The purpose of the inventory is to sell it. Unsold goods can accumulate over time, resulting in what is described as 'deadstock.' Deadstock is money that has been left on the table, and it can have a substantial influence on a retailer's bottom line.
Deadstock must be offloaded in order to maintain strong profit margins, but eCommerce businesses face inventory optimization challenges as they grow. Deadstock accumulates over time as a result of a lack of inventory management systems and processes.
We'll go through what creates Deadstock, how to get rid of it, and how to keep earnings up in this article. We'll also go over how to avoid dead stock inventories through good inventory management.
What is Dead Stock, and Why is it Important?
Deadstock refers to inventory that does not move — that is, merchandise that does not sell. If a company does not use inventory management software, finished products can accumulate on warehouse shelves, forgotten and useless.
Businesses lose money when they have dead stock on their shelves. They can't cover the expense of unsold products that they either made or bought from someone else. Furthermore, holding dead stock costs money and takes up the available warehouse space that may be better utilized by storing more of a company's best-selling products.
What Causes Dead Stock?
Understanding what causes a dead stock to collect in the first place is critical to avoid it. You'll be better positioned to transfer the dead stock out and stop it from building up in the future if you figure out what's causing it to pile up. Some of the most prevalent reasons for Deadstock are listed below.
The fastest method to amass dead stock and boost carrying costs is to order excess inventory without knowing how much you'll sell in a given period.
It can be a struggle to comprehend just how much inventory you need to meet future orders. There is a fine line between having too much stock and having too little. Still, by investing the time to set up an inventory management system and track key distribution metrics like turnover ratio, you can make smarter choices about inventory restocking, how much inventory to buy, and when to buy it.
Another option for retailers to minimize overordering is to buy fewer products more frequently. For example, you can decrease the risk of collecting dead stock by acquiring inventory to satisfy a month's demand rather than a year.
2. Faulty demand forecasting
When the correct data isn't tracked, future demand is miscalculated. This leaves eCommerce businesses in the dark about what products are popular and how fast they will sell. You can better estimate demand by obtaining accurate past order data rather than purchasing slow-moving products that take up warehouse space and hurt your bottom line. In addition, you can make informed choices about how much inventory to buy to satisfy future orders if you have reliable demand forecasting.
3. Poor marketing and sales activities
If you're selling a high-demand product and your inventory isn't moving as rapidly as you'd like, it's likely due to a lack of marketing and sales activities; this is a high potential cost. In addition, poor communication between you and your sales and marketing teams on selling things, incorrect product messaging, a bad web experience, and a lack of customer understanding can result in high, high-demand products being unsold.
4. Poor quality control
Even though the inventory is brand new, that does not guarantee that it is of excellent quality. Therefore, it's crucial to have a good working connection with a reputable manufacturer or supplier to ensure adequate quality control. This ensures that suitable quality control standards are in place prior to purchasing other goods.
How to Steer Clear from Dead Stock?
In the first place, common sense suggests avoiding the dead stock. That is, after all, the most acceptable practice.
However, most shops and online stores will concede that this is easier said than done. Fortunately, you can do a few things to prevent dead stock from accumulating.
1. Make inventory management more efficient
You may avoid mistakes that result in Deadstock by enhancing and optimizing your inventory management. Inventory management systems that are robust provide you with an accurate, real-time snapshot of your goods. This is another area where automation can assist in eliminating human error.
2. Investigate and test new product lines
Better market research can assist you in avoiding the dead stock. Before you agree to developing or purchasing any new lines, make sure that buyers want them. You might reach out and inquire directly, or you could put up a voicemail service for customers to call.
3. Keep your website current
One of the drawbacks of internet communication is that information might get lost in the shuffle. It's simple for a member of your team to overlook updating your eCommerce store, for example. It's possible that an item you have a lot of in your warehouse isn't even featured on your website. Minimize the risks of dead stock by keeping your web content up to date.
Tips to Manage Dead Stock
Although getting rid of dead stock can be difficult, there are a number of practical and profitable options. Using the best practices listed below, you may revive the worth of your dead stock and free up space for new inventory.
1. Offer products that are no longer useful for a discount
The dead stock offers a once-in-a-lifetime opportunity to entice bargain hunters. Hold clearance sales or establish a discount section of your shop where you can sell dead stock at a reduced price. You might also try bundling Deadstock with a hot seller (and even provide free shipping).
2. Give them away as a freebie
Offer dead stock as a bonus to delight customers and improve the unpacking experience. It's a terrific approach to increase client happiness and encourage them to make future purchases from your company. The gesture is priceless, and if you can get rid of finished goods while doing so, it's a win-win situation.
3. Donate them to charity
If everything else fails, your company can always donate unsold items and deduct them from its inventory. While charitable gifts do not provide the same instant return as other tactics, they are an excellent opportunity to give back to the communities. In addition, customers typically appreciate a company's humanitarian initiatives.
4. If at all possible, return the items
A return policy is included in many supplier contracts. In other words, you may be able to return items for up to 365 days. However, in order to receive a supplier return, the items must be in "as new" condition and delivered in their original packing.
Are you unsure if this is a viable option? Examine the small print in your supplier agreements to check if:
If they provide refunds,
If you're in the process of returning something,
Any requirements you'll have to meet
If you're still within the return period and the items are in good condition, feel free to send the dead stock back to your suppliers for a refund. Just bear in mind that there can be a slight price associated with this option. This is usually a 10% fee with the opportunity to pay by credit card rather than cash.
Even if you're within the return window, if the products are in bad condition, consider keeping them. It isn't worth jeopardizing your supplier connections over a bit of amount of dead stock.
5. Investigate possible collaborations
Any established relationships you have with some retail firms or e-commerce organizations can come in handy when it comes to dead stock. Work with them to figure out the best methods to use an item that is out of supply.
Relationships come in a variety of shapes and sizes. You may, for example, attempt to form co-branded goods bundled with another retailer. Organize a 'garage sale' with co-sponsors.
6. Use online markets to sell your stuff
Amazon, eBay, and Flipkart are all fantastic places to sell unwanted stuff, but they will require some effort on your part. If you haven't previously, you'll need to establish product pages with descriptions and SKUs, as well as photograph products (if you haven't before). Each marketplace has its own set of rules, so read them carefully before registering.
7. Re-merchandise or refresh
It's possible that it's not the product that's causing the unsold stock. It could be due to the way the products were promoted or placed. In this instance, new marketing and selling initiatives may be necessary to renew things. If you have got a physical presence, this can be done in-store.
Changing the location of things or rearranging their shelving could give them a new lease on life. Making things more aesthetically attractive and providing a better customer experience can be done by creating new and bright signs and replacing worn-out price tags.
Products could also be re-photographed for the site, and if you have a blog, a piece outlining the product's benefits can be included. While this may require additional time or money, the payoff could be well worth it.
8. Consider liquidation
You can liquidate surplus inventory by selling it to companies that specialize in buying dead stock. These companies are known for 'cherry-picking' things and will agree to buy your items at drastically discounted prices, so you're unlikely to make money this way. Nonetheless, you'll be opening up space and revenue for the company.
Deadstock can be caused by a variety of factors, including changing consumer demands, inventory management errors, and simple spoiling. However, it's the product lines that are collecting dust on your warehouse shelves. The most strong brands work hard to maintain dead stock to a minimum.
There are a variety of approaches that can be used to reduce the danger of dead stock. Optimizing your inventory management and drawing closer attention to your consumers' needs are two of them. However, if you do find yourself with lines that are going glacially slowly, act swiftly. Giving those things as presents, donating them, or selling them at a loss will help you get rid of dead stock.
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