Why is it important for retailers to know their inventory levels?

Understanding inventory levels is crucial for retailers primarily to avoid stock outages and over-stocking. When a retailer has precise knowledge of their inventory, they can make informed decisions about replenishment and purchasing, ensuring that popular items are always available to meet customer demand. This helps in maintaining sales momentum and customer satisfaction, as customers prefer to find the products they want in stock.

On the flip side, over-stocking can lead to increased holding costs and potential markdowns on unsold merchandise, negatively impacting profitability. By accurately tracking inventory levels, retailers can streamline their operations and optimize their stock levels, ensuring they have the right amount of product on hand to meet customer needs without excessive surplus. This balance is vital for efficient inventory management, ultimately contributing to a healthier bottom line.