Alex holds up shoplifter attempting to steal an article of clothing and hands the item back to grateful retail employee

How Retail Inventory Management Can Keep You Out of Trouble

By Read Time: 12 min.

Properly managed inventory is the backbone of every successful retail business, but are you actually losing money by making common inventory management mistakes? Overcome inventory management hurdles with our business solutions.

The Cost of Shrink In Retail Inventory

Time Magazine shows that in 2017, retail shrink cost businesses a shocking $48.9 billion. With so many companies operating in just the US alone, you might ask yourself “What is the actual impact on my business?”

That $48.9 billion of loss breaks down into four main categories:

  • Shoplifting (36.5%)
  • Employee theft (30%)
  • Administrative errors (21.3%)
  • Vendor fraud (5.4%)

The National Retail Security Survey pointed out that the decrease in legal action against internal theft and shoplifters may have been the reason that the average cost per shoplifting incident has doubled to $798. Employee theft is a staggering $1,923 per incident.

For someone that has worked hard to build a business and develop a team to help drive their vision, it can be devastating to see the impact of a bad hire.

Fortunately, there are retail inventory management systems available that will help track and maintain inventory. With the aid of management systems and retail software, issues can be identified early and resolved quickly.

Step-by-Step Retail Inventory Management

You may be somewhere along this journey, but it is important to hit each step below. Inventory management is a product of a proper foundation. System implementation always begins with establishing the right processes, then matching the systems to those processes.

Review each step and if you have any questions, my team of supply chain experts and I will be happy to assist you in making the right decision for your business.. We help businesses of all stages gain control of their inventory through industry best practices.

Setup and Configure Items

Item numbers can have meaning, or be more generic like a SKU or UPC. Logic can help your team understand what the item is from a glance, but as business and product lines grow they can bring growing pains.

Depending on the retail inventory management software, it may be able to track the pack size, colors, profiles, as well as other dimensions. The amount of detail recorded will be determined by the level of tracking the business needs. For example, an independently owned clothing company may only track size and color, whereas a big box store might track Case, Carton, and Each.

Receiving Product

The first step of accurate inventory is in the receiving process. Receivers should be chosen based on their commitment to accuracy. The information that they enter into a system or process sets the stage for everything that comes next.

One of the biggest mistakes a business makes is getting the product in quickly, without enough effort towards accuracy. However, accuracy is what takes a store from good to great!

Male retail store owner looks at computer while holding tablet

Integrating Point of Sale Systems

Point of Sale (POS) Systems often have an option to track inventory. They can know what the current stock levels are in real-time, or through daily reconciliation.

Getting near-to or real-time inventory updates as the product is sold gives merchandisers visibility into what to order and when. Retailers being supplied from another warehouse can get transfers setup same-day and never have an empty shelf.

Always look for systems with deep integration capabilities as real-time updates across systems can help businesses make better-informed decisions.

Inventory Management Systems

An Inventory Management System is the bridge between the financial system and the sales floor. When all of the departments can see the flow of product through the business, amazing things can happen.

Get a good understanding of what needs to be tracked, and what questions need to be answered on a daily basis. While most businesses look for a feature-rich request for proposal, those implementations often aren't as successful as when the retailer knows the current demand and processes.

Tracking Adjustments

As inventory accuracy grows, so will the need for transparency. Removing and adding the product from inventory should have an explanation. For example, “Why did this product suddenly appear?” or “What happened to this product, and can it be repaired before we remove it from inventory?” Transparency will help the business make better decisions.

Not only will it become increasingly important to track why a product was removed from inventory, but as it hits the financial system it will be important to track how those dollars get logged.

Cycle Counting

To keep inventory accurate, retail stores and warehouses should complete routine counts. Many businesses start out doing a monthly or weekly count of their entire inventory. However, this can be costly, time-consuming, and disrupt the business.

With the right systems, cycle counting enables the business to count a portion of their inventory every day; often when there is downtime during the day or as part of the closing routines.

Those who want to excel at efficiency break their products into A, B, and C groups by sales velocity and cost. Products in category “A” get counted weekly, products in category “B” monthly, and products in category “C” quarterly or semi-annually. Why waste time counting product that hasn't moved?

Retail Management Systems

While there are many retail inventory management systems available, I've listed some industry favorites to help get you started thinking about inventory management software.

Laptop computer with inventory management system running


Quickbooks retail management software is easily one of the most well-known software choices for POS and inventory management amongst retailers. It helps to see the impact of inventory in a friendly and familiar interface. Since it is so commonly used, most bookkeepers and accountants are familiar with it, which lowers training and onboarding expense.

Transactions are easily rolled back and are very forgiving. Average costing helps to understand the true cost of a product as it changes over time.

Quickbooks also has a vast array of third-party tools that connect through it. It is easy to find systems that have native integrations and can save time and effort setting up.


Square took a complicated and bulky credit card processing industry and put a very easy and attractive solution around it. Now credit card transactions can be easily completed virtually anywhere via mobile phone or tablet.

Square also has a very attractive Point of Sale system that can be quickly set up and connected to Quickbooks to start tracking inventory at retail locations.


As businesses grow out of Quickbooks, they begin to grow into more robust systems. 2CP makes a robust POS inventory system but has deep integrations to multiple financial systems like Quickbooks, Intacct, and Sage.

Knowing that inventory is at the heart of the retail function, 2CP also has integrations to inventory management and financial software that allows sales to drive inventory needs.

Warehouse Anywhere

Warehouse Anywhere is the best way to scale a business fast without the time and cost of building out warehouses for distribution. We leverage a network of over 10,000 existing locations across North America, including Hawaii, Alaska, Puerto Rico, and Canada. Bluetooth enabled locks paired with RFID tags and scanners ensure your product is safe. Our cloud-based technology means you have access to your data from anywhere in the world, and multiple integrations mean your existing systems do too.

3 Common Inventory Management Mistakes

Receiving From the Invoice

While there are few suppliers that will knowingly send less product than they bill for, use the old saying “trust but verify.” It is not uncommon for a supplier to send an invoice for more than was ordered.

The receiver is the key piece in retail inventory management. The receiver is responsible for making sure the product coming through the door is entered correctly. Connecting the order to the bill of lading and what was actually received is a solid step towards accuracy.

Not Greeting Every Customer

Since shoplifting accounts for 36.5% of shrink, a smart way to protect inventory on the retail sales floor is to let each customer know they have been noticed. It is also excellent customer service to reach out and let customers know there is an associate available to help them regardless of how busy they may seem.

Exceptional customer service is one of the best ways to easily combat shoplifting while also increasing sales. There is never a downside.

Carrying Too Much Inventory

If there is too much product to track, it is not easy to notice when it goes missing. In a retail store, this could be cases on the floor. In a warehouse, this could be using containers for long-term storage where employees know no one is monitoring.

Excess inventory is a good sign that product isn't being watched. Carefully weigh the bulk discounts with the additional cost in maintaining that inventory, damage, and shrink.

Retail Inventory Best Practices

Retail inventory management has a number of best practices to ensure success. Since many retail businesses still function as customer-facing brick and mortar shops, it's important to touch on the following inventory management techniques.

Witnesses for Discounts, Refunds, and Voids

Again, we reference the “trust but verify” ideology Always trust employees to do the right thing, but having a manager or supervisor nearby during these types of transactions helps to add in a layer of security. Not only does this help get eyes on shrink, but it shows all parties that the retailer takes these transactions seriously.

First In First Out

With First In, First Out (FIFO) Inventory, we assume that the first items in are the first items sold. For example, a store restocks bread every Tuesday and Thursday. If a customer visits the store looking for bread on a Friday, they'll most likely grab a loaf of bread from Tuesday's restock instead of Thursday's. With proper stock rotation, the oldest product will leave the store first, so customers are always getting fresh product.

Prioritize Items by ABC

Instead of looking at all items in inventory as equal, separate them into categories of A, B, and C. “A” products would be considered the most important, while “C” products are of least importance. Using both sales velocity and cost as factors, businesses can expend time and resources on items in their inventory that require more attention.

Loss Prevention Tags

For items that frequently fall victim to shrink, loss prevention tags can help. Garment tags, safer boxes, exploding ink cartridges, and RFID sensors will all help protect your inventory.

Leverage Systems

Tracking retail inventory can be difficult without a retail management system. By leveraging technology and management systems, much of the hard work can be done automatically.

Systems also bring visibility to other areas of the business. Everyone benefits from accurate inventory. Marketing knows what has excess stock and run promotions, finance can properly account for stock, merchandising can keep key items in stock, and customers always have product when they need it.

Mobility for Efficiency

Woman retail business owner checks inventory on her mobile phone

Similar to leveraging systems for retail inventory management, mobility brings those systems to where the items are. With cell phones and mobile apps, we can leverage the tools and interfaces they are already familiar with.

Barcodes and RFID For Accuracy

Most products that retail business owners will come across have barcodes on them from the manufacturer. Barcodes streamline data entry to a “point and shoot” motion.

RFID takes it to another level and is able to read just by being near the product. While it can be expensive to add for most warehouses, Warehouse Anywhere has turnkey RFID solutions available to bring retailers to the next level. When humans aren't involved, the accuracy is astonishing!

Warehouse Anywhere's Services

If you are looking to increase your inventory management capabilities, take a look at our Inventory Management Plans & Pricing page. We offer solutions for any size business. Each plan includes a single lease, web app, and consolidated invoicing.


For businesses that would like to choose up to 25 of 700+ possible locations, the Core plan will help bring product closer to your customer than ever before! Our team of supply chain experts will be happy to help you determine the right locations for your current operations and will be there as you rapidly grow.


If you need 26 or more locations, or need special climate-controlled environments for wine or pharmaceuticals, you might enjoy the Core+ plan. Choose your locations from more than 10,000 possible locations across North America!


Retailers who sell expensive AV equipment or other valuables might need more control. They need to be able to track when every single item enters and/or leaves the location. The Pro plan offers intelligent locks and RFID to track every movement of item and personnel for advanced protection.

Our mobile app helps keep track of inventory on the go and last mile delivery helps you get the product to your customer faster without pulling from your busy team.


Major brick and mortars who value every square foot of their stores will benefit from the Enterprise plan. Inventory overflow that can't fit in the stores will stay close enough for same-day or next-day delivery. No more missing items/liabilities; everything is tracked real-time with RFID.


Full 3PL solution perfect for startups, tech, and ecommerce companies with small parcel delivery. Lightspeed customers take advantage of on-demand orders, pick pack and ship; everything is done for you. A truly concierge service.

Learn More About Inventory Management

Retail has some key differentiators, but share many best practices with the rest of the marketplace. If you're interested in learning more about inventory management, click the link to dive in. By gaining control of your inventory, you can capture larger margin in each transaction and make a better experience for your customers and your team.

About the Author

Alex Ullrich | Warehouse Anywhere

Alex Ullrich

Alex has over 10 years of experience driving results for Fortune 100 organizations. As a leader in the supply chain space, Alex takes pride in building resilient relationships and providing tailored solutions for businesses that reduce costs, scale revenue, and create innovative logistics efficiencies. His expertise includes life sciences, field service, technology, automotive, and e-commerce companies. Alex earned a Bachelor's degree in Political Science as well as an Masters in Business Administration from Canisius College.

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