Inventory Management Now a Key Battleground in the Digital Transformation of Brick and Mortar Retail

To truly transform operational efficiency within physical stores, retailers must be able to achieve near-perfect inventory accuracy. With computer vision use cases maturing, Artificial Intelligence (AI) tools becoming more powerful, and RFID technology demonstrating major ROI, retailers are now able to approach 100% inventory accuracy, therefore enabling a transformation of the industry. This is according to ABI Research, a market-foresight advisory firm providing strategic guidance on the most compelling transformative technologies.  

“Stores which have limited intelligence on the location and quantity of stock at the individual item level cannot expect to adequately serve their customers or successfully execute a competitive omnichannel retail strategy,” commented Nick Finill, Senior Analyst at ABI Research.

For many retailers using traditional inventory counting methods in the apparel, fashion, and soft goods sector, inventory accuracy can drop to around 65%, resulting in a poor experience for shoppers and lost sales. Using RFID technology, these retailers can reach near-perfect inventory intelligence at more regular intervals, leading to improved customer satisfaction, reduced shrinkage, and improved sales velocity. In most cases, fashion retailers employing RFID can increase annual revenues by at least 3%.

RFID deployments in the fashion retail sector have demonstrated clear ROI for retailers deploying the technology at scale. ABI Research calculates that an apparel store with annual sales of just under US$6 million can realistically achieve a 44% ROI within the first year, with returns increasing to over 200% in the third year.

“The resurgence of RFID as a powerful inventory management tool in fashion retail has been driven by rapidly falling costs and demand for greater end-to-end insight in retail operations,” said Finill. “However, RFID will fail to transform the entire retail market due to its limited viability outside of soft goods and fashion verticals.”

In shelf-based retail environments such as grocery stores and supermarkets, 20 hours of labor per week is spent on average by associates performing stock counts. The automation of these processes, using computer vision, robotics, and AI, promises to save labor costs for retailers, in addition to improving the customer experience and driving sales.

As physical stores strive to perfect how they serve customers and integrate various shopping and delivery channels, being able to accurately count, control and predict available inventory will become a basic operational requirement, making the right combination of digital inventory tools a necessity for any forward-thinking retailer.

The emergence of easily integrated, cloud-based managed service models has played a major role in the transformation of inventory management. Diverse SaaS inventory solutions offered by disruptors such as Infor, Nedap, Scandit, and BossaNova are helping retailers digitize and automate the entire in-store inventory lifecycle without the need for major capital expenditure.

“In order to remain competitive with e-commerce retailers and other brick and mortar rivals, physical stores will soon be adopting IoT and AI-enabled inventory tools as the standard, rather than the exception,” Finill concluded.

These findings are from ABI Research’s Transforming In-Store Inventory Management report. This report is part of the company’s Smart Retail service, which includes research, data, and Executive Foresights.

About ABI Research

ABI Research provides strategic guidance for visionaries needing market foresight on the most compelling transformative technologies, which reshape workforces, identify holes in a market, create new business models and drive new revenue streams. ABI’s own research visionaries take stances early on those technologies, publishing groundbreaking studies often years ahead of other technology advisory firms. ABI analysts deliver their conclusions and recommendations in easily and quickly absorbed formats to ensure proper context. Our analysts strategically guide visionaries to take action now and inspire their business to realize a bigger picture. For more information about ABI Research’s forecasting, consulting and teardown services, visionaries can contact us at +1.516.624.2500 in the Americas, +44.203.326.0140 in Europe, +65.6592.0290 in Asia-Pacific or visit www.abiresearch.com.