“Dead stock is a cash flow killer”, says Jennifer Rosenberg, president of Indianapolis-based Acorn Distributors Inc. “We make money by moving boxes, not by storing boxes”.
Dead stock is that portion of inventory at your store that just won’t sell. There could be various reasons for these to remain in the shelf and not get sold. It could be because of:
- Wrong purchasing decisions – Often, wrong purchasing decisions by sellers could tempt them to buy large amounts of inventory and stock them in their warehouses. The excitement to grow could lead them into the scenario of having to unnecessarily pay for non-moving inventory.
- Poor management of inventory – Undoubtedly, lack of proper track-keeping of your inventory flow and status will lead to accumulation of stock and ultimately increase dead stock.
- Defective product – Sometimes goods don’t sell simply because they are defective. For example: a shoe size might be wrongly marked as 9, when it is actually a 11-sized shoe. In such cases you can contact the manufacturer and request for return of product.
- Lack of proper marketing – When you and your sales personnel have little knowledge about the product or its technical specifications, then you might find it difficult to market it, or to communicate about it to the customer. This might again lead to the customer ending up not buying it.
Are you able to relate to these reasons? These could be the important few. There could be many other reasons for dead stock existing, like sales personnel not being enthusiastic enough to sell them, etc.
Now that you know why this is happening, let’s look into how it can be avoided or cut down:
1. Take the help of a good inventory management system
The stock that you purchase for your store can be divided into 2: Cycle stock and Safety stock. Cycle stock is that portion of inventory that is needed only to meet the customers’ demand, between the times you order more inventory from suppliers.
Safety stock is that portion of inventory that is kept as reserve stock. This is kept to meet sudden increase in demands or for situations encountering delayed shipment, supplier lead time, etc. It is this stock that could later get converted into dead stock. This could be called ’bad inventory’ at times.
Making use of an efficient inventory management system is a must. These systems give you real-time information about the status of your stock. Some also give automatic alerts when your stock is about to get over. This will help you escape a deadstock scenario.
2. Transfer the dead stock to another company location
Sometimes, there may be cases where some products may move faster at one location, but not at another, i.e, they might be geography specific. In this case, recognize the particular store and move your dead stock to that store, where it is more in demand. This process is called ‘inventory balancing’.
3. Have a watertight agreement with your supplier
Before procuring your goods from your supplier, if possible, make a watertight agreement that if the products don’t sell beyond a point, it can be returned at little or no cost. This is essential, as it is important to consider the holding cost of inventory too. You would rather replace the dead inventory with faster moving ones.
4. Use efficient demand forecasting solutions
It is extremely important to know in advance what to buy. Forecasting the stock you would require in future will help you get rid of large amount of dead stock. There are many advanced tools that help you with this. Your purchase orders also can be utilized over time to analyze the pattern of your purchase and plan the next one, accordingly.
What you can do within your store to sell slow moving inventory
Implementing a few smart techniques within your store can go a long way in helping to sell the slow moving inventory.
5. Create an urgency
For the slow moving goods, offer discounts, highlight the percentage savings, create an urgency by saying that only very few of the product is available in stock.
6. Bundle products
If your dead stock consists of several items coming under a common category of products like mobile cover, charger, etc., then you can easily bundle these and create an interesting combination and put a good price for it.
7. Offer free shipping
Free shipping for product drives in many more people to buy.
Apart from these methods, you can list the slow moving inventory at marketplaces, at price comparison websites, etc.
Most importantly – prevention is better than cure. Knowing how your inventory flows will lead to a significant drop in the amount of dead-stock you carry at any point of time. Plan your inventory better using a good inventory management software like Primaseller.