If you're reading this blog, it's likely that you have been thinking about your excess inventory. And it's time to move it on.
Retailers holding onto clearance stock for too long can hurt them. This is because retailers who hold onto their stagnant inventory for too long and do not sell surplus stock, will have slower stagnant shelves, or their valuable warehouse space will be taken up.
Why should you care about stagnant shelves? One Major KPI (Key Performance Metric) in the retail space is sales per square foot. Sales per square foot is a figure of the average revenue earned per square foot of your retail space. If 25% of your floor space has stagnant stock, which is not selling. You are effectively incurring a 25% cost from the opportunity cost of not having faster selling products in the same space as your obsolete inventory.
To help you overcome your excess inventory we are going to cover:
When to consider your stock as excess stock
Why shouldn't you hold surplus inventory
What are the causes of excess inventory
How to get rid of unwanted inventory
16 ways to move excess Inventory
How to avoid surplus stock in the first place
When is inventory considered excess stock?
Inventory is considered excess stock-also known as surplus, obsolete, overstock or clearance stock-when it's at the end of its product life cycle. The usual sign of this is that there is no demand for the products.
The time it takes for inventory to become excess stock varies. In cases such as toys and FADS, the product life cycle can be as little as 12 months. Some examples of recent FADS are: Fidget spinners, pop toys and Loom bands. Whereas for automotive parts, where a vehicle may continue to run for 20 years, the parts for that product will continue to have demand for 20 years.
Another Indicator that Inventory is excess stock is that suppliers have begun to reduce the prices of the product, this is known as clearance stock. This is because at a lower price, there is more demand for a product, so suppliers reduce prices when they are not selling fast enough.
Why is having too much inventory bad?
Having excess inventory means that you need extra space, the more space you have, the more it costs! To make up for these costs, your prices will be higher, and you will not be able to compete because your prices are too high
Holding onto excess Inventory has 6 key costs:
Capital cost: The monetary cost of the items-purchase price
Opportunity cost: The difference between the revenue brought in by faster selling items compared to the slow selling excess stock
Storage space cost: The cost to store your stock eg warehousing costs
Inventory service cost: Taxes and insurance premium costs on the Inventory
Inventory risk cost: There's a potential for your inventory to lose value, leading to the risk of diminished revenue. This cost represents the foregone income you anticipated from the inventory, which may not materialise if it doesn't sell quickly enough.
Damage cost: By holding stock, there is the risk of damage. This cost is hard to predict, but it is a cot that pretty much every stock holding business faces
Overcommitting to inventory and selling below optimal levels can effect your cash flow with the 6 key costs of holding onto excess inventory. This means your ability to replenish shelves with fresh goods is reduced as you have unwanted stock sat on your shelves, leading to decreased customer interest and fewer visits.
On the flip side, insufficient inventory is equally detrimental. Depleted shelves, much like stagnant ones with obsolete inventory, fail to entice customers with anything new. Striking the right balance involves ordering precisely what is needed and proactively addressing old or excess inventory, possibly through excess inventory liquidation.
What are the causes of excess inventory?
Every retailer eventually has to deal with excess inventory. Here are the 6 most common reasons why:
Poor demand forecasting
Many retail store's over optimistically order based on perceptions of increased demand. Such as ordering too much for Christmas. It's a fine line between having too much and too little stock, many retailers find themselves on the wrong side at some point and being left with excess stock.
Inventory management
If you haven't done any forecasting, it could result in excess inventory as retailers may end up placing a large order whilst still having the items in stock.
Relying on guesswork rarely proves successful. Utilising inventory performance data in your inventory management software is crucial to ensure accurate future ordering and prevent unnecessary unwanted stock.
Evolution in customer preferences
Customer preferences change, reducing the demand for certain types of products. Either from: new products entering the market, changes in trends or market culture.
Overstocking Inventory
Overstocking inventory is the process of purposely holding more stock than you need. It is done so that factors such as: late deliveries, issues with the supply chain or weather events do not lead to empty shelves, because empty shelves bring in no money!
There's no real right or wrong answer to overstocking, because it provides a purpose. But if you mess up your over stocking it can lead to huge quantities of excess stock.
Poor product-market fit
What sells on a UK beach during 30 degree heat, will not be the same type of products that sell on a rainy day in London. This is because each market has a different product-market fit.
The same concept can be applied to retailers, whilst not as extreme, retailers in the south may buy products less known to their market and become excess stock for them. Whereas a northern retailer may sell that same product like hot cakes.
Suppliers MOQ (Minimum order quantity)
The general rule of thumb for products, is that the more you buy, the cheaper they get (The law of supply).
As retailers are motivated to buy as cheaply as possible, it will lead them to buying from different suppliers with higher MOQ's, because these are the ones supplying at the cheapest prices. This means that retailers are more susceptible to being left with surplus inventory if they order at a high MOQ and then the product does not sell.
How to dispose of old inventory:What is inventory liquidation?
Inventory liquidation is the process of converting your inventory into liquid assets, typically through selling old stock for cash. This method is the most common way of disposing of outdated inventory.
While often linked with businesses shutting down, strategies for inventory liquidation can also be employed to sell outdated or excess inventory, allowing for the introduction of new products for sale. This process can be managed independently or through collaboration with a third party, which purchases your inventory and sells it through their own outlets.
16 ways you can move overstock inventory
Use an inventory liquidator
"Retail is detail, and your success lies in the meticulous curation of products on your shelves." - Jack Mitchell, Chairman of Mitchells. Lingering overstock is a direct hit to your bottom line. Opt for efficiency by tapping into inventory liquidators or off-price retailers to sell your unwanted stock and surplus items.
Inventory liquidators aren't just for businesses closing shop or liquidation stock—they can be a lifeline for moving excess inventory. If independent efforts fall short, partnering with an inventory liquidation company can be the key to efficiently selling off goods.
We are one of these liquidation buyers, you can sell your stock to us by heading over to the sell your stock page or click here
While the returns may not match the initial investment, working with off-price retailers or liquidators ensures you don't face a complete loss on your surplus goods. Furthermore, it opens doors to new customers. Consider liquidation stock a strategic moves to manage excess inventory and expand your customer base.
See if you can return it
Some suppliers have been known to accept returns for unwanted goods, especially those who retailers have good relationships with. Sometimes a supplier will not accept a return, but would accept an exchange, so there's many creative ways to try with your supplier.
Host clearance events
Organise clearance events, either online or in-store, to create excitement around your excess inventory. Offer special discounts on your clearance stock, entertainment, or exclusive deals during these events to attract a larger audience. Clearance events are an effective way to quickly liquidate surplus stock, and may become a sales channel that you implement regularly.
Implement a Tiered Discount System
One of the classic and effective ways to sell inventory is by implementing a tiered discount system on your clearance stock. Offer higher discounts for bulk purchases or for customers who buy multiple excess goods. This not only helps in clearing out surplus stock quickly but also encourages customers to make larger purchases, boosting overall sales revenue and getting rid of your pesky excess inventory!
Bundle and Package Deals
Create attractive bundle deals by combining slow-moving products with more popular ones. This strategy not only helps to sell inventory but also enhances the perceived value for customers. Bundling creates a win-win situation where customers get a better deal, and businesses can sell inventory more efficiently, making a huge dent in your excess stock.
Flash Sales and Limited-Time Offers
Leverage the power of urgency by organising flash sales and limited-time offers on clearance stock. Create a sense of scarcity to prompt customers to make quicker purchasing decisions. Promote these events through various channels, including social media, email newsletters, and your company website, to maximise reach and impact.
Collaborate with Other Businesses
Explore partnerships with other businesses that complement your products. Cross-promotions and collaborations can open up new markets and customer bases. By reaching a wider audience, and finding a new sales channel, you increase the chances of finding buyers to sell inventory to. Some examples of other businesses to collaborate with may be: wholesalers, retailers or B2C service based businesses.
Utilise Online Marketplaces
Tap into the vast potential of online marketplaces to reach a global audience. Platforms like Amazon, eBay, and Etsy provide an excellent opportunity to sell inventory directly to consumers. Ensure that your product listings are optimised with relevant keywords and compelling descriptions to attract potential buyers.
For a larger quantity of products, many sellers also use eBay to sell their liquidation stock. This if often done by uploading joblots onto the eBay marketplace, which shops can then buy. You can either list these joblots as buy it now, or as an auction.
Implement a Customer Loyalty Program
Encourage repeat business by implementing a customer loyalty program. Offer rewards or discounts to customers who consistently purchase from your brand. This not only helps in selling inventory but also fosters long-term relationships with those loyal customers resulting in increased customer demand.
Optimise Your Pricing Strategy
Regularly review and adjust your pricing strategy based on market trends, competitor pricing, and customer feedback. Consider implementing dynamic pricing, where prices fluctuate based on demand and other market factors. This ensures that your products remain competitive and attractive to potential buyers. You also have the option to utilise a special offer, enticing customers to buy more of your excess product.
Invest in Marketing and Advertising
Increase visibility for your excess inventory through targeted marketing and advertising campaigns. Utilise social media advertising, Google Ads, and other online channels to promote your discounted products. Highlight the value proposition and unique selling points to capture the attention of potential buyers.
Regularly Review and Adjust Your Strategy
The business landscape is constantly evolving, so it's crucial to regularly review the effectiveness of your strategies. Analyse sales data, customer feedback, and market trends to make informed adjustments to your approach. Being flexible and adaptive is key to successfully selling inventory.
Sell your surplus inventory at other locations
Examine inventory levels at various stores; while one location may have surplus of a specific item, another might be running low. Utilise a Point of Sale (POS) system, maintaining accurate records across all locations. This strategy allows you to distribute excess products to locations with higher demand. Even if you can't relocate all overstock this way, it provides an opportunity to sell some without resorting to discounts or giveaways.
Gift off slow moving inventory
Some items, especially the unsold stock that has lingered on the shelves for a while, might not naturally find their way out the door. However, don't underestimate the value of surplus inventory to your store. Consider using this unwanted stock to enhance customer loyalty, such as offering it as a complimentary gift with another purchase.
While this approach means you won't recover the cost of the goods, it contributes to building positive customer sentiment. Promote a "gift with purchase" campaign both online and in-store to attract potential customers. Everyone appreciates freebies, making it a compelling incentive.
This tactic is particularly effective for low-cost items. You can also use freebies as incentives for customers to join your mailing list or boost their basket value.
Recycle your excess inventory
If you've exhausted all efforts to clear your overstock inventory and still have unwanted stock lingering, the last resort may be to absorb the cost of the unsold stock and recycle them.
This should be a final option, as it entails no financial return and misses the opportunity to reward customers or contribute to your community. However, if alternative methods prove unsuccessful, freeing up storage space for new and fresh inventory becomes the priority.
Make a donation to charity with the surplus inventory
Certain inventory, lacking the ability to generate customer interest, can still be put to good use through donations to local organisations or initiatives.
Contributing excess inventory in this way showcases your store's dedication to the local community. Additionally, some charitable donations may qualify for tax deductions, creating a mutually beneficial arrangement for both your business and the supported organisation.
How can excess stock be prevented?
Forecast demand
To prevent excess stock, you will need to forecast demand. It's no good having a guessing pie in the sky strategy, because you will get burnt.
If you have sold the product before, look at your historical data, showing how fast a product sold in the previous year at the same point. If your business has grown since that point, obviously account for that, but don't go over the top.
If you have never sold that product before, then order lightly, minimise the risk that you are left with vast amounts of surplus inventory. Look to see what other products you sell/have sold, that are similar to the new product.
The key to success with forecasting demand is to have realistic views on the potential amount of sales you can get, and use as much data as you possibly can to inform your decisions.
Order a test run first
Some suppliers will let you order an initial smaller run, this will let you test the product in your store, rather than committing to their MOQ. This is likely only to work if you plan to order large quantities. EG you are considering ordering 10,000 units from a supplier, so ask to buy a test order of 1,000 units.
The downside of this is your CPU (Cost Per Unit) will most likely be higher, as the supplier will increase their unit price due to you placing a smaller order. Whereas on the larger order you are getting a discounted price.
Monitor inventory performance data
Monitor your stock levels with an inventory control system, identify slow selling and obsolete products fast, and do not reorder them. It's one thing ordering the wrong type of products for your store, every retailer will do it at some point, but it is another thing to not realise you've made a mistake, continue to order the obsolete products and worsen your excess inventory problem. Using software for this is great, as you will not need to do manual inventory counts.
Place strategic orders
Anything that is not seen as a mass consumer product, should not initially be ordered in large quantities. This is because these type of products are a bit of a gamble, they have no proven track record in your store and they're niche. Don't let them turn into your surplus Inventory!
See if you can dropship certain products
Dropshipping is the process of taking an order from a customer, then placing that order with your supplier. Your supplier then sends the product to the customer, and you keep the profits, whilst the profit margin is usually lower than fulfilling the order yourself, it is less risky. Whether or not you can implement this strategy will depend on your supplier, liquidation wholesalers are less likely to do this as they have liquidation stock, whereas traditional wholesalers may be more interested in this approach.
Wayfair, an online furniture retailer, has achieved success through the implementation of this approach. Collaborating with over 7,000 third-party vendors, Wayfair facilitates direct product shipments to consumers. This enables the company to feature and sell a vast array of products on its website without the need to maintain physical inventory.
Do you have a large quantity of unwanted stock that you would like to dispose of?
We are buyers of unwanted stock. Sell your stock to Pink Liquidation today by heading on over to the sell your stock section.