Retail Inventory Management Software

There are hundreds of inventory management systems available for retailers. These programs are designed for all types of businesses: programs for small retailers, programs for big enterprises, programs for specific retail verticals, and programs for multi-channel retailers, to name a few. This buyer’s guide is written to help inventory control software buyers understand this complex, fragmented market. 

Here’s what we’ll cover:

What Is Inventory Management Software?
Deployment Strategies
The Vendor Landscape
What Type of Buyer Are You?

Market Trends You Should Understand
Benefits & Potential Issues
Costs & Return on Investment

What is Inventory Management Software?

If you have ever been frustrated by a retailer who has every size of an item in stock but yours, you know the importance of good inventory control. On the most basic level, inventory control software helps retailers keep accurate count of stock levels. The primary goal for this application is for retailers to re-order items before they become fully sold out. Having adequate levels of inventory helps retailers capitalize on sales opportunities. Of course, it is important that retailers don’t order too much of an item and face not being able to sell it all. Robust systems can help retailers strike that delicate balance of ordering just enough but not too much.

Core features include sorting inventory by department or type, establishing of thresholds for minimum quantities, and alerts when stock levels reach those thresholds. More advanced systems might include a matrix for tracking items by size, color, and style, open to buy modules, or integration with purchasing modules to enable automatic generation of purchase orders.  

Deployment Strategies

Best-of-breed programs such as Fishbowl can be implemented as standalone systems to manage only inventory. However, many buyers will choose to implement a program that is party of a suite that may include point of sale (POS), warehouse management (WMS), accounting, e-commerce, or customer relationship management (CRM).  Which type of system you implement will likely depend on your desire for integration with other modules or potentially the size of your company. 

What Type of Buyer Are You?

You will want to understand what type of buyer you are before evaluating inventory control software. We have found that nearly 90% of retail buyers fall into one of the following categories:

• Small buyers. Single-store retailers comprise the bulk of this category, but most retailers with fewer than five stores will belong here. These buyers’ needs are typically straightforward and are met by most off-the-shelf POS systems. 
• Large, integrated suite buyers. While their needs are conceptually similar to their smaller counterparts, larger retailers will require more robust, scalable programs that can share data across a wide network of locations. They are also looking for programs that can tie in POS and possibly accounting or warehouse management. 
• Large, best-of-breed buyers. These buyers work for larger retailers that have already made substantial investments in existing POS or accounting systems. They are looking for a standalone system that can integrate with existing applications without replacing them. They are often interested in more advanced modules for open to buy and merchandise planning. 
• Multi-channel retailers. These buyers conduct enough “brick and mortar” and online sales to warrant a system that can be managed across multiple channels. These systems will typically need to integrate with POS systems and online shopping carts. Higher volume and multi-location retailers may prefer data to be updated in real time, although they should expect a substantial increase in their investment when evaluating real-time inventory management programs.

The Vendor Landscape

The retail inventory control market becomes much less cluttered when buyers approach it with their respective category in mind.

Market Trends You Should Understand

Various software trends are impacting the retail inventory management market. The primary trends include the following:

• Automated replenishment. Advanced inventory control tools such as vendor managed inventory and electronic purchase orders enable retailers to be proactive about keeping items fully stocked. Smaller retailers are learning from larger enterprises and beginning to use these tools that have previously been affordable only to the biggest companies. 
• RFID. Another technology that has traditionally been used only by the biggest companies, RFID is working its way down market and is within reach of many mid-sized retailers. These tools enable managers to update inventory levels much faster and more accurately, improving efficiency in a number of bottlenecks along the supply chain. 
• Software as a Service (SaaS). Just about every application within the retail software industry is impacted by the universal trend towards SaaS. Having a web-based system enables managers to share data easily across multiple locations, access system remotely, avoid large upfront costs, and implement a robust system without complex hardware infrastructure. We expect the presence of SaaS solutions in retail to grow steadily over the next several years. 

Benefits & Potential Issues

A strong inventory control system should improve the retail organization from the bottom up. Most retailers should expect the following benefits when implementing and using a system properly.

• Efficiency. If you have ever counted inventory levels at the end of the day, week, or month, you know what a labor-intensive task it is. Programs eliminate the hassle of counting and keeping track of inventory levels, saving time and allowing employees to focus on other tasks that grow the business. 
• Accuracy. Diligent tracking of stock levels in a system enables retailers to know exactly how much of each item is in stock, which can get surprisingly difficult to manage without a formal program. A system will also help retailers plan purchase decisions based on actual historical sales data and improve the performance of their forecasts. 
• Less inventory shrinkage. By tracking inventory formally and updating the system as items or sold or distributed to other locations, retailers should find that inventory shrinkage naturally diminishes. Systems help retailers eliminate profit loss and headaches due to employee theft, customer theft, ringing up sales for the wrong item, and not recording sales properly. 
• Improved visibility. Inventory control software enables retailers to view stock levels at other locations and from remote locations, freeing cashiers from time-consuming tasks of calling other locations to ask if they have particular items in stock. It also provides visibility on the executive level to item counts and trends across the enterprise. 

As with all purchases, there are potential issues to consider as well. The first risk associated with inventory control systems is that they won’t be used properly by employees. This puts owners in the frustrating position of having paid for a system without reaping any of its benefits. The most common reason why employees would not use a system is because of its complexity; we have found that adequate training typically solves this issue. The second most common issue we hear about is inventory levels simply “not adding up.” This issue is likely due to the system being outdated, used impproperly, or not integrating properly with other systems that access its data (often accounting or e-commerce systems). Buyers will want to ensure that implementations are smooth and that integrations are maintained. 

Costs & Return on Investment

Retailers should find that the costs of formal retail inventory programs have never been lower, due primarily to competition among vendors and declining hardware prices. The costs that buyers face will vary widely. Small retailers implementing POS systems with inventory control modules will likely find a number of affordable options, while larger retailers looking for more advanced systems will face a larger spend. We speak to many buyers who prefer real-time inventory control across multiple locations. They should note that real-time systems are typically much more expensive than systems that update inventory levels once per day, which is sufficient for most small and mid-sized retailers. Most retailers who implement a system that is adequately sized for their needs should be able to generate a positive return on their investment. The costs of improper inventory control are deceptively high and can be easily avoided with a formal program.

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