It’s everyone’s favorite time of the year, year-end inventory count!

Alright, we know that this period can be a hassle and you have probably heard Mariah Carey’s holiday hits one too many times, but this is a very important period for retailers.

The year-end inventory count is important for a number of reasons, it helps businesses understand the financial health of their store, strategize and plan for the upcoming year, and most importantly adjust future purchasing decisions.

This is also an opportunity to reconsider pricing and marketing strategies based on the products that performed well or need to be promoted.

The landscape of retail has changed since the pandemic and after nearly 3 years of supply chain issues, retailers are still dealing with the consequences.

Supply chain issues are affecting both big and small retailers, and while it looks like some issues are not going anywhere, let’s take a look at how you can have a smooth year-end inventory count and take control of things you can actually control.

Supply chain challenges are impacting retailers of all sizes, and while it looks like some issues are not going anywhere, let's explore some strategies for a smooth year-end inventory count and how you can manage elements that are within your control.

#1 Choose The Right Method for Your Business

While this may not be your first rodeo, familiarizing yourself with alternative ways to do your inventory count can be beneficial.

Finding the right method for your business will depend on your industry, size and will require some experimentation.

Cycle Counting

A cycle count is when your team regularly counts rotating sections of the store.

Instead of doing a big inventory check, they do these smaller checks on a set schedule throughout the year.

It helps catch mistakes quickly, keeps things accurate, and makes sure inventory levels are always on track.

Full Inventory Counting

A full inventory count is when regular staff and sometimes temporary workers count all stock in one go.

Everyone pitches in at the same time to get a real-time snapshot of the inventory.

Electronic Counting

If you have never experienced this type of inventory count, it might seem like something from the future.

An electronic inventory count consists of using tools like Radio Frequency Identification (RFID) scanners and barcodes. This type of count requires all inventory to have RFID scannable tags. This definitely requires planning way ahead of time.

It's a modern way of counting that skips the manual effort. RFID scanners help you quickly scan and count your inventory in one-go, making the whole process smoother and less prone to errors.

#2 Plan Ahead

Depending on the method you choose to do your count, there are a couple of things to consider for the main event to get the most accurate snapshot of your inventory.

Pause any warehousing operations.
Plan the inventory count on a day you wouldn’t be receiving any purchase orders - you might want to have a mitigation plan in case you do receive an order as this is not something you can fully control.
Pick a day that has a minimal impact on your business – review sales reports and consider doing your count on a less busy day, especially if you need to close your store for the entire day, or multiple days.

Once you have chosen the right method and the right day, you need to start considering all the steps you need to do to prepare the store for the big day.

Prepare The Store

Your store should be thoroughly cleaned, and the right steps should be taken to ensure that there’s no scattered inventory.

If there are boxes lying around the warehouse, it will slow down your team.

And on that note, consider relying on seasoned employees on this day, or take the right steps to ensure your entire team is ready and has the right training to successfully see this through.

#3 Plan With Your Team

Once you finalize the date, you should form the team who will perform the stock counting.

It is important to train them on your process and acquaint them with the warehouse’s premises. Dry runs can be organized a few days before the actual counting day.
The warehouse should be organized, and the areas (count zones) should be divided amongst the counting team so that everyone knows their responsibilities.

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#4 Plan With Your Customers

Notifying your customers of this day is crucial.

As this happens around the holiday season, you will have to make sure to cover all grounds, and find ways to notify all types of customers.

Your usuals probably follow you on social media, where you should definitely update your hours, but there will be a slew of new customers too that need to know whether or not you are open.

Make sure to update your special hours for the year-end inventory count on the following:

Update your Google Business Profile business hours, Google makes it easy to set special hours.
Announce your store closure on social media a couple of days ahead. In addition, create a post and pin it to your profile, add it to your stories, and update your bio.
Make this change on your website as well, this way you will be covering every single way your business can be found so that you don’t leave anyone disappointed.

Automate Customer Replies

Some customers might be on texting terms with you, or even those that reach out via website chat will need to know that you are unavailable.

Even if you have taken all the steps necessary to update your hours on every platform, some people might not notice and still attempt to reach out.

Setting up auto-responses is a game changer and takes away the need to allocate a staff member on this important day to repetitively answer questions and to simply let customers know that you aren’t open.

#5 Get Lunch for Everyone

As you gear up for the year-end inventory count, make sure that you get breakfast, lunch and dinner if need be for everyone.

The last thing your team wants to think of or prepare for the night before is what they will eat all day, especially since this is usually an all-day event and can go on for multiple days.

Investing in lunch for the entire crew goes beyond filling their stomachs—it also gives them an opportunity to connect with each other and boosts morale.

#6 Expect the Unexpected

One of the most important things about doing a year-end inventory count is emphasizing its importance to your team and giving them a clear understanding of its implications.

While this count will be used to determine a variety of different metrics for the business, one of the first things that the physical count of your products will be compared to is the number you have in your inventory management software system.

You will find yourself in two different camps, you will either have too much inventory or not enough. What does this mean?

Having Too Much Inventory

Found yourself with more stock than you bargained for?

It happens.

First, you need to analyze which products are overstocked and why. Once you've identified the culprits, you need to decide if you can actually sell this inventory.

If you can, update your numbers and if the product is slightly damaged or out of season then you can get creative with promotions or bundles to move that excess inventory.

Consider offering special deals to loyal customers or bundling items for a limited-time offer.

Having Too Little Inventory

Missing inventory might be your least favorite thing to deal with.

This usually represents shrinkage, items that have gone missing for a variety of reasons.

The National Retail Federation (NRF) reports that the average shrink rate in 2022 increased to 1.6%, up from 1.4% in 2021.

What kind of numbers does 1.6% represent when we’re talking about retail sales? About $112.1 billion in losses, up from $93.9 billion in 2021.

Yikes.

No retailer wants to become a large slice of that pie, even if 0% shrinkage is nearly impossible.

What are the consequences of shrinkage?

The following numbers and actions were reported by retailers as a way to address this issue:

45.3% reduced specific store operating hours
29.7% reduced or altered in-store product selections
28.1% even reported to have closed specific store location(s)

Why Is Your Year-End Inventory Count So Important?

As a business owner you already know the importance of these numbers, but how well does your team understand why they need to do this meticulous task?

Give them this list and make them part of the process:

Helps everyone have a better understanding of what products are on-hand.
Gain insight into products that don’t sell well and that you shouldn’t order in the future.
Understand which products require a new selling strategy.
Know the demand and profitability of your products if you are considering expanding.
Consider adjusting your replenishment levels for top-selling products.
Analyze pricing strategy and identify room for improvement.

One of the best reasons for conducting year-end inventory counts is to understand how your business used (or didn’t use) items over the past 12 months. A detailed snapshot of available inventory helps your business forecast demand for the year ahead.

By reviewing what hasn’t sold, you can plan sales, promotions, and marketing campaigns. These strategies can help you move old inventory and lets you focus on restocking only what your customers want.

To move the inventory faster you can consider sending a text message to customers who have purchased from the brand or category before.

This is a more sure-fire way to make sure that inventory leaves your store quickly and at the same time the customer will feel like they are receiving a promotion tailored to them.

What Is a Good Year-End Inventory Count?

Remember that having a ‘good’ year-end inventory level depends on your industry and boils down to a balancing act.

A good year-end inventory level is one that aligns with your business's sales patterns, minimizes carrying costs, and maximizes overall profitability.

It becomes a balancing act because you need to consider market demand, lead times, and storage costs to determine the optimal inventory level for their specific circumstances.

Considering the supply-chain issues that retailers are still experiencing due to COVID – we know it feels exhausting to deal with inventory.

6 Ways to Have the Smoothest Year-End Inventory Count