How Accurate is the Average Retailer's Inventory?

Retail Inventory Accuracy

Did you know the average retail store’s inventory accuracy is about 65%? That’s according to the Auburn University RIFD Lab.

That sounds like a ridiculously low number, right? Most people would assume this number insinuates that 40% of a store’s inventory is unaccounted for. Not exactly. What it means is accuracy to product type on the floor. In other words – what exactly is on the retail floor. If an employee looks into an inventory product system, and the system is counting twelve size 30 slim jeans, but there is actually only 20, the product type alone is only around 60%.

This is a compounding problem. Replenishment end up costing much more money than it should as stores order too much, or not enough of a certain item. This also causes problems in shrink. If an inventory product system is only about 60% accurate, certain items easily go missing without a trace. Or, items can be marked as available when the item is actually out of stock.

This is not a new problem. Far from it. Retailers have been actively searching for a solution, which is why RFID’s adoption rate has gone up exponentially over the past few years. With the rise of online shopping, retailers need to make sure their inventory is as accurate as possible. Items sold online need to be available in stores as well. Why? To ensure omnichannel retail success. That’s where RFID comes in.

How does inventory become inaccurate? It starts with cycle counting. Merchandise tagged with barcodes require attentive employees to count one product after another. This process is time consuming, and prone to mistakes. An inattentive employee will miscount inventory. And, typically, cycle counting takes a very long time, so most times, it is only done once a quarter or so. We’ve spoken to retail store owners who only do inventory once a year due to time constraints. With barcodes, and a staff trying their best, 65% is really the best you can ask for.

That’s why so many retailers are adopting RFID technology. RFID tagged merchandise can be counted all at once with 100% accuracy. Typically, a quick employee can count a handful of items in a minute. An employee armed with an RFID scanner can scan 200 – 300 items in a minute. With RFID, accurate cycle counting can be done daily. That’s how RFID can usually raise a retailer’s in store inventory accuracy to 95% or higher. Major retailers are implementing RFID on more merchandise – with some even mandating 100% of merchandise to be tagged by end of year. For brand owners that sell to major retailers, it is time to prepare for those mandates.