Jan 26, 2024 | 8 min read

9 retail inventory tips to make the holidays less stressful

This is a contributed article from Samantha Novick, a senior editor at Funding Circle.

From the inside looking out, the holiday season is a time of peace, relaxation, and fun. However, if you're a local retail business, the holidays find new meaning — it's a time of surging sales volume, frantic administration, and never-ending surprises.

But it doesn't have to be this way. Your local retail business can enjoy a joyous, tranquil holiday season while still maximizing sales — and it all starts with your inventory.

Inventory mismanagement is the source of many local retail business owner's holiday woes. From frustrated customers to lost sales opportunities, inventory mistakes can send your business on a downward spiral. 

Fortunately, fixing up your inventory doesn't require a huge investment or major overhaul—you just need to follow a few simple tips. If you want to experience a (much) less stressful holiday season, follow these tips to nail your inventory game.

9 Inventory Tips for the Holidays

1. Implement Inventory Management

Often, inventory becomes a constant game of catchup for local retailers. You realize you're running low on an item once you can't find it in the backroom, or you discover a product's real demand when it flies off the shelves immediately.

Manage your inventory—don't let it manage you. Find a system that works for you, and stick with it. 

According to the 2017 State of Small Business Report, 8% of the surveyed small businesses don't track inventory, and 14% use manual processes (like pen and paper). If this method works for you and you're handling inventory stress-free, then keep doing what you're doing. However, if you want a more robust, easy-to-manage system, consider using modern software.

Inventory management software can sync with your POS solution to automatically keep your inventory numbers up-to-date—saving you time and money. While it's not as cheap as your favorite pencil and notepad, software can help you rely less on physical counting and help streamline your inventory management.

2. Calculate How Much Inventory You Need (Forecasting Demand)

Don't leave your inventory levels up to guesswork. You don't want surplus inventory eating up valuable space in the back room or warehouse, but you also don't want to disappoint customers by running out of product prematurely. Use forecasting to get a reasonable estimate of demand.

If you've been in business for at least a couple of years, look at your historical data. What were sales like last year? Did you run out of inventory? When did the sales start accelerating? How long did they last?

Answers to questions like these can help you calculate your inventory needs. Make sure you don't just look at your current and previous month sales to estimate demand. The holidays are a whole new level when it comes to volume. In fact, holiday sales in November and December alone average up to close to 20% of annual retail sales.

Remember to take into account current worldwide and local economic factors. Due to COVID-19, holiday shopping will be a little different this year. However, don't expect the virus to kill the shopping season. Experts at Deloitte predict that "savings from reduced spending on restaurants, travel, and other experiences that consumers currently deem unsafe due to the coronavirus could also help buoy gift-giving."

"The good news is consumers continually show up, no matter what we throw [at] them," says Marshal Cohen, chief retail advisor at market research firm NPD Group. "Holiday-time resilience is always there. Grandma won't go to visit family, so she will send a gift—and spend more than what she normally would because she's not spending money on airfare."

Once you have a good ballpark figure for your sales demand, you can use many of the following tips to ensure your inventory reaches the required amount.

3. Secure Financing in Advance

Fast financing is expensive financing. Get the capital you need well in advance to keep your debt costs down. Using tip #2, you should have a good idea of how much inventory you'll need for the holiday season. Now, start applying for the financing you need to stock up and maintain those estimated levels.

Whether you're late to the game or just in time, here are a few financing methods to consider:

  • Business Line of Credit: A business line of credit gives you a financial safety net that you can keep in your back pocket—just in case. Tap into it to cover gaps in your cash flow and keep your inventory stocked, or keep it around in case of an emergency.
  • Inventory Financing: It takes money to make money, and that's where inventory financing can help. Use inventory financing to purchase the products you need to sell, even if your cash is low at the moment. The products serve as collateral for the loan, making it easy to qualify.
  • Merchant Cash Advance: Trade your future income for cash today with a merchant cash advance. A merchant cash advance gives you a loan now that you'll repay using a portion of your daily sales. When cash is low, but you know major sales are around the corner, a merchant cash advance can help you stock up on inventory ahead of time.

4. Get Your Inventory Orders in Early

This year, expect the holiday shopping season to start in October. Suppliers and manufacturers will get swamped with orders sooner, so don't wait to get your inventory orders submitted. Contact your vendors in advance to let them know your predicted order volume so you can avoid stockouts.

"We are going to be incredibly challenged to get product to consumers this holiday season if we are on a traditional calendar," says Deborah Weinswig, founder and CEO of Coresight research. "With the constraint on e-commerce and delivery and a lot of shopping going online, there needs to be a way of getting things to people in a timely way. So, shopping in October is a good idea."

Don't wait until the week of Thanksgiving to start stocking your inventory. Get ahead of the game and order your inventory as soon as possible. Due to the chaotic season, it's sometimes impossible to refill orders in a timely manner, so dial in your forecasts so you can stock up from the get-go.

5. Perform Inventory Audits

Prevent inventory disaster from sneaking up on you by regularly auditing your inventory. An inventory audit is a process of cross-checking your financial records to make sure they match your inventory counts.

Fail to audit your inventory, and you may find you're selling products that you no longer have. Stay up-to-date on your inventory levels by doing product counts or cutoff analyses (pausing operations temporarily to ensure accurate counts).

While auditing your stock, take note of what's hot and what's not. What's been sitting on the shelf the longest? How about the shortest? What needs to be cleared out so you can make space for new products?

6. Set Up a Plan to Replenish Inventory 

If you don't have room to store your entire holiday inventory (or want to restock incrementally to prevent overstocking), you'll need to make a plan to replenish your inventory.

Talk to your suppliers, so they know what to expect and try to negotiate times for potential shipments. You'll also want to make a plan for how you'll finance your inventory replenishment. If you're relying on sales to resupply stock, then you'll want to make sure your forecasts meet your projected cash flow. And if your customers are notoriously slow at making payments, then you might want to consider getting a business line of credit in advance or invoice factoring.

7. Figure Out a Strategy for Returns

Since the holidays are when most local retail sales happen, it's also the time when the most returns happen. To get ahead of potential return issues, put together your strategy for the holiday season:

  • Create and publicize your holiday-specific return policy: Make it clear which items are returnable, under what circumstances, and for how long.
  • Process returns separately: Mixing sales and returns together often leads to inventory confusion. Keep these methods separate to maintain a smooth in-and-out process.
  • Examine all returned goods: Before accepting returned products, make sure they're not damaged (unless that was the reason for return). Unknowingly accepting damaged returns will lead to business losses and potential clutter in your inventory. Identify which items can be put back on the shelf, sold on clearance, taken apart for scrap materials, or thrown away.

8. Clear Out Old Inventory

Inventory taking up space on the shelves or in the warehouse is costing you money and real estate. Make a plan for how you're going to identify and get rid of old inventory:

  • Clearance: If an item is selling poorly, consider putting it on clearance. Sometimes, it's even necessary to take a loss on an item to get it out of inventory.
  • Add-ons: Consider tacking less-wanted items on to other purchases as add-ons or special gifts. You could set a purchase-price minimum to qualify for the add-ons to incentivize customers to spend a little more.
  • Donations: If customers aren't buying, consider donating your unused inventory to a qualified public charity. This helps people in need, clears up space, and earns you a charitable tax deduction—win, win, win.

9. Hire Extra Help to Keep the Shelves Stocked

It doesn't matter if you nail your inventory logistics if the backroom's a mess and the store's shelves are haphazard. When business is booming, you may need additional hands on deck to keep everything running smoothly.

You might not be able to afford new full-time employees, but you can find contracted help for the busy holiday season. These extra hands can keep your backroom and floor shelves organized and adequately stocked. If money is low, consider using a business line of credit to finance the temporary investment.


The holiday season is the most crucial time of the year for local retail businesses, but we'd argue that the time right before the holidays is equally important. Follow these nine tips and get your inventory ready for the busiest time of the year. And who knows—if you get it right, you might find the peace, relaxation, and fun that the holidays are truly all about.

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Author image Samantha Novick Samantha Novick is a senior editor at Funding Circle, specializing in small business financing. She has a bachelor’s degree from the Gallatin School of Individualized Study at New York University.