It’s common practice for retailers to have a bit more inventory than they think they’ll need. It’s for contingency, and it’s called safety stock. The reason for doing it is sound: it means never having to turn a customer away.
But sometimes miscalculations are made. Items may go out of style or something in the market may change. Either one of these instances will result in a business being stuck with the extra inventory, and when that happens the goods turn from safety stock to deadstock.
In this blog, we’re going to look at deadstock in detail – how you end up with it, how to deal with it, and how to avoid prevent deadstock in the first place.
If you have inventory in stock that’s been gathering dust on a warehouse shelf for a long time, you’re holding deadstock. It’s stuff you can’t sell and are probably never going to sell.
An item was selling like hotcakes before it wasn’t, or items you thought would do well didn’t. Alternatively, outside forces like extreme weather or a downturn in the economy could have impacted your sales.
You’ve stocked up on the same products that everyone else has. Maybe you’re a small player that can’t beat the prices of larger competitors, or maybe the market has become too flooded with those particular items.
You waited too long to react to slow sales and didn’t offer discounts when you should have.
Someone didn’t put enough effort into getting feedback from your customer base through methods like emails or online reviews, so you weren’t aware of the kind of products customers wanted to buy.
Some of your products were of low quality, customers were not happy, and they returned them. Or maybe the low quality resulted in bad word of mouth.
Maybe data and research told you that particular items would be good sellers, but the information didn’t take everything into account.
Deadstock can have negative effects on your business. Here are a few of them:
If you’re in the business of sales, you know that getting inventory planning right is important. What to order, when to order, how much to order, the list goes on. If you get any of these areas wrong, you’re in danger of ending up with deadstock. It can happen to anyone, but there are steps that can be taken to make it less likely.
Ditch your spreadsheets. They’re not only old school, they’re time consuming and prone to error. Automating your buying decisions with the data inventory management software (IMS) gives you is efficient and much more accurate.
The precise data, reports, and advanced analytics you get from IMS software does more than help you identify best-selling items, it will also separate out those that aren’t selling quickly. When you have that information, abra cadabra, no more deadstock.
Product forecasting analyzes competitors, works out pricing strategies, studies market trends, and “learns” customer preferences. Put together, this information gives you an invaluable forecast on your market, and when you have this information, you’re much more likely to acquire inventory that’s going to sell.
If you have an agreement that allows you to sell unsold items back to the supplier, this is a good time to use it. If you don’t have such an agreement in place, try to get one. Of course, you should always check to see if buyback is even an option during early negotiations with your suppliers.
Keep in mind that those manufacturers and suppliers that do offer buyback are usually the more reputable ones, and that the products they handle are usually high quality.
If you do find yourself saddled with things you can’t sell at their standard price, there are things you can do:
This is the time-honored method for reducing unsold stock. You don’t want these goods tying up your storage space for years, so anything that has been hanging around for six months should be discounted. You could start this at 20% off and increase that amount if you have to.
Advertising clearance sales and other discounts on your website and social media is the best way to get the word out. Sending emails about the event to your mailing list should also get good results. And depending on the size of your company and the market you operate in, you could consider investing in local radio and television advertising.
While this strategy should help you clear out a lot of deadstock, it’s still way better to avoid having it in the first place. If bad inventory management has been the cause, it’s time you consider a good automated inventory management system like Cin7.
There is a marketing term called “Fear of Missing Out.” It’s about creating a sense of urgency in shoppers, letting them think that if they don’t buy something right there and then, they’ll be missing out.
Marketing strategies for this usually boil down to putting limits on offers. These could be in the form of an end date to a sale, or letting customers know that there’s only a limited number of items on offer. In other words, you could advertise an “end of sale by Thursday,” or “50% off this week only,” or offer “last (x number) of products left.”
When it comes to presenting deadstock as a deal in this way, the underlying point is that you’re appealing to customers who are more interested in getting a bargain than the product. That doesn’t matter, though; you’ll still be offloading your old, otherwise unwanted, goods.
This option is about grouping similar products together and offering them at a special price.
By using this technique, you could combine something in your deadstock with top-selling items. You won’t get top-dollar for everything, but you will greatly minimize your losses.
Deadstock is a drag in more ways than one, and it’s important to minimize it. Technology is the best and most reliable way of doing this. So why not invest in a robust inventory management system like Cin7?
Cin7 inventory management software is an ideal choice for businesses of any size. By automating workflows and stock levels in real time, you’ll always know what you have and can ensure you’re stocking the right amount of the right product. That means an end to deadstock. And if that’s not enough to streamline your business and improve your bottom line, the software also connects all your storage locations and marketplaces – online and offline – into one system.
If you’d like to know more, contact our Cin7 team and arrange a demo today.
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