Handling inventory can be problematic at all times of the year—particularly for companies without the proper inventory processes in place—but the holiday season typically presents a specific challenge, even for those with the appropriate inventory management software in place. There are several reasons why this is so:

New technology
The launch of new technology may lead to high demand for the latest models of some types of items (smartphone models or gaming systems, for instance) and a waning demand for more outdated versions. Retailers that stock up on older models may find themselves unable to shift the inventory as consumers are drawn to newer versions.

Legislative changes
Product recalls affect virtually every type of retailer, from businesses in the food sector to companies in the automotive industry and everything in between. Toy and gadget recalls can have a particularly big effect on retailers' inventories during the holidays, as just one piece of negative publicity is all it takes to generate a sizeable inventory surplus for an item that would previously have flown off the shelves.

Consumer demand
In periods of economic uncertainty, some consumers tighten their belts and others open their wallets. Those who err on the side of caution don't want to start the new year in debt or otherwise in a bad financial position simply for the sake of having a good holiday season. Meanwhile, many of those who take a "go big or go home" approach justify their spending as a break from the self-imposed austerity measures that they abide by during the rest of the year. What this means for retailers is that they shouldn't assume demand will be down (or, indeed, up) simply based on the current economic climate.

It's not just consumers who may be concerned about the economy. Financially aware retailers who may have been considering adopting inventory software might decide against it because they see it as a frivolous expense. However, it is far from an unnecessary purchase when the risks of manual inventory management are taken into account. Manual methods are prone to inaccuracy and inefficiency that can result in over-purchasing or inventory shortages if not properly addressed—two scenarios that could cripple revenues during the most lucrative time of the year for many retailers.