Efficient Inventory Management Tips for Online Apparel Retailers

By: | December 3rd, 2023

Inventory management is one of the most critical aspects of retail. If you don’t have the right amount of inventory, it can cause many problems for your business. You can lose out on sales and have a higher risk of stockouts. In this article, we will explain how to manage your inventory effectively by using different techniques and tools.

Challenges in Inventory Management for Online Apparel Retailers

Online apparel retailers face several challenges in inventory management due to the dynamic nature of the business. Here are some common challenges:

  • Seasonality and trends: Fashion is highly influenced by seasonal trends and changes. Retailers need to accurately predict and plan for seasonal fluctuations in demand. Rapid changes in fashion trends can lead to sudden spikes or drops in demand for specific products. This can make it challenging to maintain optimal inventory levels.
  • Product variability: Apparel comes in various sizes, colors, and styles, leading to a high level of SKU (Stock Keeping Unit) complexity. Managing many SKUs can be challenging and increases the risk of overstock or stockouts for specific variants.
  • Fast fashion and short product lifecycles: The fast fashion model involves quickly responding to emerging trends and delivering new products to the market. This rapid pace makes it difficult for retailers to accurately forecast demand and manage inventory effectively.
  • Supply chain disruptions: Global supply chain disruptions, such as natural disasters, political instability, or pandemics, can impact the timely delivery of products. Retailers need contingency plans to address these disruptions and minimize the impact on inventory.
  • Returns and exchanges: The online apparel industry often experiences higher returns than other product categories. Managing returned items, processing refunds, and ensuring the returned items are in a resellable condition can be challenging.
  • Multi-channel sales: Many online apparel retailers operate on multiple sales channels, including websites, marketplaces, and physical stores. Coordinating inventory across these channels to prevent overselling or stockouts requires sophisticated systems.

There are many more such challenges that lead to stock pile-ups. A McKinsey survey shows US retailers are stuck with $740 billion of unsold inventory. Retailers must clear pending inventory and create more realistic supply chain systems to keep going in today’s competitive and ever-changing markets.

Best Practices for Efficient Inventory Management

Efficient inventory management is crucial for the success of any business, as it directly impacts customer satisfaction, cash flow, and overall profitability. Here are some best practices for efficient inventory management:

Real-time Inventory Tracking

The process that allows you to track your inventory in real-time is called real-time inventory tracking. It’s a tool that retailers use to make better decisions about their inventory, which can help reduce costs and improve customer service.

Real-time inventory tracking also helps retailers manage their inventory more efficiently by providing real-time information. The information about what products are selling well, what items need restocking, or when an item needs replacing can be helpful.

Consider the example of a graphic tee and a fall dress. According to Project Social T, a graphic tee is an evergreen item in fashion annually. On the other hand, a fall dress might be more popular during the fall season compared to other months. Hence, the retailers need to plan their stock accordingly.

Both graphic tees and fall dresses are elevated essentials for women. However, it will be easier to stock the graphic tees. That’s because they are a regularly selling item. On the other hand, if the retailer doesn’t have real-time information on when fall dress sales begin to decline, they might end up overstocking.

With real-time inventory management technology, you’ll know exactly how many shirts you have left in stock at any given moment. And if one sells before another does, there won’t be any confusion about whether or not the other shirt still exists for sale.

Real-time inventory tracking is facilitated by radio frequency identification devices (RFIDs). According to a study from Science Direct Journal, RFIDs can be deployed at POS, warehouses, distribution centers, and logistics.

The study has revealed that innovative approaches can help with inventory procurement and storage. In today’s scenario, at least 70% of records do not match physical stocks of 350,000 units. This leads to a 20% reduction in profits. Including RFID can reduce supply chain errors and increase revenue by 20%.

ABC Analysis

ABC stands for “Activity Based Costing”. ABC analysis is a tool used to identify the most profitable products in a company’s inventory. It helps companies focus on the most profitable items, which can reduce inventory costs and improve customer satisfaction.

ABC analysis is also known for its ability to help businesses determine what types of products should be stocked at their physical locations. This can help them avoid wasting money on low-margin items.

This can be done with the help of metal tags to identify each category of clothing separately. According to US Quick Tags, blank metal tags can be engraved with a lot of information. For example, you can categorize all clothing apparel based on the brand, fabric, style, color, pattern, etc.

Once you categorize everything in your system, you can simply assign some letters or initials to them. After this, you can engrave those letters onto metal tags and add those tags to the clothes. This will allow you to quickly find any item you want to check the inventory for.

Demand Forecasting

Demand forecasting is an important part of inventory management. It’s the process of predicting future demand and helps retailers to determine the optimal inventory levels.

Accurate predictions help optimize stock levels, reduce excess inventory costs, prevent stockouts, and improve overall customer satisfaction. A Springer Journal study concluded that effective demand forecasting can save more than 7% on businesses’ annual operating expenditures.

Here are some tips for online apparel retailers to enhance their demand forecasting and inventory management:

Utilize Historical Data:

  • Analyze past sales data, considering seasonal trends, promotions, and any external factors influencing demand.
  • Consider historical data at aggregate and granular levels, such as by SKU (Stock Keeping Unit), category, or geographic region.

Implement Machine Learning and Advanced Analytics:

  • Leverage machine learning algorithms and advanced analytics to identify patterns and trends in historical data.
  • Machine learning models can adapt to changing market conditions and provide more accurate forecasts.

Segment Products and Customers:

  • Categorize products based on their demand patterns (e.g., fast-moving, slow-moving, seasonal) to tailor inventory strategies accordingly.
  • Segment customers to understand their preferences and buying behaviors, allowing for personalized marketing and inventory allocation.

Stay Informed about Industry Trends:

  • Keep abreast of fashion trends, industry developments, and changes in consumer preferences that may impact demand.
  • Collaborate with suppliers and monitor the market to quickly respond to shifts in demand.

Regular Audits and Cycle Counts

Regular audits and cycle counts are essential to the success of any business. A cycle count is a process that allows you to keep track of your inventory, ensuring that it’s up-to-date at all times. It involves counting every piece of clothing in your store, sorting them into different categories, and then putting them back.

Regular audits help ensure that there aren’t any missing items or mismatched stock numbers between two employees’ inventories. They also give you a better idea of how much you spend on monthly inventory. This can help decide whether it’s worth doing another round soon enough after one ends.

Technology and Tools for Effective Inventory Management

Technology can be used to help with inventory management. The right technology can make tracking your inventory easier, saving time and money in the long run. Examples of technology that can help with inventory management include software and barcode scanners.

The software can help you track all sales data and see what’s selling well. This will let you know which products are worth stocking more of and which ones should be cut from your line-up.

On the other hand, a barcode scanner can let each employee access the same updated information on inventory. This can be extremely useful if you have multiple physical stores. According to Future Market Insights, the market for such scanners was around $ 8.10 billion in 2023.

In conclusion, you can manage your inventory more efficiently and effectively with the right tools and technology. The key is to keep track of your inventory at all times so you don’t run out of stock unexpectedly or overstock items. This will also help with forecasting demand and managing supplier relationships so that they can support your business needs better than ever before.


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