Still got shelves full of stock you hoped to sell during peak season?
You’re not the only one.
Nevertheless, it’s important not to be complacent about excess stock – it can pose a significant financial challenge.
Beyond occupying valuable (and expensive) warehouse space, unsold items represent a missed revenue opportunity and an inefficient inventory planning strategy.
It’s essential to take action to shift excess stock as early as possible – and to take urgent steps to overhaul your approach to inventory planning before peak season rolls around once more.
Why is excess stock a problem?
- It can severely hit cash flow. Tying up your money in inventory means there’s less available for paying bills, salaries, rent and for investing in new products. Poor cash flow means you might need to borrow money – and pay interest on it. It also means you may not be able to afford to take advantage of opportunities that could benefit your business.
- It takes up space. Inventory storage is a major expense. Every square inch of warehouse space occupied by excess inventory is a square inch that isn’t occupied by more popular (and more profitable) items.
- It hits your profits. Excess stock is often eventually liquidated – the heavy discounts needed to shift it can hit your profit margins hard.
- It can escalate fast. Retailers currently hold just 19 days of cash on average and high-growth, low-profit models mean there is hardly any room for error. Just a couple of false moves when it comes to inventory can be all it takes to make a business run out of cash, and then ultimately go out of business.
- It makes you less agile. Modern e-commerce brands have to be able to adapt quickly to the ever-changing demands of modern consumers. If you’re overrun with unpopular inventory, you’re less able to respond flexibly to market shifts.
If you’ve been struggling with excess stock, you might be hoping that consumer demand suddenly picks up, or that the economic situation will suddenly improve or that an influencer might post about the exact product you’ve got piled high in your stock room and there’ll be a surge in orders.
However, as the old adage goes, hope is not a strategy.
Instead, here are five smart, practical things you can do, starting today, to shift your excess stock…
- Flash sale
When you’ve invested your hard-earned cash in inventory, it can be hard to admit that it’s not going to bring in the profits you hoped. At this time of year especially, it’s likely best to give up the good fight and take a loss on your excess stock.
Promotions and flash sales are a tried-and-tested way to shift excess stock fast – and still bring in some (albeit limited) revenue. The first step is to identify all slow-moving items using Inventory Planner by Sage. Then decide on your discounting strategy – it can work well to take a staggered approach over a number of weeks (for instance, offering 25% in week one, 50% in week two, 75% in week three).
- Fresh marketing
Digital marketing is now so expensive (the average CAC has jumped 222% since 2013) that merchants have had to be extra careful where they spend their marketing budgets. Perhaps that means that your excess items didn’t get the marketing push they need to drive demand.
A fresh marketing push on stale items can work – but set a strict budget and try lower-cost, lower-risk methods like email marketing, rather than a costly social or PPC campaign.
Another quick and easy option is to revamp your product descriptions, or add in some extra personalized content – especially in industries like fashion and homeware where purchases are more emotive. Unique product copy will also boost your site’s SEO ranking, which will positively impact your product discoverability without affecting your marketing budget.
- Bundles
As well as using inventory planning software to see which products aren’t in demand, you can also use it to identify which ones are. It can also show you who your best customers are.
Use this information to your advantage. Combine fast-moving items with slow-moving ones in discounted bundles. Use the excess items as free gifts for your VIP customers or when new customers spend a certain amount. Add an upsell pop-up to add an excess item for a nominal amount, or simply offer 2-for-1 or even 3-for-1 bundles.
Baffled by bundles? Inventory Planner provides the insight you need to make bundling items profitable. Find out more with a free trial.
- Donate to charity
If you’re still left with stock after trying discounting, bundling and marketing, why not donate it to a non-profit organization or charity of your choice? It might not boost your bottom line but it’s a way to get rid of the inventory once and for all and do some good at the same time.
Remember to keep records of what you donate as it should all be tax deductible (but seek advice from your accountant for specifics) and don’t be afraid to share about your donation on your social media channels – it’s a proven way to build reputation.
- Focus on other regions and channels
As every multi-channel or multi-region retailer will tell you, what sells well in one area of the country won’t sell well in another. The same applies to sales channels. This means if you have excess stock, it’s worth looking at your data to check for opportunities to shift the items with a decent margin intact.
Inventory Planner will show you the performance of every item, in every variant, across all regions and sales channels. Use this insight to easily spot which channels and regions you should focus on as you push your excess stock – either at full price or with a discount.
How to avoid the same issues this time next year
Even in a perfect economic climate, with easily predictable consumer demand, excess stock is always a risk – especially for e-commerce merchants – unless you take action to prevent it.
With this year’s excess stock sorted, now is the time to think about how you can avoid a similar situation next year (and in the years after that).
Inventory Planner is your number one tool for keeping excess inventory at bay – it shows you exactly which items are overstocked and how overstocked they are (including exactly when they would sell out at the current rate of sales).
If you get Inventory Planner set up now, you’ll have a year’s worth of historical data on your performance and purchasing next festive season, which you can use to make better decisions that boost your profit.