Free Press Journal

Inventory in Retail: When every SKU matters!


Inventory, inventory management, inventory analysis, all these words, until a few years ago, weren’t common parlance. It is in fact a very recent phenomenon, that inventory, the backbone of the retail business, has gained recognition. With the proliferation of e-commerce, more and more consumers, have become privy and familiar with this term.

What then, is inventory? Inventory, simply put is the amount of stock, in the form of number of units of a product, available for sale or distribution, to a retailer, at any given point in time. Inventory management is a system that enables retailers to keep track of the number of units sold, the numbers of units in stock and the numbers that need to be maintained, depending on the projected demand.

To further simplify this, let’s say that you as a consumer are logged in to an e-commerce site. You select a product and are going through the features and benefits of said product. Most e-commerce sites these days, have an active counter of the number of the products sold, in stock, or the expected time in which an out-of-stock product will be available. The number of any product available is known as an SKU or stock keeping unit. This is a form of inventory management that is sometimes used to create or induce a buying decision.

Inventory in Retail: Just how much does it truly matter?

It wouldn’t be an overstatement of fact, if we said that inventory is the backbone of the retail trade. In the day and age of e-commerce, where every SKU is the difference between profit and loss, active inventory management is of the essence.

Inventory management and creating demand:

The recent trend of flash sales in the e-commerce space, has made it that much more vital to keep track of the number of units available in order to keep the demand satiated. Take the case of the OnePlus, or Xiaomi phones, how many consumers waited patiently for their ‘turn’ to buy a product. Chirag Alreja, one of the core team members and director at GOQII, a fitness band manufacturer and retailer has this to say, “buying my OnePlus was also a lesson in creating demand for a product. Knowing that only a limited number of phones was up for sales, got me that much more excited, and I looked forward to getting my hands on the device. A great example of how shrewd inventory management was used as an effective marketing tool. I eventually did get my phone, and a valuable lesson in retail, which I hope to apply to my own business someday.”

Inventory Management and Customer Service

Creating demand is one side of the equation, inventory management, also helps a company service its customers better. Customer service is one of modern retail’s most enduring pillars and great customer service will almost always bring your customers back for more. Sahil Dalal of pays testament to the importance of inventory management to customer service. He says, “having a good inventory management and tracking system, is the difference between having a customer and losing one. We retail hundreds of products, and being in the daily goods retail space, we have employed a robust inventory management system to tell us just how much of a product or item we have in store. Our policy is to always have whatever our consumers may need, ever in stock. This takes a massive effort on the part of our inventory team, who are experts in what they do.” Like Sahil, hundreds of other entrepreneurs, have gone on the record to state that inventory management is one of the most important tools in their arsenal of good customer service.

Inventory Management as a tool for knowing what sells:

There is a fine line between stocking up on the right product, and stocking products that are a hard sell. This fine line often determines the relative success or failure of a retail venture. A good inventory management system, helps businesses determine the success ratio of one product vis-a-vis another and weed out or phase out underperforming SKUs. Jigna Alreja, CEO, Hitplay Devices lends us a perspective on this, “at Hitplay we retail quirky and rare items that aren’t for everyone. Even in this selective space, we need to understand, which one of these items are our bestsellers, and which ones we could do without. Our inventory management system is a real Godsend in this respect. We scrutinise the numbers of sales versus items in stock and arrive at a conclusion about which products should be kept in stock, or ordered, or which ones are dispensable.”

Inventory Management and keeping costs down

Inventory management also helps in controlling costs. With a majority of a business’ overhead spent on inventory acquisition, a robust inventory control system does work wonders on controlling cost as well. Look at it this way, there are 5 types of products:

  • There are items that are inexpensive to acquire, but sell copiously and quickly, yielding a decent profit
  • There are items that are expensive to acquire, but the sale of even a few of these yield a good profit ratio and justify the cost of acquisition●There are items that are inexpensive to acquire, but sell either poorly or seasonally
  • There are items that are expensive to acquire, but sit on the shelves for a while and sell rarely
  • What a good inventory control and management system will do, is help streamline the ratio of all these products and strike a profitable expense ratio of one product to the other.

How does an entrepreneur invest in inventory control and management?

If you were to pick the brains of an entrepreneur, or even a seasoned businessman for that matter, you will learn that even though inventory management is a critical part of the business, that one single, overarching solution for the activity, will never work. Back in the days of the license, when computers, software and other tech related innovations weren’t as ubiquitous as they are today, the ‘munshi’ or accountant-cum-stock-keeper played an important role in inventory control and management. This system while exemplary for its time, left a lot to be desired, as it depended on human accuracy, trust and the honour system. Ledgers had to be maintained and it was a time consuming process.

The proliferation of technology and the easy availability of software’s for inventory management, may have simplified life for the entrepreneur. However how one chooses the apt inventory control system is still a mystery. Demystifying this conundrum is one of the business owner’s biggest challenges. While custom-made inventory management software’s are a dream not everyone can afford, there are alternatives available that meet the need for one for smaller businesses. Choosing between a mobile based, desktop based and a hybrid system mandate the same set of considerations. So while choosing an inventory control and management system for your business, you need to take into consideration the following:

Total volumes of order, sale and repurchase

  • Total fulfilment of orders on a daily, weekly and monthly basis
  • Cost of the system and whether it fits your needs
  • Need-gap evaluation of the software
  • Availability of a free trial
  • Customer service support and infrastructure
  • Cloud data support and integration

These checkboxes ticked will help you as an entrepreneur, find the right kind of solution for your retail inventory control/management software.


Innovation is the basis of taking any business to the next level. Knowing what is in stock, determining whether said quantity is enough, or whether more needs to be added, finding ways and means to lower a particular product’s cost of acquisition, determining the worth of a product as a profit generator and of course deciding which products ought to be focused on are all key functions of retail inventory management. As a business grows, expands and gets more and more complex in terms of the scale and number of products it offers to consumers, a retail inventory management system, becomes that much more important. From the perspective of a business owner, establishing a custom-made system or choosing a readymade alternative becomes that much more critical a question. This question however, can determine how successful a venture is in the long run, and is not one that must be taken lightly.