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Even small inventory missteps in a retail business can quietly reduce your store’s profitability. Products that miss their expected sell-through rate, reorders based on habit instead of what’s selling, or holding on to excess inventory may seem innocuous. Over time, they can compound, weakening your retail inventory profitability. But it’s fixable with better visibility and connected retail tools that bring sales, inventory, and reporting all together.
U.S. Census data shows that by late 2025, the typical business was holding over a month’s worth of sales in stock. And as a 2026 National Federation of Independent Business (NFIB) survey shared, small business inventory levels hit their highest point since January 2023. These numbers mean that cash may be sitting on many retailers’ shelves when it could be reinvested in the business.
For retailers, visibility into what’s selling is crucial to making smarter inventory decisions and protecting margins. Here are seven ways successful store owners keep their profits healthy through strategic retail inventory management.
1. Identify slow-moving inventory early
The cold-weather gear that had to sweat out an unseasonably warm winter, or that trending color that never quite took off. Every retailer has products that stall, but the key is to discover them early so they don’t tie up valuable shelf space that could be allocated to better-performing items.
By monitoring inventory turnover and SKU performance, you can give lingering items a jumpstart through fresh promotions, bundling as an upsell, or price adjustments. Then, ensure they’re on your “do not reorder” list.
How Square can help: Item-level reporting in Square Point of Sale surfaces performance by SKU so you can quickly identify products that aren’t moving. With real-time stock overview, you can make adjustments on the spot — discounting, transferring, or discontinuing items before they become costly dead stock.
2. Review sell-through rates before reordering
Many profitability issues start at the reorder stage, when shop owners automatically replenish stock, whether based on instinct or by routinely ordering the same items and sizes.
Confirming the sell-through rate before placing a new order adds discipline to your inventory planning process. If an item has not met expectations the first time, it may not deserve a second round of investment.
How Square can help: Centralized sales and inventory reporting, including item and category sales reports, allow you to compare performance over time and make informed reorder decisions. Purchase order functionality helps you track vendors and manage the reordering process so buying decisions are based on real data. And with Square AI, you can quickly surface seasonal trends and past bestsellers, helping you plan future orders with more confidence.
3. Prevent both overstock and stockouts
Once you monitor your sales history, you can avoid overstock and stockouts, which both undermine your store’s profitability, just in different ways. Excess inventory ties up capital that could be invested elsewhere, while stockouts lead to missed sales and frustrated customers.
Effective inventory management requires balancing both. Regularly reviewing which products sell out fastest and which linger on shelves can help you fine-tune reorder quantities, improving inventory turnover without sacrificing availability.
How Square can help: Real-time inventory tracking syncs across your in-store and online sales channels, helping you maintain accurate stock counts. Low-stock alerts and multi-location inventory tools ensure you don’t overbuy in one store while running out in another. When everything updates automatically as you sell, you spend less time reconciling and more time selling products.
4. Simplify your assortment based on variant performance
Not every size, color, or style performs well. While you might want to carry a wide range to suit all needs and tastes, one size may move twice as fast as others, or you may realize your customers prefer maxi dresses to minis. For example, one retail store owner discovered that while cherry blossom and jasmine were best-selling lotion scents, the same fragrance didn’t sell as candles. Without variant-level visibility, these insights are easy to miss.
By focusing on high-performing options and trimming weaker ones, you can improve your sell-through rate and free up capital to carry the products customers consistently buy.
How Square can help: Variant-level reporting and support for large catalogs can help you understand which sizes, colors, or styles are driving revenue. With detailed item and category reporting, you can remove underperforming products and reinvest in proven bestsellers.
5. Make targeted pricing adjustments
If your sell-through rate slows, discounting can feel like the fastest solution to free up space for new items. However, broad markdowns can reduce margins across the board and take a toll on your overall store profitability.
A smarter approach is targeted marketing for your store. Consider bundling slower-selling items with top sellers, offering limited-time promotions, or testing small price adjustments. The goal is to improve movement without sacrificing margins.
How Square can help: Reporting in your retail POS system can help you measure how pricing changes affect performance over time, so you don’t have to react with blanket discounts. Instead of guessing, you can see exactly how a promotion affects revenue and margins, and adjust accordingly.
6. Use seasonal trends to plan smarter inventory
Seasonal and event-based goods often have high demand and a short selling window. Fans may cheer when they see team merchandise, for example, but that energy quickly fizzles after the big game, leaving shelves of dated items with limited appeal.
Looking back at how items moved during previous seasons provides valuable context so you’re fully stocked during peak periods, without dealing with excess inventory afterward.
How Square can help: Time-based and year-over-year reporting lets you compare seasonal performance and adjust purchasing accordingly. Square AI incorporates real-time data, so it can alert you to upcoming events to ensure you have adequate stock of team merch for that big game or extra ice cream on hand for festival goers during a heat wave. Unified reporting across in-store and online channels helps you see the full picture of seasonal demand, so you can minimize leftover stock and uncover new opportunities for your store.
7. Make inventory reviews part of your routine
Inventory management improves most when it’s consistent. A short weekly or biweekly review of top sellers, slow-moving inventory, and upcoming reorders can help you make more proactive decisions for your store. And if you sell across multiple channels, a centralized view is especially important to avoid overstocking in one location while running out in another.
How Square can help: Square AI provides helpful insights to make inventory reviews faster and more actionable. That means you can reduce manual reconciliations and avoid last-minute scrambles at reorder time because you’ve been regularly tracking performance.
Use your inventory data to increase profitability
Better visibility into your store’s inventory gives you a real competitive advantage. When you understand what’s selling, what’s sitting, and what to reorder or not, you gain control over cash flow and margins. And real-time visibility into how your products are selling across in-store and online channels makes optimizing that inventory easier.
When your retail tools work together, you spend less time toggling between systems and more time building the kind of store customers keep coming back to. By incorporating the right tools and habits into your routine, you can provide a better in-store shopping experience for customers while keeping day-to-day operations running smoothly for your team.
