Retail Resources

“In the Back” to the Future: Managing Your Inventory Headaches

Jan 11, 2016 — Aaron Shauf
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‘In the back’ is a retail term that everyone knows, especially those who have worked in the retail industry. From a customer’s point of view, ‘in the back’ is a magical room where every variation of every product imaginable should be, as what is on the floor is close, but not quite exactly what they want. From a retail worker’s point of view, it is likely where piles of unsold, possibly unsellable merchandise is stacked in unorganized piles. It is where the surplus, the excess and the dead inventory sits in purgatory.

The effects of surplus inventory are much more severe than simply piles of merchandise, though. It can create space problems in a world of pricey square footage that could always be used in ways much more appealing to customers and staff alike. Profit margins are reduced as retailers drastically slash the prices to get them out the door or worse, product is written off completely. 

Inventory management is a detail of retail that requires proper attention to the options and strategies that can help minimize excess and maximize efficiencies. One of those options is working directly with your vendors to incorporate vendor managed inventory (VMI) programs. These are designed to statistically match inventories with demand, as well in some cases, use buy-back programs to take the risk of excess inventory away from the retailer and put it back in the hands of the vendor or manufacturer. 

Virtual inventory and omnichannel retail is stepping in to meet that expectation for the customer.

The unique thing about combining your VMI and Dropship programs with the same distributor and brands is enabling yourself to open up to some really valuable data. By combining your virtual sell-through with your physical sell-through you can begin to adjust the planogram for your shelf space to best maximize your sales opportunity.

For example, you may have an item you never would have dreamed to stock in-store that ends up being your top-selling product via Dropship. Perhaps you consider bringing in a few of that item in-store to supply customers who want the product immediately. Alternatively, you may be stocking an item based on your own assumptions or an item that was projected to be huge but just doesn’t seem to move. Rather than continuing to order more of those items to stock physically, you can consider supplying that item to your customers virtually as needed. Our vendor partners now have the understanding behind that data to truly help you maximize on limited retail space.

Vendor managed inventory can solve a lot of the problems for the retailer, but the customer still wants the choice and the variation of the product they're looking for made available to them. Dropship technology that allows the customer to have product available to them even if it isn’t present at the store, coupled with virtual inventory, are stepping in to meet that expectation for the customer. Completing the sale and truly creating a magical ‘in the back’ feature of the store will create an experience that never disappoints your omnichannel consumers.



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Topics: Industry Best Practices, Vendor Managed Inventory, Retail Marketing, Digital Merchandising, Integrated Solutions

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