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LS Retail | 04 April 2024

Maximizing revenue: how to avoid over- and understocking in retail

Maximizing revenue: how to avoid over- and understocking in retail

The Retail Resilience Barometer from ROI Hunter found that UK retailers have been forced to sell nearly half (48%) of their stock at a discounted rate because of overstocking. In the same report, 99% of retailers said they lose at least £10,000 of revenue due to unsold stock each quarter.Out of stock are also a problem for retailers: when faced with unavailable products, 31% of consumers end up making a purchase elsewhere, and 24% will either buy later or not buy at all.

Here are 5 tips to reduce the risk, and costs, of revenue loss from over- and understocking.

1. Use a single management system across all your locations

Disconnected systems lose retailers up to $223b every year worldwide. Data is either not being collected, or it is not being shared effectively across the operation – sometimes because systems got disconnected, and at times it’s because the different systems in use in the company can’t communicate effectively. By moving to an all-in-one management system retailers can fix this problem. An end-to-end retail system guarantees a clear and accurate flow of information across all departments and locations, giving managers a real-time overview of all business operations –including inventory in stock, sold, and in transit across the whole chain.

2. Minimize returns (and errors that might cause them)

Returns can happen for many reasons: defective merchandise, wrong sizes or items, buyer’s remorse – you name it. Unfortunately, returns can be very expensive. Processing a return can cost retailers as much as 39% of the original price of the item, according to a report from logistics company Optoro. Although not all returns can be prevented, you can help decrease the likelihood of people sending their purchases back by having technology that increases your accuracy. If you reduce the risk of sending customers the wrong model, color, or size, you can also expect fewer stuff sent back

An action more retailers are taking is to attach a fee to returns by mail. “I think the age of free returns is over, in a universal sense,” said Neil Saunders, managing director of analytics company GlobalData. 

3. Connect your physical stores and eCommerce

Retailers who offer omni-channel shopping need to make sure that their customers’ shopping experience is consistent and seamless. If you offer home delivery or click & collect, you need to ensure that you can always deliver these options efficiently and guarantee product availability once an order has been placed. A retail management system where you can manage your inventory for both physical and online stores can help you prevent the risk of untimely out of stocks: as the e-commerce portal uses the general ledger to pull up real-time stock information, you can ensure that product availability online is always correct and in real time.

4. State your sales conditions upfront

An easy way to foster and grow customer satisfaction is to be transparent and clear. Say your sale conditions, item limitations or delivery costs loud and clear: if you wait until they are almost done with their purchase to show some hidden fees, you risk losing your customers’ trust - and business.


Inventory inefficiencies and unexpected returns can eat up a large chunk of retailers’ revenues – but it doesn't need to be so. “Retailers can realize huge gains by addressing opportunities that are in hand and slipping through enterprise fingers,” said Greg Buzek, president of IHL Group. “It requires understanding the root causes of inventory and data disconnects and implementing the technology solutions and operational changes to address these revenue-limiting issues.” If you need help understanding how technology like LS Central can help reduce your costs and increase your bottom line, contact us.


Don’t ignore the red flags of stock-outs and overstock
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Don’t ignore the red flags of stock-outs and overstock

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