How Inventory Accuracy Can Elevate Your Sales and Revenue

Hey, everyone. Welcome to the very first episode of Herb's Hot Takes. I'm Tyler Kern alongside herb billings. The VP of Technology Strategy at DataScan. Herb, welcome to show. This is your show. I'm happy to be here. Thanks for having me. Well, I am thrilled to be here with you for the first episode of Herb Sat Takes. And today, we're talking about how inventory accuracy helps boost sales and and how helps that bottom line aspect for retailers, and we're gonna dive into all of that today. And so let's start off just with the basic question, Herb. Is there a proven impact on sales by counting more frequently in having that more accurate count? Actually, there is. RFID retailers have enjoyed this for a while, but a a true study -- Mhmm. -- an academic study was performed and released in October of twenty nineteen by the efficient consumer response group. They studied seven retailers, four grocery stores, three apparel retailers. Mhmm. When I say four grocery stores, I mean four grocery chains, three apparel retailers. So a total of seven retailers, a million SKUs, one hundred stores. So this was a very wide study, a a deep study and they did find that there is a significant impact on sales if you count more often. It's actually increasing your inventory record receive that's the benefit? The okay. So there is a relationship then between accuracy and sales then. Like like you just pointed out, I suppose the the next question is how how does accuracy impact sales. Right? So if we know that there is a relationship, what exactly is impact acting how those numbers are are higher when there is better accuracy? There are several ways. One of the things is important to understand is that inventory record accuracy, the the degree to which your ERP system units match what's really in the store, that degrades over time. So it starts out perfect right after account or at least you assume that it does. And then over time, as people touch the merchandise as you have store processes that affect the merchandise, receiving, being anything can affect inventory record accuracy. It degrades. As it degrades, let's say that you are increasing a shortage for a particular item. Over time, you will miss the true reorder point. So if your reorder point is when I hit fifty, let's go ahead and replenish the store, then you may not know that. You may have been at forty or thirty -- Mhmm. -- when your ERP hits fifty, you reorder it, but now the supply chain cannot get it to you fast enough. You are out of stock and therefore you're not selling. That's one way to lose sales. Another way to sales is to think you have it and you don't. You're actually out of stock. If you're presenting this on a website or in your app for a buy online pickup in store or curbside service? You run a big risk. It's one of the most dangerous conditions for a retailer. You run a big risk of having to cancel that order because you did not fulfill it. You also run of aggravating that customer such that they don't come back again. Right. Do that twice to me for for instance, and I'm I'm not coming back. So you not only lose the sale. Mhmm. You potentially lose the sale of other other items that were in that cart. And then you potentially lose the lifetime value of that customer. Because customers have options these days. There are a lot of different places they could go to shop. You know, it's it's rare that there's a a customer who says, okay, this is the only place where I can come to find these things. And so if you do burn that bridge with that customer by saying you have something twice and you're not actually having it, like you said, you do run the risk of losing you know, losing that business for the life of that customer. That's correct. That's one of the most important things to a retailer. Yeah. I learned that when we were first digging into inventory record accuracy and how we could help along those lines. I I mentioned, you know, did all kinds of statistics about how much money was on the table for unknown out of stocks and unknown in stocks. And the the person that I was working with at a major retailer here in the US said we're actually more concerned about whether customer is satisfied or not. Less concerned about the revenue side of this and how much money we lost on this one sale? That's interesting. That it that it's more about that customer experience than it is necessarily about the overall gains or or losses on that particular Absolutely. That is that is really fascinating. And and you took me somewhere I wanted to go, and that was talking about online sales because that's kind of a big and growing aspect of this and also a tricky aspect of this to manage. Right? In a place where inventory accuracy really gets put under the micro scope. That's absolutely true. Prior to the pandemic and prior to all of the retail shutdown, omnichannel was becoming really big. I at first, honestly, did not understand the whole buy online pickup in store. But as I read more about Porsche Pirates and you know, people thinking about people who who are living in an apartment or in a dense situation. It is a hassle to have Amazon or a re your favorite retailer's ship directly to your door. It may be more convenient for you to actually go pick it up, and it's certainly more cure for you to go pick it up. It also gives you the opportunity and the retailers love this to buy something else along with that particular purchase that you have and you wanted reserved for you. Prior to the pandemic, this was becoming very important. The pandemic just fast forwarded this desire by five, maybe even more years. That's a great point. We've seen a lot of different ways that the a pandemic has accelerated trends that we saw, you know, maybe glimpses of or or we're starting out and the pandemic really, you know, sped up five years of progress and innovation into five months, really. And and that's that's an excellent point. And one of the other things you mentioned was just having that ability to know when you have a more accurate count, you know when you hit fifty like you mentioned and you need to reorder. And I wonder if just having that data at your fingertips also just helps refine, you know, your restocking and you're you're reordering process a little bit. Like you were mentioning, just having that more granular and accurate view allows you to then be more accurate when you're when you're, you know, deciding what you need to reorder and that sort of thing. There are a lot of reasons for wanting your inventory record accuracy to be as high as possible. Mhmm. Sales as we're talking about are improved. How they are improved is you avoid the unknown out of stocks and the unknown in stock conditions. An unknown out of stock is when your ERP system says you have more than zero, And as we discussed, you're presenting that for sale on a digital platform, whether it's your app, the website, or whatever. And then you have aggravate the customer because you don't have it. You true up your inventory after you take account. So now you actually know at that point, I'm out of stock. Mhmm. The unknown in stock is one of the situations that is not talked about very much. The unknown in stock is when you actually have it, but you don't think you do. So you're not presenting it for digital sale. That's a great point. Prior to the pandemic, it didn't seem to be that big of an issue. But during this pandemic shutdown, when retailers were you know, their bread and butter was their omnichannel capability. Mhmm. It was a very big deal. They're not able to sell that. It's not like you're walking by looking at a shelf when you're online. You're looking at a digital shelf. You're looking at something that represents what should be on the shelf. Back to the brick and mortar experience, one of the big things account can do, especially you know, when you are separating your backroom count from your sales floor count, you know what's in the backroom that's not on the sales floor. So you're able to replenish that. Many retailers, that's a very, very big point for brick and mortar shopping. Is to make sure that one of everything is out on the sales floor. I you know, I hadn't even thought about it from that reverse perspective of I had always thought, if you say you have it and you don't, that's obviously bad, but you're right. It's also bad to say you don't have it when you do because then I'm going to go find it somewhere else. Right? If store a doesn't have it, oh, but I need this thing. I'm gonna go to store b and and and get that thing that I need. And you just lost out on a sale, and maybe now I'm a more loyal customer to this other store that had the thing I needed at that moment. That's absolutely it. And and one more thing that comes from these unknowns in stocks. If you're not selling it digitally and you may have it in your backroom and not on your sales floor, this becomes a mark down tomorrow. So you lose sales dollars even if you don't lose the eventual sale of that item, you're going to be selling it for less. Interesting. That is that is particularly fascinating. And I also wanted to touch on analytics here on this episode. Do do accurate inventory records play any part in retail analytics. We've spoken with many analytics companies -- Mhmm. -- and in fact, they say that it's their biggest challenge is getting accurate inventory records. The analytics companies do a whole bunch of things, you know, primarily assortment, patient, pricing, promotion, markdowns, those types of things. And those do rely on accurate inventory records. If you don't have accurate records, then you're going to be making poor decisions about where to move stock, when to market down, the pricing, it it it just it flows through their whole system. That's a that's a really great point. And and as we start to maybe wrap up this episode here just looking the bottom line and looking at the impact of inventory accuracy on sales. Herb, do you have any final thoughts? Anything you wanna leave audience with or just the final takeaways for people as we begin to to bring bring this episode to a close? Well, I wanna go back to the beginning with that study. Mhmm. The study was very well done. It it found a four to eight percent increase in sales as a result of counting more often. That right there is huge. Yes. Now if you don't have RFID, if your counts cost you significant labor as a result of scanning bar codes, You may not be able to afford counting everything every week. But this study prescribes a test and outlines how to perform it to determine what your mileage is in counting more often. And what they're saying is and what they found was you only have to count the high velocity, high impact items that are most likely to be inaccurate. Not everything is going to be inaccurate. A canoe at REI is not necessarily going to be inaccurate. People don't walk out store with that, and they're very obvious. But smaller items, cheaper items, very high demand items might be stolen. These types of things are, you know, fast movers, high sales items the retailer, count those more often and those items were found to have a fourteen percent increase in sales. Wow. So it it it's a big impact, and this is something that that retailers should pay attention to Gawn are the days of trying to count when your inventory stock was lowest. You did that because of the labor involved. You wanted to reduce the amount of labor because you're reducing the amount of items that you're counting. It it it just a that's what we did for many, many years. Now we have seen retailers change their schedule Regardless of how many items they have in the store so that they can prepare for their big selling seasons, whether that's back to school or holiday or what have you. Now, we are not only seeing the change in schedules which was happening prior to the pandemic, but we are also seeing change in frequency. So as a result of this renewed interest well, not renewed, but a significantly increased interest in omnichannel retailing, so goes the increase in interest in inventory record accuracy, in counting more frequent fixes the problems that cause it? It's almost like taking a proactive approach more than more so than a reactive approach to inventory accuracy and seeing the benefits that yields, and I can't think of a single retailer that would turn their nose up at a four to eight percent sales increase. Right? Accounting becomes a good investment, not just a very cost. I think that is a a great point and a great thing to to leave people on for this episode of Herb's hot takes. The very first one very first one. And Herb, you actually have a blog post on this topic as well on datascan dot com that people can go and read if they wanna get a little bit more granular with some of the information and that sort of thing? Yes. We do. Hit data scan dot com slash blog, and it should be there. It should be there. So Go check out Herb's blog on this as well. It's fantastic stuff. If you're more of the reading type less so than the listening or watching type, go check out Herb's blog also go visit datascan dot com to stay up to date with the latest in inventory accuracy and check out the solutions that they have there. And stay tuned. We're gonna be back soon with another episode of herb hot takes. You don't want to miss the next one. As we talk about the impacts of poor inventory accuracy, So today we talked about how inventory accuracy can really boost and benefit sales. On the next episode we're going to talk about if you have poor inventory accuracy here are some of the effects You don't want to miss that episode it is coming out shortly and stay tuned to datascan dot com to know when that episode is going to drop. But for my guest today, her billings Herb. Thank you so much for joining me. Thanks, Tom. We will see you all next time. Thanks for tuning in.