6 Ways For Running Down Old And Surplus Inventory

If you can’t fulfill their order, you aren’t just missing that particular order—you may lose future sales with them if they become discouraged. If you are currently using fixed pricing, the easiest way to immediately improve sales velocity is to implement dynamic pricing.

Even with an inventory sale, it is best to track your orders as and when they come. If you are running your business via an e-commerce store, you need to have proper tools on your website that help you manage your orders effectively. The best order management tools help you keep track of the status of each order. You can avoid costly new-product-pricing decisions by keeping the higher price in most stores. Using advanced analytics, explore pricing alternatives in test markets before rolling out the optimal pricing company-wide. Advanced analytics and retail AI let you take a more systematic, proactive approach to stock balancing as sales at different stores slow and accelerate.

How to Cash in on Your Excess Inventory

You may be able to replace your slow-selling products with something else. Contact your suppliers and explain why you weren’t able to sell the items. Ask them if they can offer you an exchange or a refund and they might oblige because they want to keep you as a customer. For many sellers, different seasons can cause massive changes in demand that require inventory prep. You want to avoid understocking at this time because potential profits during different seasons can be so high. On the other hand, you don’t want to order too much to prepare and then lose money in overstocking.

This will ensure you that someone has a clear overview of your inventory and can give quick answers about the management system. You might end up with a big mess, if there is no one responsible and several people are performing separate tasks.

Make use of your social media and digital marketing campaign

More often than not, dead stock is a direct result of inaccurate demand forecasting . When companies make faulty forecasting predictions and then fail to properly manage their inventory, it can cause excess stock in a hurry. Group a slow-moving product with a complementary product that sells well. If you sell lots of treestands but struggle to sell safety harnesses, pair them together. If you’re overstocked on arrows, package them with best-selling broadheads.

For example, you could order two products from two different suppliers and receive one way before the other. This is because Supplier A has a different lead time than Supplier B. If you don’t sell these products within a certain time limit, you can’t sell them — you have to get rid of them. Products with higher costs of goods sold would require a higher turnover ratio since more of the company’s money was used to produce that item.

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For example, a bundle of bath products, or a gaming bundle combining one new release with a collection of older games. Or it could be a Tiered Discount Ten Ways to Deal with Excess Inventory – “10% off of the first purchased product, and 20% off of the second product”. Another classic way to get a product to move is to offer a discount.

• Bundles increase the items’ perceived value, which boosts their sales attraction.
• We have a blog dedicated to safety stock and its relation to reorder points if you want to learn more.
• Relative classification of inventory items can be done by a number of techniques such as ABC Analysis, Fast, Slow and Non Moving , Vital, Essential and Desirable , and High, Medium and Low .
• There’s really no way around the fact that surplus inventory is bad for your company’s cashflow.
• When you do not reduce the number of units manufactured for a product that’s going through a drop in sales, you would have to sell excess inventory at lower profit margins later on.

Effectively notify your shoppers of your sales with e-commerce promotions. There’s really no way around the fact that surplus inventory is bad for your company’s cashflow. Inefficient inventory management happens when retailers keep items on their shelves much later than they should. Typically, business owners do so in hopes of one day selling the product at full price. In reality, however, this stagnant inventory is much more expensive to hold and manage . Even if that item is eventually sold at full price, the company will still end up in a loss. For this reason, it’s crucial to remove old inventory as soon as possible, so as not to create additional expenses.

Efficient Inventory Management

If you have obsolete inventory, this might be your only option. From time to time, you’ll have reasons to give some products away for free. And you can get a nice way to offload overstocked products to someone who might actually appreciate them. With Inventory Age Condition you can easily build your repricing strategy on your old inventory. You have many options, and you can select which one is the most suitable for your inventory needs.

• Some might make the mistake of holding onto excess inventory, thinking that more is always better.
• In other words, many foods and medicine products don’t give you any choice on how long to keep them or when to throw them away.
• But they can also be used as one of your inventory reduction strategies.
• Additionally, a sales volume-profit analysis identified opportunities for this company to reduce the number of size variations they were offering.
• A simple reason why a product is spending too much time in inventory could be that you’re trying to sell it to the wrong type of customer.

To do this, you need to keep good records of how much you sell each quarter of each product. Feel free to use all the formulas we shared with you concerning turnover ratios, COGS, and DOH. The turnover ratio is high when your products sell quickly and consistently. The inventory turnover rate is a huge factor in determining the amount of a particular product to keep on your shelves. When your cash is tied up in unsold products, you may not have the funds to invest in new products. Not only do you lose money this way, but you could also lose out on an opportunity to advance your business due to limited cash on hand.

Donate excess stock to charity

For example, you might take some of your inventory to an inventory liquidator while keeping just a few pieces of inventory to give to influencers. In accounting terms, these items are depreciating in value, so every day you lose profit potential.

You can also kick this tactic into high gear by creating a sale event. Why not run a flash sale to instill a sense of urgency in your customers? Or, if you have a ton of merchandise that you need to get rid of, consider running a store-wide event and aim to draw crowds to your store. With the availability of online outlets such as eBay, you can sell inventory directly to whoever wants it. This requires staff time and can be a slow and tedious process. A liquidator will buy up what you have for a negotiated price.

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If you’re holding goods you’ve marked down two or three times without any action, give them to your favorite charity. You’ll save a lot of carrying costs, and you can take a full-value deduction on your next tax return. The tax savings will free cash for you to reinvest in new merchandise. Create and maintain strong relationships with your customers so they continuously return to your business or service and continue buying products!

Call them specials or limited-time offerings to increase demand and use up that excess stock. The best way to reduce and prevent excess inventory is to only purchase the products you know you’ll use. This can be done by looking at your historical data to get an idea of seasonal trends, calculate usage, and discover your best-selling products.

Use clearance sales

She is passionate about setting up innovative strategies to grow sales pipelines using data-driven decisions. That could mean anything from a killer email marketing campaign to strategic product placement on your ecommerce website. Just make sure that you’re placing those offers where your customers will find them . Luckily, there are plenty of strategies that can reduce or even negate this common problem. From shifting current stock to demand forecast optimization, keep reading to find out everything you need to get on top of your inventory controls.

She’s also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. A multi-buy offer is a type of sales promotion that allows customers to purchase products at discounted rates if they buy a certain quantity or amount. BOGO promos as well as offers like “Buy 3 get 1 free” are some common examples of multi-buy discounts. The route for this depends on whether your customers are businesses or consumers. If you sell directly to distributors or businesses, then approaching them with a different or special deal on finished goods might work. You might try packaging your product for a discounted price. Regarding end-users, there are many who don’t care about having the latest make or model and will gladly buy your out-of-date inventory.

Such customers aren’t always picky about whether they need the product or not. And then you’ll have products that sit in your inventory forever, that just don’t move fast enough. https://personal-accounting.org/ So, now let’s review the 13 ways in which you can manage this excess inventory. Another option is to give the excess product or products away to influencers in your industry.

• Consignment may be virtual, which means you keep the goods and are responsible for shipping them once a sale is made.
• If they hesitate to give you a refund, request an inventory swap.
• C – moderate value items with a moderate frequency of sales Items in this category fall somewhere in-between and still require some attention and financial assessment.
• Every square foot costs money in rent, electricity, and staffing .
• They can buy it at a big discount from you and resell it online or wherever they offload their goods.
• The problem of slow-moving and excess inventory happens to every retailer.

This can become a major financial burden on your business. If your suppliers are unreliable, you might find yourself overcompensating to avoid insufficient inventory, ending up with way more stock than you need. For example, maybe their deliveries are often late or products are frequently back-ordered, so you overbuy or order too far in advance, leading to excess inventory. Down time for sales often occurs in the early months of the year, as well as at the end of seasons when new products come into demand. Rather than clinging onto these items in hope that someone will suddenly purchase them, it’s best to find ways to clear your stock as quickly as possible. Collaborations between small businesses and nonprofit organizations can be beneficial to both parties. What’s more, donating products to charity is a great way to boost your brand image by getting involved in social responsibility and giving back to your community.