What is an Anticipation Inventory? The Ultimate Guide For New Retailers

Seasonal peaks and boosts in customer demand are excellent for boosting revenue as long as you have enough stock available to avoid missed sales and disgruntled customers. Anticipation inventory is the solution to this problem.

This article is the ultimate guide to anticipation inventory for new retailers.

What Is Anticipation Inventory?

Anticipation inventory refers to the extra products or raw materials a business purchases to meet an anticipated increase in demand, usually due to the season. Retailers can’t anticipate flash, intermittent, or erratic demands.

Some retailers may use anticipation inventory to prepare for a spike in customer demand based on upcoming events, holidays, or seasons. For example, a florist stocking up ahead of Valentine’s Day or a decoration store stocking up ahead of Halloween.

Meanwhile, other businesses may use anticipation inventory to buy raw materials ahead of anticipated price increases or potential supplier shortages. For example, a business making notebooks should buy paper ahead of the back-to-school sales in August, as suppliers might increase the paper price or have a limited supply.

Advantages Of Anticipation Inventory

Satisfied customers

Anticipation inventory helps retailers prepare for expected increases in customer demand, which minimizes the chances of stockouts and increases customer satisfaction – especially for last-minute shoppers.

If your store has the high-demand product in stock at the right time, you will have satisfied customers, positive reviews, and repeat business.

Alternatively, if a specific product is out of stock or your customers are unsatisfied with your offerings, your customers will shop with your competitors instead. This will result in lost sales and loyal customers for your business.

Improved efficiency

Having the right amount of stock for an anticipated increase in customer demand means you have more time to spend on your marketing and sales campaigns during the peak period. This increases the likelihood of successfully selling the anticipation inventory.

In addition, businesses that build inventory before an anticipated increase in demand can keep workers busy during slow times and avoid making workers do overtime when demand peaks.

Lower costs

Knowing what raw materials you need, when, and how much is required will allow you to order in bulk, negotiate prices with suppliers, or make purchases before any price increases.

In addition, when a raw material or supply is expected to fluctuate in price, retailers can buy anticipation inventory when the costs are low. For example, if you know the price of travel accessories increases in the summer, and you need some to create your travel kits, you can order at a lower price in advance.

Improved forecasting

Finally, anticipation inventory enables you to improve your retail forecasting for the years ahead by learning more each time about your business, your customer’s habits, and your most successful sales techniques.

The better you get at buying and selling anticipation inventory, the more successful you’ll be.

Disadvantages Of Anticipation Inventory

Increased storage costs

Anticipation inventory requires holding extra products or raw materials at your warehouse, meaning you will need more storage space and be required to pay additional storage costs.

In addition, if your inventory forecasting is inaccurate, the inventory will take up space that you could use to store other products with a higher demand. For example, Christmas-themed products stored in your warehouse before December help meet future demand, but you can’t use that space for goods in high demand now.

Increased risk of overstocking

While anticipation inventory means your risk of running out of stock is low, it also means that your risk of overstocking is high.

If your forecasts are inaccurate, either by poor demand forecasting or sudden changes in demand, you’ll be left with too much stock. This can take up storage space and damage your profitability.

In addition, if you cannot sell perishable stock, it may have to be written off if you don’t have the correct storage space. For example, perishable foods are likely to spoil, decay, or become unsafe to consume if not kept refrigerated at 40 °F or below, or frozen at 0 °F or below.

Do You Understand Anticipation Inventory?

All retailers should understand anticipation inventory if they sell products that are seasonal or have predictable demand increases.

However, the amount of anticipation inventory you purchase will depend on several factors, including the value of the goods, the accuracy of your demand forecasts, and the amount of warehouse or storage space you have available.

As with many business decisions, the key is to weigh up the advantages and disadvantages. This guide shows the plethora of advantages of purchasing anticipation inventory, in contrast to the few disadvantages.