as big and you can easily train members of your team to use it. However, you still need to have people on the team with specific expertise who are going to be decision makers.

Retail managers need to determine whether they are going to take the time to develop the skills and knowledge needed to run the inventory process, or if it would be a better option to hire someone who already possesses experience and expertise.

While automated and mistake-free inventory records are a good first step, wasteful inventory can still pile up if you are making bad decisions when it comes how you are buying merchandise and stocking your store.

Keeping good records helps you to avoid losses and confusion. But retail stores need to take that one step further and designate a knowledgeable team member to make proactive decisions that are going to bring about real benefits, like cutting costs and increasing profits.

Your Checks Aren’t Frequent Enough

Shutting down your store for a day or two to perform an inventory check seems to be a very common procedure in retail. But is it really necessary? Apparently, many believe that it is. Otherwise, why else would you shut down your store for an entire day and lose profits if it wasn’t absolutely necessary?

The fact is that it is not an unavoidable event. It is an outdated method that needs to be thrown out entirely. What you should be doing is dividing up your inventory checks into several smaller ones and performing them more frequently.

Of course, automated inventory management systems give you real-time data about your inventory, but taking time out for planning and double-checking is always a necessity. Divide your merchandise into logical groups of products and perform more regular checks on each group individually instead of trying to tackling your entire inventory at once.

It’s much better to pay your workers an hour or two of overtime every few weeks to stay late and do inventory checks on smaller groups of merchandise than it is to shut down your entire operation for a day or two in order to perform these checks all at once.

You Have Too Much Inventory

If you think that you can never have too much inventory, then you’re wrong. You can’t look at all of your inventory as a sale just waiting to happen because you could be waiting a while. The longer your merchandise sits on the shelf, the more it’s subject to damage and depreciation.

Overstocking is an issue that can be avoided by better planning and forecasting. It’s one of those issues that might not seem like that big a deal at first, but as you continue to accumulate unnecessary merchandise, the negatives become very clear.

It’s a problem that creeps up on you slowly and the longer you ignore it, the bigger it grows. As mentioned previously, expert analysis, better forecasting and more efficient planning will enable you to avoid this issue and buy more accurately.

You Have No Backup Plan

There’s always something that can go wrong in retail, especially when it comes to inventory. The thing about inventory is that it’s not an aspect of the job that is completely in your hands. It’s not as if you are producing all of your merchandise in the back room and then simply selling it out front.

You are dealing with third parties all of the time, and they may not all be equally reliable. This part of the inventory planning process is not about expert knowledge and analysis, it’s about common sense. You need to have backup plans in place for numerous situations.

Always have multiple sources from where you can purchase your merchandise, especially when it comes to your most popular items.

If the power goes out in your store, make sure that you have your inventory management software installed on a tablet, and in a worst-case scenario, have a backup inventory spreadsheet on a USB stick.


Bringing down inventory costs is an ongoing goal that every serious retail business should have. It is, however, an ongoing process that never really ends. What’s important is that your retail store is actively working to reach optimal inventory levels.

It’s something that requires constant attention and daily work, but the advantages of making your inventory management as cost-efficient as possible are well worth it. To read more about small business inventory management, check out this informative article by Fit Small Business.