Knowing what is deadstock, and how to handle it properly, is critical for successful inventory management. This is a huge opportunity cost for businesses, and there are several steps you can take to eliminate the problem. These steps include understanding the underlying causes of deadstock, identifying where it’s most likely to be found, and establishing a system to prevent and eliminate it. Read on to learn more.
Deadstock causes opportunity costs
When you have a dead product, you are not only losing revenue, but you are also wasting space that could be used for a more profitable product. Additionally, dead inventory is taking up valuable warehouse and shelf space that could be devoted to faster-selling products. The costs associated with dead stock are numerous, but the most obvious cost is lost revenue. When you pull 100 units of a $50 product, you will lose up to $5,000 in revenue.
The most common cause of dead stock is inconsistent ordering. It happens when you order the wrong amount or at the wrong time. Lack of knowledge about inventory turnover rates and sales patterns can lead to inconsistent ordering, resulting in a large stock of unsold products. Setting up reorder points for popular products will help you determine the right amount to order each day. When a popular product is in high demand, you may have to replenish your inventory with it to keep it available.
The most popular way to avoid dead stock is to bundle and sell it. Try to bundle low-selling items with popular products. You can also offer a gift with purchase or sell it to closeout liquidators. The more valuable your product is, the more likely it is to sell. When you can, donate it to a charity to receive a tax write-off. The money you save from donating your dead stock is well worth it. Read more to know in detail.
Know the Costs of accumulating deadstock
Accumulating dead stock can lead to several problems. First of all, it costs money. You spent money purchasing products you know will never sell. You now have dead stock sitting in your warehouse or fulfillment center, taking up space you could be using for a more profitable product. And, since you can’t sell deadstock, you’ll have to pay for the storage space and other costs of keeping it alive.
Identifying the real reason for accumulating dead stock is important for your business. In addition, knowing why the inventory is useless can help you avoid making the same mistakes again. Knowing what drives deadstock inventory helps you decide whether it is worthwhile to spend more money on it. If you are trying to improve profitability, you should keep a surplus of inventory, not a deficit. Even if you can’t predict demand, a surplus is more cost-effective than a shortage. Poor communication skills can cause poor sales and leave older stocks lingering in your warehouse. FIFO or first in first out is important in perishable inventories. If you don’t remove older stock from your warehouse, it will spoil. Electronic items are also prone to dead stock because of changing trends. To avoid deadstock, make sure to keep track of trends and educate your staff.
Another major issue is a lack of communication and coordination between departments. For instance, if there are shortages of certain items, employees may forget to replenish the inventory. This means older products will remain unused in the warehouse. Additionally, poor communication skills may cause some older stocks to remain unmoved. Inability to properly remove dead stock can cause food to spoil, which costs you money. Dead stocks are also a result of faulty communication, poor planning, and inadequate inventory forecasting.
If you have a large number of products that don’t sell, you’re likely to encounter deadstock. Deadstock is the term for unused products in your warehouse. These products can be expensive for the company because they consume valuable warehouse space, obstructing your cash flow. In addition to costs, deadstock is also time-consuming, so the sooner you sell them, the better because the dead stock will fetch you a higher price.
And the costs of donating deadstock
Aside from reducing your warehousing costs, donating dead inventory is a great way to get rid of old inventory. Dead inventory can be bundled with high-demand items and sold back to the manufacturer or donated to a charity. However, the costs of donating dead stock can be high. Here are some tips to help reduce these costs:
First of all, donating dead stock can help your business save money. Typically, businesses tie up a great deal of money in inventory, which sits on shelves until no one wants it. This means that dead stock represents a waste of resources. In addition, it may also increase your employee costs because the items have to be stored. You will need more workers and more space to manage dead stock, which means a higher staffing cost.
Better market research can help you avoid buying dead stock. Make sure to gather feedback from your customers prior to purchasing any products. If you’re still unsure about the demand for your product, you can try requesting feedback from customers or setting up a voicemail system. Continue collecting feedback even after you’ve sold the product. It can help you identify potential problems, such as changes in customer requirements or a decrease in the quality of your product.
Identifying the causes
Inaccurate forecasting, poor ordering practices, and poor sales are three of the most common causes of deadstock. If you want to reduce deadstock, you should follow these tips. Make sure that your order quantity is adjusted to account for color variations. Here are other tips for retailers to prevent deadstock:
Inaccurate forecasting
Inaccurate forecasting is another major cause of dead stock. When you can’t accurately forecast demand, you risk ordering too much inventory. This problem is more severe if you don’t use inventory management software to analyze your data. The software is also useful in identifying trends in data. Without accurate data, you can’t predict demand accurately. For example, if you buy clothing in the winter months, you might end up with excess inventory.
Poor ordering practices
Improper ordering is another cause of dead stock. Inconsistent ordering results in ordering the wrong amount or at the wrong time. When a product is on the shelf, no one realizes it’s gone. As a result, businesses lose a substantial amount of money, and no one realizes it until it is too late. Poor ordering practices tie up cash that might never see a return.
A better understanding of your target customer’s buying habits can help you avoid this. Regularly conducting surveys of your customer base will provide insights into what the current market wants. By monitoring your customers’ preferences, you can avoid ordering products that no one wants or needs. Using these insights will also help you determine which products are popular and which ones aren’t. This will reduce your deadstock problems. There are many other ways to improve inventory management including going automated.
Remember that deadstock does not include items that have been returned, so keep track of what’s being sold and what’s not.
Poor sales
Overstocking can be caused by several different reasons, including poor inventory management and improper marketing strategies. Some products that are in demand aren’t available to the public, and the business has to replenish these products to avoid dead stock. Moreover, businesses have to keep replenishing their popular products because they take away their competitors’ sales. Insufficient marketing strategies and bad sales are other major causes of dead stock. A company’s reputation is at stake if the sales team can’t hit their numbers.
In addition to these reasons, deadstock can be caused by the wrong inventory management strategy. If the stock level is too low, the business cannot meet demand and isn’t able to maximize profit. On the other hand, if the stock is too high, the company will have too many items on hand and will end up losing money. Thus, businesses should take proactive measures to avoid dead stock. In order to avoid this, they should implement an inventory control system.
How to Prevent Deadstock Costs
In business, deadstock can be a huge problem. Not only do you lose revenue, but you also spend a lot of time dealing with unsold products, increasing labor costs, and decreasing the focus of your team on profitable items. Additionally, deadstock occupies valuable warehouse space and shelf space that could be filled with more profitable products. Of course, the biggest cost of dead stock is the loss of revenue. But there are also some other hidden costs to be aware of (more on that later).
Test small batches of new products before investing
One of the reasons why there is so much dead stock is that new products are not sold fast enough. To avoid this, a business should test new products to ensure that they have enough demand.
To avoid deadstock, be sure to understand the needs of your customers. Do thorough market research and communicate with potential customers. Also, look at your competitors and popular products. If your sales aren’t rising, consider selling your slow-selling products at a discount. Deadstock is an unpleasant reality for nearly all businesses, but if you’re determined to succeed, you’ll be more likely to avoid it
While this may seem like a daunting task, a well-tested product will ensure that the product is ready for mass production. As a result, you won’t risk investing in dead stock. After all, you’re going to have to invest money into new products and inventory but at the same time, you don’t want to spend hundreds of dollars on a new product that you don’t have a chance to sell. Test small batches of new products before investing in deadstock, and double-down on successful products.
Quality test your products
Deadstock is a problem that can be avoided by using a quality testing system. Deadstock is often caused by a lack of quality control. Despite its minor weight in your budget, it can be a real-time and resource drain. Here are some tips to avoid dead stock:
First, understand your target customers. By testing different products, you can gauge the demand for each one. By collecting data and analyzing your sales, you can make the right decision about which products will sell best. Also, educate your staff and customers about the benefits of using this system to avoid dead stock. This method is also very effective when you are testing a new product. It helps you know the level of demand for a particular product before it is released in the market.
Product quality is also crucial in preventing dead stock. Deadstock can lead to a number of different issues, including lack of demand. Your product may not be pleasing to your target audience, it may be outdated, or the trend in a particular category has changed. Additionally, your stock may be of poor quality. This can occur if you have not followed quality standards, product specifications, or packaging requirements. As a result, your stock may be useless and ineffective.
Improve your tactics for slow-moving products
Having a slow-moving product is a potential liability, but you can improve your tactics for slow-moving items to increase sales and reduce dead stock. A modern inventory management system will enable you to identify lagging SKUs and take proactive action before they reach a critical point. You may choose to promote the product or phasing it out or revamp the item in order to draw more attention.
Deadstock can be caused by a number of factors, including weak product research and poor purchasing decisions. Poor research can lead to dead stock, but intelligent tactics and actionable data can mitigate this risk. When you sell a product, make sure it’s priced accurately. Your text and image descriptions should be easy to understand and reflect the product’s true value. If you fail to offer an accurate description of the product, customers may not be compelled to buy it.
Whether it’s seasonal or a specialty item, deadstock is inevitable, but it’s a part of retail. Whether it’s a new product or a popular bestseller, deadstock is a major source of frustration for a retailer. Fortunately, there are ways to minimize dead stock. First, you can use inventory management to help you make informed decisions about purchase orders. When it comes to seasonal items, GWP and bundles are excellent ways to deal with this problem.
Dealing with deadstock
In the modern world, it is rare to find a customer willing to buy dead stock. Deadstock is essentially unsold items that are sitting on your shelves. The best way to get rid of them is to create a bundle, offer heavy promotions, or donate the stock. However, these methods are not for everyone, and you may need to experiment with several options to find the best fit for your business. If all else fails, try one of these ideas.
Create bundles, Increase Loyalty
Product bundling is one way to eliminate dead stock. Bundling similar products together will increase the perceived value of an order. Bundled items usually have a common theme. As a bonus, you can usually bundle several items at once for a lower price. If you have a lot of deadstock, consider pairing it with your top-selling products to make them more appealing to your customers. If you’re not sure how to use product bundling to clear dead stock, here are some ideas.
Offer special discounts or bundles of similar products to attract buyers. For example, if you sell watches, consider selling extra bands along with the watch. These extra bands are not required, but they can help you to make more money. To maximize sales, offer your dead stock for a discount. Often, people love to buy discounted products, and when you can offer up to 50% off, they will go for it.
Another way to get rid of dead stock is to offer bundled products as freebies. This way, you can free up storage space and inspire customers to make purchases. Say, the free gift should only be offered to customers who spend $100 or more in one transaction. Those who spend more than this are likely to be loyal customers. However, if you want to increase customer loyalty, limit the freebie offer to customers who spend over a certain amount.
Try Heavy Promotions and Bundle Up
If you’ve got deadstock in your inventory, you can get rid of it by offering incentives or giveaways. Free gifts, gift certificates, or discounts are the most popular incentives for customers. Even though no one wants to pay full price for items, giving away free items is a good incentive for spending more money. These are also good opportunities to offer a deep discount on products. But make sure to keep the terms of these offers reasonable.
Another way to get rid of dead stock is to bundle items together. Bundling two or more items will allow you to move them out of the store, recouping some of their value. Although this strategy may seem like you’re sacrificing your profit margin, it will help you get rid of dead stock. You’ll also gain valuable shelf space that you can use for more profitable items. Here’s how to do it.
Donate the Stock (For a tax write off, of course) and Freebies
There are many ways to donate deadstock, including clothing. One of the most effective is through tax write-offs. For clothing retailers, donating dead stock is a great way to improve brand recognition. Clothing donations are often tax-deductible and can benefit many charities. In addition to helping the less fortunate, deadstock also helps businesses save money in the long run. To receive the full tax benefit, fashion retailers should work with a charity and follow proper documentation processes. To ensure the donation is tax-deductible, they should seek the advice of a licensed tax professional.
Other than donating deadstock, companies can sell surplus inventory. Businesses may offer a discount or a full refund to customers for dead stock. Others may even offer credit for their surplus products. Donating dead stock can help companies save money on warehouse space while ensuring that excess items do not end up in landfills. It is a win-win situation for everyone. Here are some ways to donate dead stock:
Giving away free gifts is another effective way to sell dead stock. While this strategy may not boost your sales, it helps improve the relationship between your brand and your customers. A recent study found that 90% of people are more likely to buy from an online retailer if they receive a gift. While this tactic will not solve your revenue problems, it will ease the burden of inventory carrying costs. Moreover, you can also offer gifts to your customers after they spend a certain amount of money.
Final Thoughts on Strategizing for the Inevitable
Don’t let deadstock go to waste. Donate it to charity if you can. This will not only free up valuable storage space but will also increase your brand’s image in the eyes of customers. In addition, consumers are influenced by CSR, and 81% of millennials expect companies to declare their commitment to good corporate citizenship. If you don’t have any funds to donate, try selling your dead stock for a fraction of its original price.
While you may have a good understanding of what sells, deadstock is inevitable. You must have a strategy for when this happens. A successful retailer is agile and can adjust inventory within a few seconds, unlike large enterprise stores, which may take months to make any changes. Make sure your inventory is well-organized and you’ll be able to quickly identify dead stock.
Educate your staff and customers on the importance of keeping a low level of dead stock. A tight-knit team is one of the best ways to avoid dead stock. In short, deadstock is dead-weight, and getting rid of it early is the best course of action for any retail business. There is no greater advice than that!
