Allocating for Store Inventory 

Americans may have largely moved on from COVID-19, but the supply chain issues wrought by the pandemic are taking longer to fix. The surge in e-commerce sales that took place in 2020, followed by last winter’s sudden slowdown, have confounded even sophisticated retailers including Amazon, Wal-Mart and Target; the latter two of which have ended up holding far too much inventory as consumers shift from spending on goods to services. 

Excess inventory can frustrate retailers because it often leads to expensive markdowns; but they also don’t want to lose out on sales because the goods aren’t there. Manufacturers like Nike are now building up inventories out of necessity, in case the Asian countries in which they manufacture their products shut down again. Meanwhile, there has been a pronounced shift away from e-commerce back to in-person shopping, making inventory management even more complicated.

While it’s true that clogged supply chains have increased lead times, and thus compounded the difficulties in properly managing inventories, less attention has been paid to areas where retailers have a lot more control. After all, the farther ahead a retailer has to predict their inventory allocation or management, the less accurate that prediction is likely to be. And while record inflation has tamped demand for even the basics lately, if customers find what they want when they want it, they are nevertheless more likely to make a purchase.

Past is Prologue

“Sellers can begin to understand future buying patterns by eliciting feedback on their  customers’ past buying experiences,” says Anil Varghese, CEO of retail consultancy Proxima 360. Proxima360 offers a module that provides accurate inventory allocation for retailers, helping their operations to run more efficiently. As Varghese explains, his software helps ensure that storerooms always have the right amount of stock available to complete sales and cut labor costs by alerting retailers exactly when and where employees will be needed in order to manage inventory effectively.

The post-sale experience is too often overlooked by retailers, he says, but it offers important clues to determine future sales, and therefore, appropriate inventory levels. Varghese recommends that clients send a survey after every purchase, which will offer retailers clues as to purchase patterns. Moreover, this will grant retailers and their businesses the benefit of engaging with customers who will subsequently feel that their feedback is important. 


Mapping behavior is another useful tool in determining future inventory allocation and management. Here, Varghese recommends creating a customer persona based upon customer behavior. “This will help the company create and market the right product at the right time and place,” he says.

User interfaces, such as websites, must be able to recognize two fundamental prospects: one, the customer that already wants to buy a specific item; and two, the customer who is website hopping (or window shopping). “If a customer is interacting across your website for more than five minutes, we know that they found something interesting. If they don’t, then the site or shop did not have anything interesting for them,” Varghese observes. In order to stock the correct amount of inventory, it is essential to map out the types of visitors to the store and/or website. For instance, how many are buyers and how many are just window/website shopping?

Without first knowing where these customers are along their journey, Varghese points out that it is next to impossible to project demand, and therefore allocate inventory efficiently. “Companies that don’t create the right map will end up lost,” he says, “and, as a result, they will ultimately lose their customers, as well.”

Product Matching

Product matching can also help retailers reduce overhead costs. The matching process involves matching the same products from a variety of inbound sources through learning technologies, such as ML and AI, that mimic purchasing behavior. “Content matching increases warehouse and store efficiency by enhancing cross-docking and receiving operations,” Varghese says. “This allows for reduced redundancy and automates related workflows.”

Wherever the customer and whatever the technology, efficient inventory allocation comes down to understanding what the customer is looking for and when they are looking to buy. With inflation raging and the cost of human capital rising, inventory management is one area where retailers still have control, but the stakes could not be higher. 
“Many businesses don’t have much to spare in regards to extra inventory costs,” Varghese says. “Our software offers all-encompassing solutions that will help them recover.”


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