8 best practices to optimize your apparel inventory management

By: Jul Domingo

The fashion retail sector has consistently been one of the best performing in the world. And in 2022, its global GDP reached 3 trillion dollars.

If you’re a fashion retailer, these numbers show your business’ potential. But if we flip the coin, they also depict how great the competition is. You need to cater to your target market if you want to stand out.

But keeping up with style trends is difficult. Fashion has a short shelf life. You can’t predict how long the enthusiasm for your latest collection will last. This makes it hard to determine how much stock to keep on hand without putting your investment at risk.

It’s not without solutions, though. Focusing on proper apparel inventory management can be a game-changer. It’s a method—a core process—of polishing the movements of your stocks and maximizing their life cycle.

In this post, you’ll learn how to mitigate inefficiencies, risks, and losses by integrating effective fashion inventory management into your daily operations. Before diving into what you can do, let’s first examine the benefits it brings to your enterprise.

Why does apparel inventory management matter?

Apparel inventory management, also known as fashion or clothing inventory management, can help your retail store in many ways, including:

Reducing stock out for higher customer satisfaction

You lose out on a potential sale as soon as a customer request is not fulfilled. It also translates to poor customer experience, with some 30% saying it ruins their shopping experience. And if stock shortages occur repeatedly. 70% of customers will switch to another brand.

Maintaining an adequate inventory for each of your products is easy with proper apparel inventory management. With the right system or approach, you can make accurate assessments of the customer demands and simplify replenishment. One way to do this is by implementing automation, which can reduce stock out by as much as 60%. Optimizing your large apparel collection can help increase your sales while gaining more satisfied and happier customers.

Avoiding excess and dead stock inventory

Retailers often stock extra garment products to meet unanticipated customer needs. But there’s a thin line before you cross over to bloating your inventory level. Your excess stocks, if not controlled, can become dead stock items. And since the fashion industry relies on ever-changing market trends, it’s crucial to have a retail inventory management system that reduces excess inventory.

An important objective of fashion inventory management is to increase stock transparency. It gives you the ability to see movements and determine how many stocks you need each period. It also helps you detect which stocks aren’t worth your time and investment, so you can reduce their price or pair them with your best-sellers to free up your warehouse space for more profitable items.

Optimizing warehouse layout and space

Optimizing your warehouse layout is a breeze without excess inventory and dead stocks. It’s easier to picture the ideal place for your stock boxes, racks, and aisles when you understand the entire stock flow. With a warehouse space that can support the ins and outs of your inventory, you can expect more efficient operations.

Your apparel inventory management approach should help you stay on top of your processes, including receiving deliveries, storing, packing, shipping, and returning orders.

Prevents retail inventory shrinkage

Inventory shrinkage is a common issue for fashion retailers due to the size of the merchandise, leaving it vulnerable to internal fraud, damage, theft, and shoplifting.

With proper clothing inventory management, tracking each unit’s movement makes it easier to mitigate these risks. The right inventory software can help you track delivery, sales, and returns in real-time. You’ll have a greater chance of identifying these risks and circumventing them. It also saves you from tedious, error-prone, and costly manual recording and reporting.

Achieves effective management of retail chains

A hallmark of a good supply chain is well-strategized processes for manufacturing, outsourcing, and distributing your products. Apparel inventory management can reveal operational weaknesses and inefficiencies, such as delayed deliveries and production.

Another example would be to go straight to manufacturers for lower costs instead of outsourcing from distributors. Or you can also design a replenishment system (e.g., monthly, quarterly, annually) that can reduce your holding and carrying costs. In short, inventory management makes internal and external functions more efficient.

Reducing administrative errors

Administrative errors are anything but trivial. They can cost you substantial financial losses due to various problems, from faulty POS transactions to accounting inaccuracies to incorrect manual recording.

When you systematize your inventory, you’ll be able to identify shrinkage patterns and errors. From there, you can implement changes in your operation to break those patterns. Example: Assigning a counter-checker for error-prone administrative tasks like duplicate entries.

Apparel inventory management encompasses everything inventory-related—physical stocks, external functions, and even the internal team involved. To help you maximize its benefits in your store, here are the best practices you should start focusing on.

8 best practices for clothing inventory management

Apparel inventory management is not a one-off job. For as long as your shop is open, you need to maintain good inventory management practices. Take the following tips to heart:

1. Sharpen your inventory forecasting skills

Inventory forecasting is a smart way to estimate your stock requirements. Knowing consumer demand for a specific product over a specific period will help you plan your future stock purchases.

Monitoring historical data first to improve your forecasts. Doing this manually or using an Excel sheet are traditional methods. Yet they don’t take into account unpredictabilities crucial to making an accurate forecast, and they can be quite time-consuming to navigate.

Fashion items have high volatility and low predictability. Retailers stock up on items to ensure they can cater to their customers, especially since 87% of shoppers make impulse purchases. Forecasting collections is also a different beast. This could have a wide range of products that have nothing in common, yet behave in the same manner. All these factors contribute to the difficulty of predicting demand over a period of time, let alone over a week or per item.

Leveraging an inventory management system provides real-time and more accurate data. Using artificial intelligence and advanced algorithms, forecasting software incorporates all potential unforeseen events and other changes. The goal of fashion inventory management is to always maintain accurate inventory levels, and it’s easier to do so when you have a reliable inventory forecasting platform.

Say goodbye to messy Excel sheets and checklists.
Don’t rely on guesswork and use a smart inventory forecasting app

2. Reduce erroneous balances

Having inaccurate inventory counts is a nuisance in financial reporting and actual selling operations. Imagine having a record of 12 black skirts in your store, but only ten of them are actually available. Upon discovering that it’s because of human error, wherein only ten should’ve been accounted for in the first place, it’s a sign you’ll have to clean up your records. It’s unlikely to be an isolated incident.

Using an inventory management solution can reduce these instances and prevent sales losses. Integrating it into your system eliminates the need for manual input and human error by extension. Ensure that your staff accepts stocks with proper signatories and conducts a weekly audit to ensure accuracy. These inventory management techniques can help you reduce inventory errors by holding your staff accountable, which technology can help them with.

3. Reduce storage and maintenance costs

Space, rent, electricity, and staff costs are associated with holding inventory. Effective inventory management can reduce these expenses. A component of this strategy is to focus on in-demand apparel and avoid slow-movers.

If your apparel normally sells within three months, but some are still in stock six months later, it’s time to put them on sale. Other tactics that would work include bundling them and. You’ll prevent inventory aging and all costs associated with it by doing so.

But the number of items in Excel (or pen and paper) reaches tens of thousands per product, so analyzing them all would take days. Results would be outdated before you were finished. Consider using a platform that leverages product segmentation can simplify the process and provide higher transparency.

4. Enhance apparel stocks movement

Clothing inventory management streamlines your operation from the point of purchasing to selling stocks. By using integrated systems, you can track the precision of their movement from your warehouse (in terms of quantity and quality) to the distribution center and your customers afterward.

For apparel retailers, a well-developed supply chain is imperative to satisfy customer expectations. So there should be clear communication between you and your suppliers (re: production and quality fulfillment) and your third-party carriers (re: shipment procedures). Connecting with these partner companies is essential to successful retail inventory management.

5. Optimize order fulfillment

The apparel industry has an expansive market base. Because of the rise of online shopping, consumers can now shop at your store 24/7. This means that business owners have to deal with an increase in customer demand. In fact, B2C ecommerce sales are expected to grow to $5 trillion at the end of 2022 and as high as $6 trillion by 2024.

Fulfilling orders depends on how long it takes your suppliers to deliver. Storage and security measures, as well as the time it takes for packing and processing, will affect how long the process will take. If you plan ahead, you will reduce unmet demands and stock shortages. For instance, SMBs often choose to outsource shipping to fulfillment centers instead of handling logistics in house.

A higher-order fulfillment rate means a better customer experience. You don’t want to lose out on 69% of consumers who won’t return to your business if your delivery is late. Only a data-driven, future-oriented apparel inventory management system can make this a reality.

6. Take stock of your inventory regularly

Check your records against inventory levels regularly. For starters, you can conduct physical audits to spot items you wouldn’t notice and garments that need to be repaired, saving you from having obsolete inventory and bloated stocks. But this is only feasible if your inventory is small.

The best method is to use technology. Barcode scanning software increases the efficiency of inventory management by reducing tasks and increasing accuracy during cycle counting. You don’t have to sort the shirts, skirts, and blouses by design, color, and size and count them one by one. You just have to scan all the items, and it will give you the end balances you need to compare with your records. Also, you can even integrate it with your inventory platforms.

Fashion inventory management is evolving and progressing with time. Take advantage of these advanced methods to improve your inventory control and increase your cost savings.

7. Establish effective inventory management routines

The right approach establishes better habits and managing stock appropriately. As a first step, make sure you have a solid inventory management system in place from top to bottom. Engage your purchasing, sales, and customer service teams in continuous improvement. Here are some ways to do so:

• Appoint a staff member to supervise inventory transactions
• Use ABC analysis to optimize your product segmentation (i.e., best-sellers and slow-moving stocks)
• Automate your ideal Reorder Point for inventory replenishment to avoid stockouts
• Calculate your Safety Stock level and maintain backup stocks
• Set your Inventory KPIs and track your team’s performance (e.g., quantity sales per month, foot traffic)

Using apparel inventory software can help you maintain the practices listed above. If needed, you can check your staff’s performance, hold them accountable, and offer recommendations in real time.

8. Expedite exchanges and returns

Management of your retail inventory does not end with the delivery of products to your customers. Considering the likelihood of in-store and online returns is also important.

The probability of fashion items getting returned is pretty high, thanks to bracketing, the practice of buying merchandise to return it. This is especially true with online purchases. In fact, 30 to 40% of clothes bought online end up back in the store.

Automate your return and exchange inventory management by implementing the right software, or partner with a logistics provider that offers returns management. Lay out a concrete return and exchange process. How can customers send their exchange or return requests? What are the requirements aside from their purchase receipts? How would you deliver the exchange items or return the payment?

Make the information accessible to your customers by displaying it on your store counter, website, or mobile app. Tracking and understanding your return rates is crucial to reducing them in future sales and improving customer satisfaction.

Take control of your clothing inventory management

Fashion inventory management is a continuous process. And it gets harder as you grow. You can follow the 8 tips above to streamline your clothing inventory management. But remember, you don’t have to do it alone. We’re here to answer any pressing inventory management questions. We’ll be glad to walk you through proper inventory forecasting, segmentation, and replenishment. Drop us a line today.

Discover how Inventoro can help fashion retailers manage their inventory more effectively.