Inventoro is an inventory management tool. Yeah, okay, great… Inventory is such an exciting subject, right? Honestly, when was the last time you sat down with friends or family for dinner and talked about your inventory. Doesn’t happen much, does it?
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Doesn’t happen much, does it? So how is it possible that something as boring as inventory has an effect on something more exciting, like customer satisfaction? As it turns out, however, these two fields are closely related.
Let’s begin by breaking down customer satisfaction. It really comes down to two things: the product and the service. Inventoro focuses on the product side of the equation. And in retail, wholesale, and e-commerce, the product is determined by product range, product availability, and price. As it turns out, all of these are associated with inventory management, and they can all be substantially improved by Inventoro.
Product range is a critical factor for the customer
Maybe it’s psychological, or maybe it’s just convenient, but there is a clear connection between product range and the amount of customers this range attracts. Think of the world before super-sized shopping malls and the one we know now, after.
Shopping malls offer “everything”, and families are willing to spend their afternoons in these modern complexes of capitalism just looking at things. It doesn’t matter that they don’t need anything at all or maybe just one or two items. It is the possibility to buy anything that catches their interest and allows them to spend their time and money there.
With the increasing popularity of e-commerce we see exactly the same phenomenon. Those e-shops which offer the most goods and services enjoy the biggest traffic.
Just the fact that customers can buy “anything they want” and have one billing place, one delivery, and one customer experience is important enough that they don’t even check prices elsewhere. It’s convenient, so what the heck, right?
Our data show that in just the past two years, retailers have increased their portfolio size by 40%, creating an even more demanding environment for inventory management. You may choose to stay small, but if you do, you will likely lose out on sales.
Increasing product range with Inventoro
As a business owner, you know very well that keeping and maintaining a massive product range is not only difficult but also expensive. There is a huge difference between a business with 500 SKUs and 100,000 SKUs.
The more products you offer, the more cash you need to keep them in stock, the more manpower you need to handle the stock, and the more chaos-prone you become. At a certain point it grows beyond your brain’s capacity and turns into utter frustration.
Offering more products makes it more complicated when it comes to keeping track of which products make the profits and which should be delisted. There are simply too many numbers for one human brain to remember, especially when all of this happens at more than one branch. For this reason we have added the Winners and Losers section to our software. It makes this analysis fast and data driven
ABC analysis and customer satisfaction
The Winners and Losers section of our app is just a fancy name for an ABCD analysis. It divides your product portfolio into Winners (the cash cows of your product range), Chasers (the strongholds of your inventory), and Losers (products which just aren’t worth the effort and slow your business down).
Let’s start with the Losers. We said that a large product portfolio is good for customer satisfaction. That’s true enough, but you want to be smart about it. We covered this subject in great detail in Product segmentation, but to simplify things for now, Losers just cost you money; there is no real benefit to keeping them in your product portfolio. You are basically the sponsor of these products. They cost you more in time and effort than they are worth in real profit made.
Do the best you can to get rid of your Losers. You might try to offer a massive discount on them, or negotiate a buyback from your supplier. Just don’t keep them in stock. It’s not worth the hassle for the meager profit they earn you.
Large product offers make you popular
Chasers, though, are a different story. They make up the majority of your products. They don’t sell that often, so they don’t represent more than 20% of your turnover, but they do create the majority of your product offer. When a product appears in the Chasers section of our software, we are confident enough to say it is making you money.
The more Chasers you have, the better it is for you … as long they don’t eventually fall into the Losers category. Chasers are products that typically attract customers to your store or e-shop. They are niche items which a typical consumer buys only a few times in their lifetime (exaggerated to make a point).
So chasers are not so good for your bottom line, but they are extremely important for customer satisfaction. You don’t have to sponsor them, since eventually they will pay for themselves. That is, if you have a lot of them.
One of the main benefits of having Chasers is that they attract customers to Winners. Winners are the everyday popular products which make the most profit, because they sell extremely well. They represent the majority of your turnover. But you need Chasers to sell Winners.
Keeping products available makes satisfied customers
The second field of inventory management which influences customer satisfaction is availability. It is really simple. When customers want to buy something, they want to buy it right now. They have no patience, and they will turn to your competitor in the click of a mouse if you can’t meet their demand instantly.
So it doesn’t matter so much that you can order goods when an end customer is ready to order. Anybody can do that. Because remember, for the customer, waiting for goods to arrive in 24 hours or in three weeks is a game changer. Customers buy goods because they need them and they need them now, not tomorrow and especially not in a couple of weeks.
But you as a retail operator know very well that keeping goods in stock at all times is challenging and expensive. And THAT is the reason why Inventoro was created in the first place.
Smart orders lead to customer satisfaction
Stockouts are bad. When in doubt, avoid them. These are the moments when customers come to your store or e-shop looking for something and ready to spend money, only to find that the goods they wanted to purchase are not available.
Let’s analyze for a moment what just happened. First of all, you didn’t make a profit on a sale. Not only that, you have also lost a customer who went to make a purchase elsewhere. And he or she might never come back, because they’ll remember your e-shop or store as a place which could not satisfy their demand.
Product availability is therefore crucial for customer satisfaction as well as profits. Keeping products available should be your top priority! Make no mistake, it is a very complicated task. So complicated that only next level computer power can handle it.
How to avoid stockouts
The only effective and long-term strategy to avoid stockouts and keep your inventory available for sale as much as possible is to make smart, everyday decisions in your orders. In order to sustain availability of goods, you have to order on time and in the right amounts. So how do we help you to achieve optimal amounts of inventory?
First, we have to be able to forecast sales. Think of a sales forecast as a weather forecast. There are many simple ways to forecast weather. You look at the skies, you see a cumulonimbus cloud, and you think to yourself,” It’s going to rain”. But if you try to make a forecast for tomorrow based on yesterday’s clouds, you might end up carrying an umbrella with you all day for nothing – or worse, wet.
It’s the same with sales forecasts: There are simple excel sheets that you can download for free on the Internet, but these are so basic that they don’t tell us anything. Inventoro uses 102 predictive models, all of them proven to forecast sales with a high level of accuracy. Some of them are mathematical formulas, some of them use AI and deep learning principles. All together, they create forecasts so accurate that they match the capabilities of the biggest retail companies in the world.
With high accuracy forecasting, Inventoro can see your future sales in great detail and can accurately prepare an order list everyday. From there it is as simple as cut and paste. Follow our order recommendations, and you will see both a substantial decrease in stockouts and a decrease in your inventory size at the same time.
It may seem counter-intuitive, but keeping less stock can mean more satisfied customers, if you keep the right stock. Keeping a smaller inventory while meeting demand clearly means more profit for you. So you see, keeping your customers happy doesn’t necessarily mean you have to buy more to satisfy more. Inventoro helps you satisfy demand and save cash at the same time.
Smart discounts that actually
Another thing you have to consider is price. Today’s customers are more demanding than ever. They want to pay less to get more, and faster. It is this phenomenon that allows retail giants to destroy the market. Their financial power, computing capabilities, and negotiation ability puts them in a perfect position to corner the market in a big way.
So a typical small or medium-sized business like you does the best it can to keep up. You start a discount campaign here and there, just to attract some customers. But only a few retailers actually put much thought into what they’re doing or why. Eventually, many end up losing money on discounted goods.
Discounting products is tricky in so many ways, so much that we could probably make a Saas product only for discounts – and we probably will, by the way. The challenge to meet demand and forecast well on discounted goods is a chapter in and of itself. That’s because discounted goods sell faster, so the risk of a stockout increases with discounts. And there’s something else: Discounted goods cannibalize other goods, which then risk being overstocked in another part of your inventory.
For example, you put a discount on camembert cheese. The cheese sells like crazy, but sales of other types of cheese drop, too. At the end of the campaign, camembert is sold out, but your inventory levels for cheddar or blue cheese are way above optimal, with expiration dates getting closer and closer.
So how to do it right? Inventoro learns these interdependencies and is able to see what products cannibalize others. If you decrease the price for one product, Inventoro adapts immediately, correcting order levels for the discounted goods while lowering orders for other items.
If you’re not sure how to do this right, we recommend you start discounts on products listed as Losers in our app. Not much damage can be done here, and you will only do yourself good by getting rid of these.
Satisfied customers come back
Customer satisfaction isn’t a direct feature of our app, but it is written all across our code. Eventually all our features lead to higher customer satisfaction. And the more of that you have, the more positive vibes you can create, and the more new customers you will attract to your business.