{"id":16763,"date":"2024-01-13T06:08:10","date_gmt":"2024-01-13T06:08:10","guid":{"rendered":"https:\/\/breadstack.com\/?p=16763"},"modified":"2024-02-17T00:41:44","modified_gmt":"2024-02-17T00:41:44","slug":"how-to-improve-inventory-turnover","status":"publish","type":"post","link":"https:\/\/breadstack.com\/insights\/e-commerce\/how-to-improve-inventory-turnover\/","title":{"rendered":"How To Improve Inventory Turnover: Turning Overstocked into Opportunity"},"content":{"rendered":"\t\t
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If you\u2019re like many online retailers, you stocked up for the holiday season. But while it\u2019s crucial to be prepared for a surge in demand, there\u2019s always a risk of ending up with too much stock of the wrong products. Learning how to improve inventory turnover<\/strong> will help tremendously for managing inventory and sales planning.<\/span><\/p>

Microtrends, changing social and economic conditions, and mistakes in forecasting can all contribute to stocking errors. In February of 2022, the challenge of post-holiday <\/span>inventory turnover came front and center: over half of American retailers were sitting on excess inventory following the January returns wave.\u00a0<\/span><\/p>

All that warehouse space, lost revenue, and (in some cases) deteriorating stock quality are real expenses. Small-scale retailers reported an average of $48,000 tied up in excess stock, with the majority admitting they would probably have to liquidate those extra quantities.<\/span><\/p>

In this article, we\u2019ll take you through some of the pitfalls of overstocking, along with the limitations of common strategies to reduce overstock.\u00a0<\/span><\/p>

Then, we\u2019ll discuss how real-time inventory and <\/span>customer data<\/b><\/a> can work in tandem to help you increase your inventory turnover in a way that is healthy, sustainable, and good for business.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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The excess inventory challenge<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Overstock hurts retailers in more ways than one. For most, a chief concern is the financial burden. Excess inventory ties up valuable capital that you\u2019d prefer to invest elsewhere, such as in new products, marketing campaigns, or business expansion.<\/span><\/p>

Storing surplus goods incurs additional costs, not the least of which is warehousing fees. Certain products, such as food or plants, may be at risk of spoilage, while others face obsolescence. For example, if your warehouses are full of winter sports equipment, you\u2019re likely feeling the pressure to sell all of that off before the season ends.<\/span><\/p>

Finally, overstock can damage your brand image. If customers sense that you\u2019re struggling to get rid of products, they may start to doubt how well your business is doing.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Common challenges to a healthy inventory turnover <\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Handling overstock is a delicate balancing act, and many retailers fall prey to common mistakes that worsen the situation. If you haven\u2019t already taken a good look at your <\/span>inventory management<\/span><\/i><\/a> practices, now is the time to tighten up your stock review, communications, and performance tracking habits.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Irregular inventory checkups<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Failing to conduct regular inventory checkups is a common pitfall. Without accurate and up-to-date information on stock levels, you may find yourself blindsided by overstock situations, making it challenging to implement timely solutions.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Team silos and poor communication<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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When marketing, sales, and merchandising teams operate in silos, resolving an overstock situation becomes all the more difficult. Inefficient, sporadic communication can lead to mismatches between supply and demand, plus a lack of alignment on strategy for reducing overstock.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Too few (or too many) performance indicators<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Balancing the right number of performance indicators is crucial. Some retailers make the mistake of relying on too few metrics, overlooking critical aspects of overstock management.\u00a0<\/span><\/p>

Conversely, too many metrics can lead to information overload, making it challenging to prioritize and act on key insights.<\/span><\/p>

Your goal should be to identify key metrics that provide actionable insights into inventory management – without overwhelming the decision-making process.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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How to improve inventory turnover?<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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For many retailers, promotions are a go-to strategy in times of overstock. Their goal is to sell off as much of the excess inventory as possible, as quickly as they can, in order to return to a normal inventory management rhythm.<\/span><\/p>

But while this impulse is understandable, certain sales tactics can backfire if too hastily employed. In this section, we\u2019ll look at the limitations of some common promotion types. Then, we\u2019ll zero in on how real-time customer and inventory data can make all the difference in helping them succeed. <\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Themed, limited-time promotions<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Offering limited-time promotions on your overstocked items (think \u201cdeal of the day\u201d sales) can help draw customers\u2019 interest where you want it.\u00a0<\/span><\/p>

At the same time, in order to make a deal stand out, you need to make it enticing. Too many retailers resort to discounting items beyond what their margins can realistically handle.<\/span><\/p>

Meanwhile, you risk \u201cspoiling\u201d your customers. if you\u2019re regularly putting different items on featured sale, your more engaged shoppers might start to hold off on purchasing items at regular price.\u00a0<\/span><\/p>

Depending on your brand image, slashing prices might also prompt customers to become suspicious of your normal pricing. If your handcrafted glass lamps are really so luxurious and well-made, why are you suddenly willing to part with them for 60% off?\u00a0<\/span><\/p>

Over time, the pressure to keep meeting customers\u2019 expectations by offering irresistible deals might start to hamper your sales strategy and squeeze your profits.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Abandoned cart emails<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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These are auto-generated emails to customers who have added one or more items to their cart, then drifted away from your online store. Usually, they contain a reminder to complete the purchase.<\/span><\/p>

Abandoned cart emails can be an effective tactic to win back a percentage of shoppers. However, they can also backfire.<\/span><\/p>

Firstly, you run the risk of annoying your customers. There\u2019s usually a valid reason why the customer didn\u2019t go through with the purchase the first time around: they might be reluctant to spend money after the holidays, or they might simply be busy with more important things.<\/span><\/p>

Opening their inbox to find a slew of \u201cOops! You forgot something!\u201d emails may come off as demanding. In a worst-case-scenario, it might sour their interest in your brand and drive them to unsubscribe.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Blowout sales<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Offering deep discounts on overstocked items is a common strategy to speed up inventory turnover. But it can also be a painful one. Take, for instance, <\/span>Target\u2019s inventory turnover challenges<\/span><\/a> during the post-pandemic era.\u00a0<\/span><\/p>

From 2020 through to the end of 2021, the megaretailer stocked up on popular lockdown items – sweatpants, homewares, and hobby supplies. Then, in the summer of 2022, pandemic restrictions eased, and customer preferences shifted sharply again.<\/span><\/p>

Instead of sweatpants, customers wanted attractive clothes for offices and parties. Families were suddenly on the hunt for back-to-school supplies, not bread-making equipment.\u00a0<\/span><\/p>

The megaretailer found itself sitting on too many of the wrong items – and it coped in a dramatic way, cancelling orders with suppliers, slashing prices significantly, and lowering its profit forecast for the second quarter. It was a painful period, and share prices fell by a shocking 25%.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Source: Target<\/a><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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As hard as Target\u2019s road was, blowout sales can be even riskier for less well-established retailers, who may lack the brand awareness and financial resources to bounce back quickly.<\/span><\/p>

In some cases, blowout sales also risk devaluing your brand in consumers\u2019 eyes. If you bill yourself as a high-end furniture boutique, slashing prices on a wide array of items may, at best, make you look like you\u2019re in trouble. At worst, it might cause customers to view you as a discount or low-end retailer.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Upselling and cross-selling strategies<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Upselling and cross-selling<\/span><\/a> are tried-and-true sales strategies, and both can be extremely effective.\u00a0<\/span><\/p>

Upselling refers to pushing a higher-value product as an alternative to a lower value one. Cross-selling means positioning one product as complementary to another –\u00a0 for example, encouraging customers to purchase a dog collar in addition to a leash.<\/span><\/p>

Both upselling and cross-selling need a careful approach. A full <\/span>70% of customers<\/span><\/a> feel irritated by product and service recommendations that seem generic; instead, they expect suggestions tailored to their interests and behavior.<\/span><\/p>

Moreover, too many upsell and cross-sell attempts may overwhelm customers, leading to decision fatigue and causing them to abandon the purchase altogether.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Source: Our Place<\/a><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Post-purchase retargeting<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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This strategy involves showing targeted paid ads to customers who have recently made a purchase.<\/span><\/p>

The problem is, bombarding customers with too many retargeting ads can lead to irritation or a negative perception of your brand as \u201cspammy\u201d. Customers may feel oversaturated, reducing the effectiveness of the ads – or, more seriously, harming their enthusiasm for your brand.<\/span><\/p>

If you don\u2019t segment your audience effectively, you may end up showing irrelevant ads to customers who have already purchased the item being shown or have no interest in the remaining stock. This can waste your advertising budget and diminish the overall impact.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Harnessing customer data for inventory management<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Armed with the right technology, retailers can navigate a way out of an overstock crisis – and do so in a way that helps the business grow sustainably.<\/span><\/p>

Immediate insights into inventory levels, coupled with real-time customer data, enables you to adjust pricing, target and time your promotions, and adjust product placement for maximum effect.\u00a0<\/span><\/p>

Customer data includes everything and anything you\u2019re able to learn about your customers. This means demographics, such as age, gender and location; purchase patterns, such as the products they\u2019ve bought and the shipping and payment methods they prefer; to their shopping behavior – the types of links they click, the categories they browse, and the times of day they\u2019re most active.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Breadstack pulls together demographic, purchase, and behavioral data on your customers<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Using the promotion types we reviewed above, let\u2019s take a look at how a data-driven approach would make them more effective as tactics to reduce overstock.<\/span><\/p>