Oct 06, 2022 George Goodwin

Why Inventory Management is More Important During a Sensitive Market

Why Inventory Management is More Important During a Sensitive Market

 Summary: With recession concerns looming, many businesses will move forward with the traditional knowledge of how to approach a sensitive market. However, where other recessions were notable for decreased demand, the main issue plaguing this one may be decreased production. Therefore, it is important that businesses do not drastically decrease their inventory.

When it comes to businesses, and especially retail stores, preparing for sensitive markets and recession concerns, traditional wisdom says to cut back on inventory and build up cash reserves. This is due to decreasing demand, and for most retailers, too much unused inventory will mean great losses that could even lead to total business closure.

However, with this current potential recession market, the reality is a bit different. Now the factors at play mean that retailers who have MORE inventory are better positioned for success. This is because the current sensitive market was caused due to many complex factors, but one of the most important ones is supply chain issues. Therefore, buyers were willing and eager to purchase goods, they were just unable to due to lack of inventory.

This may be a much different reality for many grocery store owners who have been in the business during past recession times, and they may therefore not trust this insight. To help further illustrate the strength of inventory in this sensitive market, we are going to break down the various aspects that have contributed to this new reality.

Price Changes

One important thing to consider when it comes to a sensitive market for grocers is how price changes will affect your business, as well as your customers. What past sensitive markets tell us, is that when demand decreases and supply decreases, a business will often have to change prices to reflect this. This can mean dramatic price increases, as retailers look to recoup losses they sustained due to decreased demand.

While this can certainly be seen in some areas of retail business now, another reality is also showing amongst grocers. Many grocers, especially the big retailers like Walmart and Target are drastically lowering some prices, as they have over ordered and are left with excessive inventory. Now the title of this article does suggest that increased inventory is good for grocers in this market, so how is this compatible with these results?

Well, the answer is in moderation. While corporations like Walmart and Target are detailing with too much inventory, other retailers are dealing with this opposite issue, and find themselves with not enough stock to serve their customers. With their prices increased due to less stock, and less stock around to fulfill customer orders, customer satisfaction decreases, and these customers will seek out other locations where they can find their products.

Therefore, when it comes to a retailer healthily approaching this current market, your best bet is to be wary of market forecasts, but not cut too much from your inventory orders. You’ll want to have enough inventory to provide for your customers and being able to sell even at a reduced price, if necessary, can provide more for the long run than being out of stock.

Security from Supply Chain Disruption

We briefly mentioned before how Supply chain disruption has played a major role in getting the market to the point it is currently, and these issues may have lessened, but appear to not be over just yet. Making sure that your grocery store is prepared to deal with these supply chain issues, is how you can ensure you are able to serve your customers and maintain growth and success. This is where the importance of maintaining inventory comes in, as supply chains directly impact store inventory.

To further break down how we got here, big issues occurred along the supply chain, with plants and producers having to close due to illness and the time needed to deep clean and reopen. Shipping companies were also not spared this fate, and experienced their own downtime, causing impacts on the movement of products on top of the existing delays with production. This meant that stores were not getting the inventory they needed in time and had to settle for placing larger orders for the future, hoping customers and demand would still be around when inventory returned.

The issue we are seeing now is in some places, demand has not shot up to reach the number of inventory stores have, leaving many vendors with excess inventory that they are desperate to part with. This could potentially be mitigated with appropriate inventory management, and if you cut your inventory down too far, you could risk not being able to serve customers when another supply chain issue hits.

The best advice here would be to not under-prepare for your inventory needs, but also don’t get ahead of yourself and over thinking you will be cut short by a supply chain issue in the future.

Product Movement

This last point is perhaps the most necessary to consider, and that is the necessity to keep products moving off your shelves and to customers. But in the case of this market, your product movement is your most asset, and focusing on cash for the business rather than a product for the customers can actually be more harmful in the long run.

As opposed to older sensitive markets, this market is not notable for decreased demand across the board. Customers are still eager to purchase products, they are just dealing with inventory shortages and inflated prices. As a retailer at this time, your best position is to have the inventory available to meet consumer demand and seek to maintain steady prices so that you can be more competitive than less-prepared peers.

This current market was created by a lot of unprecedented factors and will therefore need to be approached in unprecedented ways. Older wisdom would suggest that inventory is a weakness, but your best way to prepare for the current market is to have products available to move.

Now more than ever, inventory is essential for grocers

Part of running a grocery store, or any business for that matter, is preparing a strategy for market conditions ahead. As it stands right now, the market is in a precarious position. Recession signs loom, but with the causes being different than usual, this fate may be avoided with the right steps forward.

An important thing that grocers can do right now, is to not react with the wisdom of past recession threats. The retail business is experiencing a lot of shifts, including demand in many places, but grocers are a unique case among them. With food and essential items being necessary purchases, demand is less threatened than in other retail areas.

This is especially true with how supply chains have been affected in recent years. With items being off shelves for so long, and now starting to reappear for some, demand can be expected to be steadier, or even increase. In this case, grocers should consider keeping a close eye on their inventory, but not drastically reducing it for fears of recession circumstances. A fully integrated POS system can help grocery stores keep up with the changing market, and keep their perpetual inventory running smoothly. At this time, consumers are still in need and want grocery products, and businesses should not miss out on the opportunity (and responsibility) to serve them.

IT Retail can help grocers keep up with customer needs while having accurate inventory data. With IT Retail, grocers can always keep an eye on their inventory, seamlessly add or remove products, and ensure there are always products on the shelves. Schedule a demo today to learn how IT Retail can upgrade your store, and help you remain competitive in this volatile market. 

Why Inventory Management is More Important During a Sensitive Market

Key Points:

  • The current market conditions in consumers; maintaining from what you might expect from pre-recession statistics.
  • A decrease in production poses a bigger issue than a decrease differs in consumer demand.
  • Therefore, grocers should not severely cut inventory, as they will be unable to meet this demand.
  • Maintaining inventory allows you to handle shifting prices and even charge less than your competitors with less stock.
  • Supply chain issues are still a concern inventory levels can help avoid product shortages later on.
  • Being able to consistently move products for your customers will be crucial for surviving and thriving in this market.
  • Schedule a demo with IT Retail today to learn how IT Retail can help you manage your inventory seamlessly. 

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