how to deal with excess stock

1. Liquidation. One of the most well-known ways of getting rid of surplus stock is liquidating excess inventory. ...
2. Steep Discounts. Offering huge discounts is another great way to free your shelves from extra stock. Discounts work well for boosting the demand and sales for products.
3. Bundling. Bundling is one of the most popular promotion techniques used by all retailers. It’s proven to be extremely effective.

Full Answer

How to deal with excess stock in your online store?

The best way to deal with excess stock is to try to avoid the issue altogether. Here are some quick tips for doing that: Ensure that you’re ordering the right products by keeping your customers’ needs in mind. Talk to them and observe their behavior so you can gain insights into what items will sell.

What is the best way to classify excess stock?

Excess stock is best classified as a declining stage of the product life cycle, which is represented in the graph below.

How does excess stock affect your business risk?

Conversely as excess stock levels go up, so does your risk, as well as, the financial strain on your business. Companies that leverage an inventory optimization software like EazyStock have the ability to more accurately calculate safety stock to ensure unnecessary replenishment is avoided. Watch a demo to see how this is accomplished.

How can you turn excess stock into a loss leader?

Big sales in your shop window – or discount coupon codes on your store – allow you to turn excess stock into loss-leaders. You could advertise the coupons on key landing pages in your site, or pass them out through your mailing list and/or social media. While this option is most useful to manufacturers, it’s very useful to some of them.

How can excess stock levels be reduced?

7 Methods for Effectively Reducing Inventories (2021)Forecast your true demand instead of your sales.Employ the Pareto distribution in merchandise assortment planning.Leverage data to perfectly time your purchasing and allocation.Optimize your logistics, warehousing, and safety stock.Automate your replenishment process.More items...•

What happens if you hold too much inventory?

Inventory is purchased to be resold at a profit, and having too much inventory on hand can result in working capital being tied up as goods. Inventory loses value over time as degradation occurs and demand diminishes, leading to an eventual loss of revenue.

How do retailers deal with excess inventory?

Selling to Other Businesses Retailers that have a surplus of nonperishable products might sell those products to other businesses. This usually occurs when the surplus of inventory is causing space issues, preventing the retailer from stocking additional product.

Why is holding too much stock bad?

Excess inventory can lead to poor quality goods and degradation. If you've got high levels of excess stock, the chances are you have low inventory turnover, which means you're not turning all your stock on a regular basis. Unfortunately, excess stock that sits on warehouse shelves can begin to deteriorate and perish.

Is it good to have high inventory?

The primary benefit of excess inventory is an increase in customer satisfaction. Having excess inventory means you can get products to your customers quickly. Even if you get a surge in orders, you're more likely to be able to get them in your customers' hands immediately.

How do you liquidate a dead inventory?

How to Turn Dead Stock Into SalesOffer customers a free gift. ... Bundle products. ... Clearance sales. ... Return items to a supplier. ... Donate dead stock items. ... Seek out partnership opportunities. ... Sell items on marketplaces. ... Refresh or re-merchandise.More items...

How do you tell a customer an item is out of stock?

It's out of stock and I have no idea when we will have it. Good: I know you'll be disappointed, but that item is out of stock right now. If you like, I can suggest a similar item we do have, or take your information and let you know when it comes in.

How do you liquidate inventory?

If you're looking at a surplus of merchandise in your store, there are several steps you can take to liquidate them:Refresh, re-merchandise, or remarket. ... Double or even triple-expose your slow-movers to sell old inventory. ... Discount those items (but be strategic about it) ... Bundle items. ... Offer them as freebies or incentives.More items...•

Why is excess stock considered excess?

Instead, it’s excess stock when you have to accept that you won’t be able to recover all of your costs on that stock.

What is scrap stock?

Scrap the Stock. This is basically what a liquidator would be doing. Your stock almost certainly has some value for the material it’s made of. Scrap dealers may be willing to collect, if there’s enough value in the collection. You don’t have the liquidator’s advantage in their contacts list, though.

What does a liquidator do?

A liquidator will be able to offer you a price for your excess stock. That price will be based on their own costs and what they expect to be able to sell it for, so it’s often very low. However, compare it to the costs to continue to store your excess.

Should you monitor excess inventory?

For this reason, excess should be monitored year round as part of your standard stock control. Waiting to deal with the problem will always mean more costs.

What is excess stock management?

Excess stock management and the product life cycle – All the products go through the product life cycle – like from the introduction of the market, through maturity, to decline. Excess inventory often occurs in the decline stage of the product life cycle. But there is still demand for the product, this is the beginning of the phase-out and if you fail out of the spot, you will continue to order based on the previous demand patterns.

What causes stock levels to be excessive?

Causes for Excess stock: Excess stock levels are typically caused by three ways : Excess stock due to inaccurate demand forecasting – Items will be built upon the warehouse shelf if you overcast the needs of the marketplace and order more inventory than needed.

Why are stocks high?

One of the advantages of high stocks is that companies are always prepared for situations like increased or excess of product sales. In many cases, during festivals or peak season, companies run out of stock for the products in demand, but when we keep our warehouses overstocks with products than the usual sales, we can handle scenarios like excess sales and peak season product requirements as well.

What is inventory replenishment?

Poor Replenishment tactics and excess stock – Inventory replenishment involves ordering the proper amount of stock at the right time and forecasting the demand at the proper time. Building up of excess stock can be prevented by adjusting the reordering points and quantities in line with supply and demand variables.

How to improve stock management?

1) Put someone in charge – Management and higher authorities should assign individuals who can track companies inventory requirement, monitor product trends and provide input on reordering stock which are having good demand cycle and identify slow moving products to avoid further stock ups. Close management and accountability of inventory movement in the warehouses is an excellent way to improve stock management for the company.

What is excess stock in inventory?

Excess stock in our inventory are the products that have not been sold and have exceeded their customer demands. These extra stocks will be lying in the warehouse for any future demand requirements.

Why is 60% of my shipment delayed?

60% Shipment delays – Shipment delay from the suppliers are one of the major causes of overstocks. A lot of factors are involved in the mismanaged shipment like processing times, order frequency and international regulations and more which cause excess and obsolete stocks in the warehouses.

How to get rid of surplus stock?

One of the most well-known ways of getting rid of surplus stock is liquidating excess inventory. Inventory liquidators buy all types of inventory and resell the products for a lower price. They specifically specialize in purchasing the excess stock that companies want to get rid of.

What is excess inventory?

Excess inventory refers to those products that companies keep for a very long time, failing to sell them in a timely manner. In the course of time, this inventory becomes an obsolete stock that carries no value.

How to sell surplus inventory?

Liquidating excess inventory is by far the fastest way to sell the inventory surplus you have. Yet, we have to say that it’s not the most profitable way. A liquidator usually buys the stock for a very low price. You also must consider the cost of delivering the inventory to the buyer. Be sure to work with a well-known and reliable liquidator, who won’t jeopardize your brand.

How to calculate inventory turnover ratio?

The average inventory is calculated by adding together the beginning and ending inventory and halving the number (divide by two). Once you have these two components, you can calculate the inventory turnover ratio. The inventory turnover equation is equal to COGS divided by average inventory. The COGS is also known as “cost of sales”, so the ratio is also referred to as inventory to sales ratio. The formula looks like this:

Why is inventory turnover important?

The inventory turnover is a key measure of efficiency, as it calculated how much a business sell as a percentage of the total inventory it has. It’s a useful metric for the following reasons: 1 It can be used as a comparison metric to industry averages and help identify your company’s performance in the market. 2 It will give you insights and visibility into how well your company’s internal operations are coordinated, especially between sales and purchases. 3 You will get an idea of how efficiently your company controls the merchandise 4 It shows how liquid your company’s inventory is. Inventory is the biggest asset of the company. So it’s especially important for investors to see how well the company transforms inventory into cash.

Why is there so much inventory in a company?

Inventory must be well-managed in the company. Sometimes, you might end up having too much inventory because of a poor inventory management system. When the inventory management team lacks coordination and is unorganized, overbuying inventory is likely to happen. The inventory management team must be responsible for a number of tasks. For example, making transactions, ordering, purchasing, and all of the other tasks related to sales. When the management system is unorganized, this will result in poor inventory tracking and ordering mistakes.

What is inventory management?

The inventory management team must be responsible for a number of tasks. For example, making transactions, ordering, purchasing, and all of the other tasks related to sales. When the management system is unorganized, this will result in poor inventory tracking and ordering mistakes.

How to overcome excess inventory?

Ways to help overcome excess inventory stock in the first place is to start tracking your past sales. Look at the sales volume by month and think about special events or holidays that may correlate with major dips and peaks. It may be time to think about an inventory management system that allows you to have access to analytical tools that can give you a snapshot of historical trends, in turn, helping you to make better inventory stock ordering decisions for the future.

What to do if a product is not selling on its own?

If a product is not selling on its own, try pairing it with a big seller item that is related. Bundling can be attractive to shoppers because they perceive to be getting a good deal, as long as it is attractively priced.

What happens to inventory in spring?

With the lull of the spring season, excess inventory stock can be an issue for retailers. Many businesses will wait to see if excess items will sell to justify their investments, however everyday that old inventory sits unsold, you lose money.

Why is inventory management important?

Inventory management systems are important to the business as they enable accuracy and speed up business processes. For example when inventory stock moves faster than expected, a good inventory management system can create a low inventory stock alert, allowing you to order quickly from suppliers.

Is stocktaking a necessary evil?

Stocktaking, it’s one of those necessary evils and possibly one of the least popular activities in inventory control. The necessity of undertaking a...

Why does excess inventory turn up?

Still, excess inventory problems can sometimes turn up because of things you can’t control. Perhaps there was a sudden change in what’s trending, or your demand forecasts didn’t pan out as well as you hoped. Whatever the case, don’t fret. If you’re looking at a surplus of merchandise in your store, there are several steps you can take to liquidate them:

What to do when an item isn't selling?

Refresh, re-merchandise, or remarket. When an item isn’t selling, the problem may not necessarily be the product itself. In some cases, the issue may lie in how you’re marketing or positioning the merchandise. Try to refresh your marketing and merchandising efforts when it comes to your slow-moving or old inventory.

How to freshen up merchandise in a store?

One thing you can try is to reposition them in your store. Put them in a different area in the shop or switch up their shelf arrangements. Retail management consultant Judy Crockett says that this could be an excellent way to freshen up your merchandise.

Why is it important to keep track of inventory?

That’s why regularly paying attention to your sales and inventory data is so important. You need to keep an eye on how products are moving so you can make the right purchasing and marketing decisions. At the same time, staying on top of inventory counts enables you to get a handle on the merchandise you have so you can prevent having too much stock in your store.

Why do Vanessa's stores have product grouping?

According to Vanessa, this type of product grouping helps them liquidate excess inventory in her stores. “If we have a boot sock, for example, that isn’t selling fast enough, we will have a promotion where you get a free pair of boot socks when you purchase any pair of shoes.”

What to do if remarketing doesn't work?

If remarketing or remerchandising doesn’t work, consider lowering prices for of excess stock. Kat Rosati, Brand Manager at Apparel Booster, advises retailers to discount prices at certain increments. “Start off with something small, say 30% and then continue to discount,” she says.

Can you sell surplus inventory?

Alternatively, you can go the liquidation company route and just sell your surplus inventory to organizations that specialize in taking stock out of merchants’ hands.

Why is there excess inventory?

T here are several reasons for excess inventory including canceled orders, wrong demand/supply forecasting, changing seasonal demands, product life cycle, or a scenario like the pandemic where the demand drops suddenly. Excess inventory takes up unnecessary shelf space, blocks your capital, and stops you from reinvesting in other essential things.

How to attract more eyeballs to your slow moving products?

To attract more eyeballs to your slow-moving products or excess items, make them easily visible to your customers. Place them in multiple locations/places in your store (physical or online). Here, your site traffic data can help understand which pages of your site your customers are visiting the most. You can move your slow products to those pages.

Can shipping costs deter customers from buying?

Sometimes, shipping costs can also be a deterrent for customers not buying your products, leading to a heap of unsold goods. Take the shipping costs off their heads. You can ask them to order for a minimum value above which you can wave off the shipping fee,encouraging them to buy a little more.

What to do with excess inventory?

If all else fails, you might have to look into using your excess inventory as a way to raise your public profile. Products can be given to local organisations as a donation. Just make sure your donation includes things that the organisation will definitely get use out of. With this method of dropping excess inventory you do lose out on profit, but it can be great for public relations and also shows that your company is socially responsible.

How to get rid of slow moving stock?

Even though you lose out on cash that could come from selling the products, your customer’s happiness about the reward might pay off in the future. You get rid of inventory and free up space while your customer gets something for free.

What happens if inventory isn't sold?

When inventory isn’t sold you lose out on potential profits, the value of stored products decrease as time goes by and you cannot bring in new inventory. No matter how smart you are with your business, there will be times when certain inventory simply doesn’t find a home.

Should sales be offered intermittently?

It is suggested that sales should only be offered intermittently for short periods of time. If sales are scheduled more regularly and in a predictable pattern, research suggest that it might make it more difficult in future to convince customers to buy at full price.