Mastering Retail Inventory Management

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Mastering Retail Inventory Management: The Keys to Success

Inventory management has never been more crucial as retailers adjust to post-pandemic normalcy. Amid recent supply chain challenges and the hovering threat of inflation, the delicate dance between inventory and sales is essential to retailers’ ability to forecast and preserve their own bottom lines.

Here is an overview of the retail inventory management problem, strategic initiatives to lower retail store inventory, and how smart lockers can assist with omnichannel fulfillment.

The Perfect Storm That Caused Inventory to Swell

Last year, U.S. retailers were sitting on $740 billion in unsold goods – a 12% jump from 2021, according to McKinsey & Company.1 Inventories swelled based upon intertwined events starting with the pandemic.

As consumers flocked to online shopping, closed factories, labor shortages, border closures, and backed-up ports caused enormous supply chain problems for the retail industry. By the time supply chain problems eased and inventory was brought to retailers, it was either out of season or out of sync with customer demand.

Retailers then overbought in late 2021 to mitigate potential shortages resulting in an inventory glut needing either warehousing or markdowns. As former Toys ‘R’ Us CEO Gerald Storch explains: “Many of the pandemic-fueled supply chain issues have resolved, so retailers can again count on delivery accuracy.”2

All these events combined saw retailers spending the first half of 2023 making significant efforts to clear excess retail store inventory off their balance sheets.

The Relationship Between Retail Inventory Management and Margins

Given the current pressure on the retail industry to boost margins, retailers are scrambling to lower inventory – which in turn lowers warehousing, shipping, and labor costs. At least three major retailers have not only reduced inventory but have increased profits as well:

  • TJX Companies – The proud parent of discounters T.J. Maxx, Marshalls, and HomeGoods saw inventory levels decline 8% while margins increased, and sales for T.J. Maxx climbed 5%.3
  • Target – The company now believes its inventory is “in the rearview mirror” according to COO John Mulligan as inventory levels dropped 16% from last year and margins jumped to 26.3% vs. a year ago.4
  • Ross Stores – Ross has righted its inventory problem, as its inventories are down 16% vs. a year ago. Total sales are expected to grow 4-6% in 2023.5

Four Strategies for Dealing with Excess Inventory

Managing inventory is a must-have for increasing sales and improving margins. These four strategies top industry experts’ list of retail inventory methods for better inventory control.

#1 Warehouse Optimization

Optimizing warehouse space is crucial for successful inventory control. Research demonstrates that using a variety of warehouses assists with fulfillment speed, allowing retailers to better address consumers’ insatiable demand for same-day delivery. Multiple warehouses with a sound inventory management system can lend an assist with last-mile delivery expenses, which often account for 20% of total logistic costs. In fact, McKinsey and Company, has found that the higher rent and labor costs associated with warehousing products closer to consumers in urban areas are often offset by reduced costs of last-mile delivery.6 It’s worth noting, however, that ShipEngine’s data reveals 57% of surveyed merchants currently operate out of a single warehouse.7

#2 Warehouse Automation

The ShipEngine study also found that 30% of merchants plan to introduce warehouse automation as a retail inventory method this year with the primary goal being to help their teams work faster.8 Autonomous Mobile Robots (AMRs), picking robots, and Artificial Intelligence (AI), working alongside retail inventory management software, are all technologies to watch in this space.

#3 Demand Forecasting

Forecasting, as an inventory management system, requires analyzing retail trends, understanding the global economy, monitoring competitors, researching past sales spikes, and perhaps, a little bit of luck. Now, software providers are helping retailers forecast better. Blue Yonder, for instance, offers a scalable and adaptable platform along with predictive, machine-learning-powered insights. Retail inventory management software assists with supply chain visibility management, “and not just in terms of track and trace and knowing where your goods are, but at the same time, aligning your labor with respect to what the tasks are in front of you that you can see and have a line of sight,” offers Edward Wong, Senior Vice President and Global Retail Sector Leader at Blue Yonder.9

#4 Inventory Management

Inventory management is simply using real-time data (e.g., inventory count, customer demand) to make data-driven decisions. Today, of course, the role is primarily served by point-of-sale software that integrates with inventory management software to track inventory count, sale trends, and more. Inventory management technology can also help identify which products to reorder when. These features combined help retailers have the right stock to meet consumer demands without overstocking and tying up unnecessary capital.

Omnichannel Fulfillment and Tracking with Retail Parcel Lockers

Good inventory management also extends to smart retail parcel lockers. As Chain Store Age summarizes: “Real-time inventory management and order routing systems enable seamless integration of inventory across sales channels, including physical stores, online platforms, and mobile apps. This integration allows retailers to offer features like buy-online-pickup-in-store (BOPIS), ship-from-store, and in-store returns for online purchases.”10

Parcel Pending by Quadient smart electronic lockers, for instance, seamlessly integrate with Point of Sale (POS) and Order Management Systems (OMS) to ensure full visibility into where the product is for both order collection and returns. Most importantly, Parcel Pending allows for fast BOPIS and returns – with both processes taking less than 30 seconds. Of course, most lockers allow for 24/7 on-demand access for pick-ups and returns.

Ready to discover how parcel retail lockers can improve your omnichannel fulfillment strategy and help you manage retail shrinkage? Speak to one of our smart locker experts today.



  1. Baum, C., Hauer, M., et al. Thinking beyond markdowns to tackle retail’s inventory glut. May 8, 2023.
  2. Smith, Seana. Retailers have fixed a major profit-crushing problem: Excess inventory. May 22, 2023.
  3. Yahoo Finance. TJX reports slight revenue miss, raises full-year forecast. May 17, 2023.
  4. Smith, Seana. Retailers have fixed a major profit-crushing problem: Excess inventory. May 22, 2023.
  5. Zacks Equity Research. Here’s What Makes Ross Stores (ROST) a Good Investment Now. September 13, 2023.
  6. Herrin, Brandon. How to Build Resilience Into Retail Operations with Effective Inventory Management. September 25, 2023.
  7. Ibid.
  8. Ibid.
  9. Zaczkiewicz, Arthur. Supply Chain, Inventory Management Are Top Priorities for Retailers. February 27, 2023.
  10. Sharma, Sachin. Building competitive advantage via real-time inventory management. October 6, 2023.