12 April 2024

How inventory accuracy boosts customer confidence

A strategic focus on data-driven inventory management will not just solve operational problems, it will transform your business, says Rob Shaw of Fluent Commerce

In today’s uncertain economic climate, trust plays a vital role in building and maintaining customer loyalty and ensuring business success. Among the factors which present retailers across Europe with a significant challenge is the widespread occurrence of order cancellations due to poor inventory visibility. A striking statistic from a recent survey we conducted reveals that nearly 40% of retailers are forced to cancel at least one in ten orders, primarily due to inaccurate inventory data. In short, they sell what they don’t have (overselling). This issue not only impacts customer trust but also reflects deeper operational inefficiencies and lost revenue.

 Overselling doesn’t mean simply running out of stock – it’s when online consumers are able to complete purchases once stock has sold out. Worse than selling out of a product is when retailers don’t have a complete view of inventory and leave stock sitting in a location where online customers can’t access it. This is a triple blow: customers are disappointed at not being able to purchase their desired product, the retailer misses out on sales, while not actually selling the items that are in stock.  

 Digging deeper reveals just how endemic this problem has become. In our survey, we found that only 6% of retailers and brands have a cancelled order rate of less than 1%. Almost 60% of retailers and direct-to-consumer brands have less than 80% inventory accuracy, with most challenged by outdated data from POS and ERP systems, legacy system integration issues or siloed inventory views. It is unsurprising, therefore, that nearly three-quarters of retailers and direct-to-consumer brands want to reduce cancellations but are held back by inaccurate inventory data.

Changing customer expectations further complicates this issue for retailers everywhere. Gone are the days when payment security was the primary focus of trust – customers now demand transparency across both product availability and delivery commitments. The frustration that results from cancelled orders can cause significant damage to a retailer’s reputation and erode hard-earned customer confidence.

Overcoming challenges

With so many negative impacts of cancelled orders, forward-thinking retailers are embracing data-driven solutions to overcome these challenges. The leading 7% of retailers, according to our survey, are now updating their inventory every five minutes or less. This proactive approach, especially critical for high-velocity stock keeping units (SKUs), ensures that inventory data is as current as possible, drastically reducing the likelihood of order cancellations.

Modern order and inventory management systems maintain real-time synchronisation of inventory data across all warehouses, stores and platforms, offering unprecedented accuracy and reliability. This real-time insight enables retailers to avoid overselling (and underselling) and ensures that advertising efforts align with actual inventory levels, thereby preserving customer trust and reducing wasted ad spend.

 By automatically updating sales channels with current stock levels, these technologies allow retailers to manage inventory more effectively, identifying demand trends and optimising stock allocation. During peak sales periods, for example, this approach is invaluable in balancing the need for aggressive advertising with the reality of stock availability. This data-driven approach also offers tangible benefits in terms of customer experience and, by definition, levels of trust. Retailers who can provide accurate delivery dates or ready-for-pickup times significantly enhance the online shopping experience. In addition, click-and-collect options, increasingly popular among consumers, blend the convenience of online shopping with the immediacy of physical store pickups. Delivering excellent levels of service here not only meets but often exceeds customer expectations, fostering a sense of reliability and enhancing trust in the brand.

Given the willingness of modern consumers to share their shopping experiences – both positive and negative – online, trust-related service levels can easily translate into bottom-line performance in the short and long term.

The journey to data-driven retailing
Yet, the journey towards effective data-driven retailing is not without its challenges. Retailers must navigate the complexities of integrating modern inventory systems with existing legacy technologies and processes. This requires a strategic approach, balancing tech upgrades with training and process optimisation. The goal should be to create a seamless flow of accurate data across all channels, ensuring that every customer interaction is informed by real-time information.

Additionally, this approach necessitates a cultural shift within many European retail organisations. Data literacy and a deep understanding of the impact of accurate inventory management on customer experience have become crucial skills for staff at all levels. Empowering employees with the tools and knowledge to leverage data effectively is as important as the technological solutions themselves. When employees, processes and technologies are fully aligned and geared towards meeting the same goal, retailers are much better placed to anticipate customer requirements and provide the shopping experience they are looking for.

Ultimately, the pathway to rebuilding and maintaining customer trust in the retail sector is undeniably linked to effective data utilisation. By leveraging advanced inventory management systems and embracing a data-centric culture, retailers can not only address the current challenges of order cancellations but also pave the way for a more efficient, customer-centric future. This strategic focus on data-driven inventory management is not merely a solution to a problem; it is a transformative approach that can redefine the retail experience, fostering lasting customer relationships and driving sustainable business growth.

About the Author
Rob Shaw is SVP and GM EMEA at Fluent Commerce. 

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