Multichannel Inventory Management: What It Is and How to Do It?

Multichannel inventory management refers to the oversight of stock across various sales platforms, such as online marketplaces, physical stores, direct-to-consumer websites and more. Systems built to manage inventory between multiple locations sync stock levels together for an accurate, single source of truth.

For today’s retailer, effective management is crucial as customers often connect with brands through multiple channels. They expect to be able to find and engage with their favorite brands in various ways. And without proper inventory management across these sales channels, businesses face significant challenges. From stock discrepancies to missed sales opportunities to disappointed customers, these issues can lead to higher operational costs and impact your reputation.

By integrating inventory across channels, retailers can optimize their stock, improve the customer experience and ultimately, drive more sales. Keep reading to learn more about how effective multichannel inventory management can streamline operations and lead to a more profitable business. We’ll discuss:

• What multichannel inventory management is
• Why it’s so important
• Challenges multichannel retailers face
• Tools and software 
• Best practices

What is multichannel inventory management?

Multichannel inventory management allows retailers to keep track of all their inventory between different locations and platforms. Done right, stock counts should always be accurate, and reflected this way across every channel. Customers should be able to purchase products they see listed as “available” from their platform of choice. 

Multi-channel vs. traditional inventory management

Traditional inventory management typically involves managing stock for just one location or platform. This can be done manually through stock counts, tracked on spreadsheets. Products can then be reordered or not based on their sales history. 

This is perfectly adequate for some retailers. However, these manual methods just can’t keep pace with the complexities of modern retailing where merchants are expected to sell through multiple channels. Multichannel systems require a more strategic, technology-backed approach to ensure that stock levels are always accurate, and that the products customers want to buy are available where they want to buy them.

How do retailers manage multichannel inventory?

Technology plays a crucial role in this. More advanced software, like Lightspeed Retail, can provide real-time tracking of inventory levels, helping businesses avoid stockouts and overstock situations. Lightspeed Retail provides insights into sales trends and inventory performance, allowing merchants to make more informed decisions when restocking and pricing. What’s more, Lightspeed can automate processes such as order fulfillment and reordering, reducing manual work and leading to a more efficient operation overall.

“With Lightspeed, I’m able to sync our in-store inventory with our online store. That really helps me reach online consumers. I feel confident that the inventory levels that I and my sales associates see on the POS and that customers see online are accurate. It’s super user-friendly.”

– Tori Erickson, Founder of Loyal Tee

Why is multichannel inventory management important?

Managing inventory effectively across platforms is important for a multitude of reasons: 

1. It increases your reach

By selling across various platforms—such as in-store, online and on social media—businesses can tap into a broader customer base, increasing their brand awareness and driving more sales. This multichannel approach allows retailers to meet customers where they are, whether they prefer shopping in person, browsing their site or engaging on social media. 

Without the ability to sell inventory across more than one platform, retailers risk missing out on potential new customers who may not have access to their products through a single channel. Not only does this restrict sales opportunities, but it can hinder business growth. Embracing a multichannel strategy helps retailers reach and serve more customers where they’re already browsing and buying. 

2. It helps you optimize your stock levels

When inventory is effectively tracked and managed, retailers can gain deeper insights into their stock’s performance. With a unified view of their inventory, retailers can see product movement and identify trends, such as which items are selling fast and which are sitting idle. 

Retailers can gain these insights with Lightspeed Retail. Lightspeed Retail’s advanced reporting capabilities enable retailers to make data-driven decisions and optimize stock levels. With custom reports and forecasting, retailers can reduce overstock, minimize stockouts and prevent lost sales. 

3. It improves your customer satisfaction & loyalty

Simply put, when shoppers can find and purchase the products they want—whether online or in-store—they’re more likely to come back! Accurate inventory tracking between locations minimizes the risk of both understocking and overselling, improving customer satisfaction and boosting customer loyalty. By consistently meeting customers’ expectations, retailers can build a loyal base of shoppers who will become repeat purchasers, and advocates for their brand. 

Challenges in multichannel inventory management

Managing inventory for different store locations, websites and more is no easy feat. Without a unified view, your separate inventory systems may not be able to communicate properly. A lack of standardization between systems can lead to mismatches in product categorization, inventory tracking and sales data. What’s more, staggered stock updates can cause discrepancies, especially when they aren’t done in real-time, or are done in batches. 

Without proper multichannel inventory management, retailers may have to contend with inaccurate inventory data, which can lead to overselling, stockouts and overstocking:

Overselling

Overselling happens when a retailer sells more items than they actually have in stock. Without perfectly accurate inventory data, it’s possible for your online store to show a product as available when it actually isn’t, for example, forcing you to cancel a customer’s order after it’s already gone through. 

This can mean more than just a lost sale. Overselling can impact your reputation, damaging trust and loyalty. Worse yet, if a customer can’t get what they want from your store, they’ll keep looking elsewhere, and they may just make a purchase from one of your competitors. 

Stockouts

Stockouts, on the other hand, describe instances where a product isn’t available due to insufficient inventory. This oversight can easily happen to retailers with poor multichannel inventory management. When bestsellers are out of stock, especially during peak sales periods, retailers can’t meet customer demand, resulting in lost sales. Just as with overselling, stockouts can strengthen your competitors as shoppers will keep looking for the products they want elsewhere. 

Overstocking

In contrast to stockouts, overstocking happens when a retailer orders more stock than is necessary to meet demand, leading to a surplus or excess inventory that doesn’t sell quickly. It can happen to retailers that don’t have clear visibility into their inventory or sales history. 

Overstocking is stressful for retailers as it can lead to unnecessary costs for warehousing, handling and insurance, not to mention the risk of product expiry. This expensive clutter can cause issues with your cash flow as capital is tied up in unsold goods, increasing the risk of profit loss due to eventual markdowns. 

Tools and software for multichannel inventory management

As previously mentioned, technology plays a critical role in managing multichannel inventory effectively. There are a number of different kinds of tech solutions that can help retailers with this. Here are a few:

1. Inventory management systems (IMS)

As you might expect, there are inventory management solutions purpose-made for multichannel retailers. IMS platforms can integrate with your ecommerce platform(s), POS systems, warehouses and other software you use to run your business.

Instead of paying for several different systems and struggling to get them all to communicate, why not just use one solution to manage your multichannel business?

Lightspeed Retail offers multichannel merchants a comprehensive solution for POS, payments, inventory management and more–all in one system.

Track all your inventory across every channel with Lightspeed Retail’s multichannel inventory tools. Speed up ordering with purchase orders you can make in just seconds, and avoid stockouts with reorder points and low stock alerts. Manage everything on a cloud-based system and take it with you anywhere, ensuring complete control across your entire business. 

Learn more about Lightspeed’s inventory management software for retail businesses.

2. Order management systems (OMS)

OMS platforms centralize orders from various sales channels in one place, helping retailers see all their orders, streamline processing and ensure timely fulfillment. These systems often integrate with other inventory management tools to provide real-time updates and accurate stock levels.

3. Warehouse management systems (WMS)

WMS platforms work to optimize inventory levels, stock movement and fulfillment across multiple locations. These systems integrate with other inventory and order management solutions to ensure accurate and timely order fulfillment across channels.

4. Point-of-sale systems (POS)

Modern POS systems integrate with ecommerce platforms, allowing retailers to manage inventory across both physical stores and online sales channels. They constantly update stock counts—an essential part of maintaining accuracy across locations.

5. Enterprise resource planning (ERP)

ERP systems provide a comprehensive solution for large scale businesses, managing not only inventory but also order processing, finance and customer relationships. They are particularly useful for enterprises that need to manage complex operations across multiple channels.

Best practices for multichannel inventory management

In addition to finding the right management solution for your business, there are other things you can do to optimize your processes as a multichannel retailer: 

Maintain consistency across channels

One of the easiest ways to both increase customer satisfaction and simplify your operations is to keep things consistent between your sales channels. For example, using the same product descriptions, SKUs and images makes for a better customer experience, and can help your staff identify products easier when interfacing with customers. It’s also a fair business practice to maintain the same pricing and policies across your business. Not only do customers appreciate this, but it also simplifies returns and exchanges. 

Get more in-tune with seasonal demand fluctuations

Another important practice for managing multichannel inventory is to develop an understanding of what seasonality looks like for your business. Every store has bestsellers, but if you keep a closer eye on your sales, you may begin to see patterns that change with the seasons, or other outside factors. Identifying sales trends unique to your business can help you forecast demand and plan ahead to ensure you don’t face stockouts or end up with overstock. 

Use the retail inventory method

The retail inventory method is an accounting strategy used to estimate the value of inventory and cost of goods sold (COGS). It involves calculating the cost of inventory based on the relationship between sales and the average cost of goods. Use the retail inventory method to streamline your inventory tracking, improve financial reporting and simplify the process of estimating the cost of goods sold (COGS). 

Increase communication with your customer base

Finally, an important practice for any retailer is to communicate consistently with your customer base to build trust and foster loyalty. 

Your customer community is just that—a community—one that needs tending to like any other relationship. Email campaigns, loyalty programs and in-store events are all ways to reach out to your audience, reward them for shopping with you and encourage them to come back. And, as a multichannel retailer, you can use these communications to entice customers to shop with you through more than just one channel. Communicate more with your customers to keep your brand top of mind, engage them through multiple channels and create a stronger sense of community. 

The bottom line

As you can see, the way you manage your inventory can impact just about every part of your business. Ultimately, what matters most is how it impacts your bottom line. With better multichannel inventory management, retailers can improve these aspects of their operations, from planning and forecasting to warehousing and fulfillment to the customer experience and beyond. Using the right inventory management solution, retailers can optimize these processes, saving precious time and increasing profitability. 

We encourage you to use this guide to assess your current inventory management processes and find areas for improvement. Inventory management tools–including those by Lightspeed–can fill these gaps and optimize your operations, helping you strategically manage inventory across channels and grow your business.

Learn more about Lightspeed’s inventory management capabilities by watching a free demo.