4 useful apparel inventory management strategies for retail

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Fashion retail is a glamorous business – but it’s still a business and you have to treat it like one. That means focusing on the bottom line and figuring out ways you can make things run more efficiently. 

One of the easiest areas to improve your retail fashion business is inventory management. If you’re not tracking your inventory and supply chain, odds are you’re leaving money on the table and not capitalizing on opportunities. 

Today, we’ll take a look at how to manage inventory to help your retail fashion business succeed – leading to more profits and happier customers. 

What happens when you run a store with no inventory management

You may find yourself thinking “I don’t know if I really need inventory management. I’ve only got a single location and I don’t sell a lot of different items. Maybe I can just wing it and everything will be okay…”

Let’s put an end to those thoughts here and now: you need inventory management. It doesn’t matter if you’re a tiny single-location retailer with only a few products. If you carry inventory, you need to be on top of it. 

One of the common questions we hear when talking with people about the value of inventory management is “What would my store look like if I didn’t bother with this?” 

The short answer? A disaster. 

One of the great things about inventory management is that it creates order. You know where things are when you’ve managed your inventory. You know how much of each item you have. You know what you need and don’t need. 

A store without inventory management is generally chaotic. 

Without inventory management, your store is likely disorganized. You may miss out on sales because you can’t find the item a customer is asking for (or you’ve got an inaccurate count and it’s out of stock even though you think you should have more). You have no idea if you’re experiencing shrink or theft (or how much). You’re likely wasting money on things that aren’t selling. You’re also probably paying for excess inventory you don’t need. 

On the flip side of that equation, you may actually be understocking things that sell quickly. Without inventory management, it becomes significantly harder to: 

  • Spot sales trends ahead of time and capitalize on them
  • Take advantage of seasonal fluctuations
  • Forecast what lies ahead and plan accordingly

A store without proper inventory management protocols in place is a store that’s not reaching its true potential. If it’s making money, it’s all but guaranteed it could be making even more. If it’s losing money, good inventory management could help it get out of the red. 

We get it – inventory management sounds complicated and intimidating. We’ve heard the excuses – it’s too much work to set up, and it’s only really important for big companies with multiple locations and huge supply chains. 

These things are simply not true. 

Setting up an inventory management system can benefit a business of any size – from a mobile clothing store to a Fortune 500 company with locations around the globe. 

The best part is, it doesn’t have to be complicated or expensive

Let’s talk about how retail inventory management for a clothing store can give your business a fashion makeover that will leave everyone swooning. 


Why does fashion inventory management, matter?

Inventory management is vital for nearly every business, but here are eight key reasons why it matters for your retail clothing business:

1. Prevents stockouts and keeps customers happy

Running out of stock on an item can have negative effects on your business both in the short and long term. 

In the short term, any time a customer wants to buy an item from you and you don’t have it to sell them, it represents a lost sale. Each lost sale is lost revenue, and over time, that can really add up. 

Compounding the issue is that most customers will not feel any particular loyalty to your business. If you’re out of stock on the item they want and they can obtain the product from another business, they’re almost certainly going to do that as opposed to waiting for you to restock. 

The long-term issue here is that items out of stock not only lose revenue and send your customer to a competitor, but you’re also potentially eroding the customer’s trust in your company. 

If the customer gets the item from another company with no issue or headache, they may well return to that competitor for a future purchase, even if you have the item in stock. 

With better inventory management, we can lower the chances of running out of stock on key items, and ensure our customers find the products they want, when they want them – without having to go to a competitor. 

2. Lowers your carrying costs

When confronted with the previous issue, many retail clothing store owners simply respond with “Well, I’ll just carry more inventory to make sure we never run out.”

On the surface, this might seem like a sound strategy. However, what most business owners fail to factor into that equation are carrying costs. Carrying too much inventory will cost you more money in both the immediate future and down the road. 

Here’s the problem – carrying extra inventory costs you money in a myriad number of ways. 

For starters, you have to pay for that excess inventory. In a business-like clothing retail, where trends can change rapidly, those hot new outfits you’ve got a hundred of might not be in demand three months from now. You’re left sitting on 50 outfits you’ll either never sell, or have to sell at a greatly reduced price.

Beyond that, you’re also going to have to have more space to store all of these excess inventory items you’re accumulating. Will you have to pay for additional storage space? Will you have to reallocate space you could use for sales and turn it into storage? Both potentially cost you money. 

Finally, will you need to carry more insurance to cover all of this inventory in the face of a potential loss? That costs more money as well. 

Tying up money and space with excess inventory is never a solution to the problem of stock-outs. You’re far better served by utilizing proper inventory management techniques and ensuring you always have the right amount of product on hand to meet the needs of your customers. 

3. Make sure your investors are happy

If you own your own business and have no investors and don’t feel as though you’ll ever need to approach a bank for a loan, this may not apply to you. 

However, most businesses will eventually have stakeholders or loans – and those investors and banks will want to look at your financial records. If they find that you’re not doing a good job managing your inventory, they may well pass on investing in your retail clothing business. 

Investors often look to make sure businesses are operating responsibly in terms of their finances. If you can’t provide any kind of valuation on your inventory, that’s going to be a red flag – and yet another thing that potentially costs your clothing business money. 

4. Loss prevention

Shrink and theft are concerns for any business, but this is particularly true for retail. Customers may shoplift items from your store. Employees may walk off with goods from the back room. If you’re not keeping an accurate inventory, how will you know if this is happening and how much it’s costing you? 

You may not think shrink is a big issue – but for perspective, retail businesses lost over $50 billion dollars to theft in 2016. The organization created by a retail inventory management software system can not only help you realize when theft becomes a problem, but it can also help you devise ways to prevent it. 

5. Better space management

We touched on this in the carrying costs section, but it bears talking about more in-depth here. 

Your retail clothing store will be much easier to organize if you follow an apparel inventory management program. 

Large retail chains organize their locations using what are called planograms. These detailed documents are designed so store managers know exactly where to put products for maximum effectiveness and sales. 

Obviously, if you know one type of clothing is selling exceptionally well at the moment, you’ll want to put it front and centre in your store and not bury it on a rack in a corner where no one will ever find it. 

Apparel inventory management helps you know what items are selling – and you can then decide where to place things based on this knowledge. 

Plus, with a planogram setup, you’ll never find yourself looking for items in the store – everything will have a clearly marked place, meaning it’s easy to find when customers are looking for it. 

6. Eliminate costly administrative errors

More than 20% of your loss and shrinkage springs from administrative errors by your staff.

Taking inventory by hand is better than not taking it at all, but if you really want to take control of your stock and supplies, you’ll need an inventory management solution that works with your Point of Sale system. 

7. Avoid the dreaded dead stock

If you work in fashion, you know trends come and trends go. What’s hot today might be totally out of style in three months. 

We talked about this earlier in the carrying costs section, but it bears repeating here – you do not want to be stuck with dead stock

Deadstock, or stock you can no longer sell because no one wants it, is a surefire way to lose money. Overstocking items is the number one cause of this – and we can solve this problem through inventory management. 

An inventory management solution will not only let you know how much stock of an item you have on hand (preventing overstocking), it will also help you better understand how much stock you need for the future. 

Knowing this allows you to order more efficiently, meaning you won’t be stuck with last summer’s hot new dress on your shelves at Christmas. 

8. Manage your supply chain

Even if you’re just a small shop owner with a single location, it still pays dividends to make sure your supply chain is operating efficiently. Inventory management can help you do that. 

The biggest way it can assist you here is by helping you make sure you’re not overpaying for products. Tracking your supply chain means you’ll always know what inventory you’ve paid for, which will allow you to adjust your stock levels as prices fluctuate. This can save you money.

It also helps to know if there are going to be kinks in your supply chain – if certain things might become difficult to get, it’s good to know early so you can prepare or find other suppliers. 

Apparel inventory management challenges

Inventory is inventory, and tracking it always presents some challenges no matter what the industry. 

However, there are some obstacles to overcome that are unique to the fashion retail industry. Let’s take a moment to look at them.

  • Apparel sales rely heavily on ecommerce

Depending on who you ask, apparel sales are either the largest ecommerce segment or the second largest. At the end of the day, it doesn’t matter which spot it takes, the challenges are the same. 

Relying so heavily on ecommerce and social media platforms, like Instagram, means fashion retailers need to be on top of their inventory, their supply chain, and their shipping. Customers want their purchases quickly, and given the nature of buying clothes in general, returns are a constant. 

Businesses in this space must be prepared to deal with those challenges. 

Fashion trends change constantly. What was hot in May is outdated by July – which means fashion retailers need to be extra aware when making projections. Being overzealous can lead to costly dead stock that will sit on shelves or be sold at a loss. 

Fortunately, good inventory management with data forecasting can help reduce risk here. 

We’ve talked about ecommerce sales, but most fashion retailers are still selling at brick-and-mortar locations as well as through other channels.

As such, you need specialized tools to help you understand how your inventory moves through each specific channel. If a shirt sells better online than in the store, that information affects future orders – and several other considerations. However, if you don’t know the sales figures by channel, you’re flying at least partially blind. 

Examining your inventory by channel on a micro level can help you allocate items more effectively – and prevent running out of stock in some locations and having too much in others. 

Best strategies for apparel inventory management

As mentioned earlier, managing your inventory doesn’t have to be difficult, time-consuming, or expensive. There are options for every business and budget – from the old-fashioned pen and paper through to complex modular software solutions that can be custom-fit to meet your specific needs. 

With that in mind, let’s dive in and look at some options along with the pros and cons of each. 

1. Pen and paper

The simplest solution around is still the pen and paper method. It’s timeless, and if you’re a really small business, it can still work.

If you’re a fashion retailer, this basically means counting your inventory by hand either daily, weekly, or monthly and breaking down everything into categories. For example, you may have a category for pants, with subcategories for men, women, style, size, and so on. 


The pros of the pen-and-paper method are that it’s simple, it’s easy to implement, and it won’t cost you a dime to start tracking your inventory. 


The cons are that it requires manual counts (where mistakes can happen) and it’s not scalable for long. If your business grows, you’ll quickly come to find that this method can’t keep up. 

That being said, if you’re looking to get your feet wet with inventory management, this is a good way to start. 

2. Spreadsheets

The next option is the spreadsheet. People generally have one of two very distinct reactions when Excel and spreadsheets are mentioned: they either get excited or they run screaming from the room. If you’re the latter, don’t run yet – it’s not as bad as you think. 

With this method, you’re still manually counting items and entering them onto a spreadsheet where you can get a better lay of the land with your stock levels. The spreadsheet offers more functionality than the pen-and-paper method, meaning it will be easier to see your data at a glance and add columns and rows for new products. It’s a cleaner method than pen and paper and more elegant. 


The pros are that it’s easier to add new rows and columns to your tracking, it offers more math tools for more detailed analysis, it’s easier to keep organized, and if you use a cloud option you can access the information anywhere. 


On the cons side, this method is even more prone to error than pen and paper. Not only does someone have to count the inventory, but they also have to write down the number, and then type it into the spreadsheet – increasing the opportunity for human error. The manual counting method also means this doesn’t scale well as your company grows. 

3. Mobile-based inventory management tools

Our next option is more tech-based and allows for greater accuracy and control than our two previous methods. 

Mobile-based inventory management apps remove the manual counting aspect, making it possible to track everything by barcode or Radio Frequency Identification (RFID) tags. 

You can also take pictures of inventory items and manually enter data if you’re not ready to go all-in on the barcode technology. 


The pros of a clothing inventory app include easy accessibility anywhere thanks to cloud-based applications, more accurate inventories because there’s no manual count involved, and faster inventory counts thanks to scanning technology.


The downside is that there is some cost and effort involved in the set-up of this type of system, particularly if you’re switching over to barcodes. The good outweighs the bad, though, as this is a great solution for both small and mid-sized businesses.

4. Enterprise resource planning with warehouse management tools

If you’re a medium-to-large-sized apparel retailer, you’re going to want to explore Enterprise Resource Planning options with warehouse management capabilities. 

These more complex solutions will help you manage your inventory and supply chain across multiple locations and multiple sales channels (in-store, online, etc.)

Not only will this type of inventory management make tracking the number of products and materials you have much simpler, but it can also help out by ensuring that orders are shipped in a timely fashion from the closest warehouse location, ensuring customers get their items faster. 


The pros to this kind of system are many – even for small fashion retailers. Barcode and RFID technology eliminates administrative errors, POS integration keeps counts accurate, warehouse management helps you manage your order and supply chain, and so on. 


The only real downside here is price and implementation – but neither should put you off considering these solutions. There is a wide range of services available at many different price points. Odds are there’s one for you. Implementation can be easily handled by the software provider – with systems up and running in a matter of days in some instances. 

Final thoughts

Utilizing inventory management is important for any business, but the fashion retail industry presents its own unique set of obstacles to overcome. 

Whether you’re a business that has a single brick-and-mortar location, or a massive company with multiple channels and warehouses spanning the globe, you skimp on inventory management at your own risk. 

The good news is inventory management has a great return on investment with a very minor buy-in. The abundance of options on the market means business owners can find solutions in every price range with the tools they need. 

So, if you’re not utilizing an inventory management system with your retail fashion business, what are you waiting for? Don’t leave money and opportunity on the table. 

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