What is meant by “dead stock” or “dead inventory”?
The name “dead stock” itself says everything. Dead stock is a term used to describe inventory that is not sold or cannot be sold, the goods which are lying on the shelves of your store or warehouse for years. Dead stock will never be sold.
The customers hate old outdated goods. Retailers think that having dead stock is the worst nightmare scenario, as dead inventory ties up their money, hurts customer experience, and does not bring even the tiniest possibility of getting a profit. The only thing dead stock gains is dust.
The inventory which is unsaleable eats up warehouse and store shelves space, and this space could be potentially used for selling high-margin goods which could bring you cash and profits. And imagine how much money you loose on storage costs for the items that are never supposed to turn into sales.
To sum up, dead stock is a frustrating and a detrimental thing for all retail business. It ties money, brings extra storage costs and takes up space that could be used for best-selling items.
1) You are dealing with seasonal and/or fast-fashion items
Mass market producers and retailers often reflect catwalk trends so quickly and produce tons of cheap and affordable clothing, shoes and accessories. Such garments are worn during a season and then are thrown away, when the new trends arrive. Some trends boom and bring you great money, some of them remain totally unpopular and leave you with wasted money and shelves full of dead stock.
Seasonal goods dealers and retailers often face dead stocks problem. They perfectly know, that Christmas, Easter, Valentine’s Day and Hallowe’en decorations are very likely to become dead stock the next day holiday ends.
2) You have ordered too much goods…
and you have failed to sell them.
In this case your overstock has a risk of turning into dead stock. Next time you reorder your inventory we would recommend you to analyze demand more carefully using intelligent inventory management techniques and solutions offered by modern software systems. The next thing to focus on is your sales strategy - you need to reconsider your performance indicators, for example, calculate Days Inventory Outstanding metric, and think about the reasons not all of your goods are not selling very good.
3) Damaged or defective goods
In case you have ordered goods from a supplier, and after they are shipped to your warehouse you have noticed that they do not meet your quality standards, or they are damaged, you have to send them back to the supplier for replacement. That is why we recommend using an integrated inventory management system and to control your inventory the very moment it enters your warehouse, or even the moment the order is being placed. A database of trusted and reliable suppliers also work as a guard against having damaged inventory on your shelves.
Here is the most important part, where we’ll focus on the ways of dealing with dead stocks.
1) Mix dead stock items with top sellers
There are several creative and smart ways to get rid of dead stocks and earn some money on selling them. Some options widely used by retailers are: “Buy 2 chocolate bars and get a biscuits box for free!” or “Spend more than 100$ and we will give you a free gift (of our choice)”. Using this smart “combo” option will not bring extra high profits, but at least you will not end up with overstocked shelves.
2) Discounts and giveaways
People love free things. People love discounts. Winning a product for free makes customers feel happy and satisfied, increasing their loyalty. And what is more important in retail than happy loyal customers? So, giving great discounts (from 60 to 90%) for dead stocks can bring surprisingly good results and help to manage the unsaleable inventory.
Here is a useful tip - Be sure to effectively manage your promotion campaign and use inventory management solution that will help you to count your inventory in real-time, track customer demand and keep your warehouse updated - this is especially important in times of messy clearance sales.
3) Return the items back to a supplier
Each supplier has its own returns policy, which includes the time frame for making returns, reasons and returns conditions. You shall carefully study all these conditions before placing an order. Some suppliers can take a return fee or require a commission for goods return. Some contractors can issue a voucher instead of returning money to their customers. In each case, a smart contractors database which is synchronized with your inventory management and accounting system will help you to control all your supplier orders and returns.
4) Donate your dead stocks to charity
Some countries, for example, the US offer tax write-offs for CSR activities. And by donating your dead inventory you contribute to good charitable deeds.
5) Prevention is the best cure
Control and track your inventory turnover in real time, analyze and keep record of your demand and sales in real time - these simple measures will save you from dead stocks and help to better manage all your SKUs in all your sales locations.