Phantom inventory, also known as ghost inventory, is a discrepancy between the inventory levels recorded in a retailer's system and the actual inventory levels on the shelf. It is a silent, but widespread problem in the retail industry impacting both supplier brands and retailers. According to a recent study by Zebra Technologies, phantom inventory accounts for an average of 8% of all inventory losses. This means that for every $100 in inventory, retailers could be losing $8 to phantom inventory. This can happen for a number of reasons, such as:

• Theft: Employees, customers, or organized retail crime rings may steal products from the store.
• Human error: Employees may make mistakes when counting inventory or recording sales data.
• Inaccurate inventory tracking systems: Inventory tracking systems may not be properly calibrated or may not be able to account for all product movements.
• Product shrinkage: Products may become damaged, expire, or otherwise be unusable.

Phantom inventory has a significant impact to on-shelf availability, which is the percentage of products that are in stock and ready for purchase when a customer wants them. When retailers have inaccurate inventory records, they may not be able to accurately forecast demand and order the correct amount of inventory. This can lead to stockouts, which can frustrate customers and lead to lost sales. In addition to lost sales, phantom inventory can also lead to other problems for retailers, such as:

• Increased costs: Retailers may have to spend more money on expedited shipping and other measures to avoid stock outs.
• Reduced customer satisfaction: Customers who experience stock outs are more likely to be dissatisfied with the retailer and less likely to shop there again.
• Damage to brand reputation: Retailers and supplier brands who have a reputation for poor on-shelf availability may have difficulty attracting and retaining customers.

‍Why it matters

On-shelf availability is one of the most important factors in determining retail sales. Studies have shown that a 1% increase in on-shelf availability can lead to a 0.5% increase in sales.

How to solve it

There are a number of things that retailers and brand suppliers can do to work together to reduce phantom inventory and improve on-shelf availability.

Retailers:

• Invest in accurate inventory tracking systems. This will help you to identify and resolve discrepancies between your system and actual inventory levels.
• Conduct regular inventory audits. This will help you to identify and correct any errors in your inventory records.
• Implement training programs for your staff on how to accurately handle and track inventory.
• Work closely with your suppliers to ensure that you are receiving the correct amount of inventory.

Suppliers:

• Provide accurate inventory data to your retailers. This will help them to forecast demand and order the correct amount of inventory.
• Work with your retailers to develop inventory management plans that are tailored to their specific needs.
• Use technology to track inventory levels in real time. This will help to identify and resolve any discrepancies as quickly as possible.

By taking these steps, retailers and suppliers can reduce phantom inventory and improve on-shelf availability, which can lead to increased sales and profitability for both parties.

Additional tips:

• Use data analytics to identify products that are most susceptible to phantom inventory. This can help you to focus your efforts on the products that will have the biggest impact on on-shelf availability.
• Implement security measures to prevent theft. This could include installing security cameras, using access control systems, and training staff on theft prevention procedures.
• Use a collaborative approach. Retailers and suppliers should work together to identify and resolve phantom inventory issues.

By working together, retailers and suppliers can reduce phantom inventory and improve on-shelf availability, which will benefit both parties and their customers.

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About Retail Aware

Retail Aware helps supplier brands and retailers capture first party-data from product displays to improve performance of in-store investments. Leveraging proprietary technology, Retail Aware measures product movement and shopper behavior to help clients solve problems such as phantom inventory. Schedule 15 min with a solutions advisor or click here to access a demo account today! 

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