Selling inventory is key to earning profits and keeping eCommerce stores in business. However, some pitfalls prevent retail businesses from earning revenue; dead stock is an example.
Out of all the issues retail businesses face, dead stock is one of the biggest problems. There is $100 billion worth of dead stock at any given time. If retail businesses struggle with dead stock, it can impact their store’s economic side and logistics.
Dealing with dead stock can be challenging. E-commerce businesses must understand the dead stock causes and how to solve this problem.
What Is Dead Stock?
Dead stock is inventory your business carries but hasn’t been sold to a customer. Over time, brands struggle to sell dead inventory. This can be due to various reasons, such as the item being out of season, outdated, or has little demand.
The fashion industry is an industry that commonly deals with dead stock. While clothing doesn’t expire, fashion trends come and go. Many clothing demands happen seasonally, such as buying winter jackets and summer shorts. If a clothing store has leftover clothing from these seasons, it becomes dead stock if they cannot sell it.
Related content: The Seasonality of Amazon Sales
How Does It Affect Sellers?
Dead stock affects sellers in many ways. While this issue is a huge financial problem, it can also make a business rethink its logistics.
As with everything, inventory management is an investment. If a retail business notices they’re wasting investments on inventory, they may have to rethink their strategy to use their company dollars elsewhere.
Inventory costs money, but so does storage. In addition to the initial cost of the items, businesses always invest in storing the items. Warehousing and fulfillment expenses add up, and businesses could use these funds to store products that will generate revenue.
And even if products don’t expire, they may become outdated, especially when talking about technology. Trends come and go, and some items may have trouble selling after some time.
Such issues can also target problems in a company’s sales forecasting, and affect future inventory planning.
Causes of Dead Stock
So, now we know the definition of dead stock and why it’s devastating to businesses. But why does it occur in the first place?
It’s integral for businesses to know the causes of unsold inventory and how to avoid it.
Inaccurate Demand Predictions
Calculating future demand is key to holding enough inventory without risks of selling out…and keeping dead stock. However, some businesses have inaccurate sales demand forecasting.
The most common cause is not tracking the right data, such as not knowing what products will sell and when those sales will occur.
- Solution: If your company struggles with this, look at your historical sales data. You’ll learn how products sell during specific sales periods. If you look at historical sales data per product, you’ll also learn which products sell and can plan your inventory better.
Over-ordering is a common problem, even for businesses that use historical sales tracking. For example, you may have had a busy holiday season the previous year and ran out of some items.
To make up for it this next year, your strategy may be to over-order inventory. However, over-ordering increases shipping and storage costs and may result in dead inventory.
- Solution: Proper inventory management will make a world of a difference here. When you plan your inventory, take storage and turnover into consideration.
Don’t forget to plan for restock limits on Amazon. Knowing when to purchase your items can also result in cost savings. For example, look at your inventory at the beginning of each month and buy what you need to cover that sales period.
Related content: Manage Excess Inventory with Amazon Outlet
Lack of Quality Control
Some businesses can have the right sales tracking and inventory management techniques. But if your products aren’t quality, they won’t sell.
On platforms like Amazon, buyers will leave honest reviews stating their experience with your products, and those reviews will be enough leverage for potential buyers to support a competitor. Or, you’ll struggle with excess returned items and will continue compiling dead stock.
- Solution: develop an effective quality control system and sell products that customers will love.
You could be selling a high-demand product, but your leads won’t move through the sales funnel as quickly as they should if the marketing doesn’t reflect that.
While marketing is another expense businesses have under their belt, it’s an important one. That’s because marketing dollars go toward a sales opportunity, bringing leads closer to becoming customers.
There are many examples of poor marketing, such as:
- Lack of marketing and advertising
- Poor product messaging and brand awareness
- Lack of a presence on eCommerce marketplaces
All of these examples will result in missed opportunities. And if your website has poor user experience, you can easily lose potential sales.
Back orders alone don’t cause dead stock but can lead to a business acting out. For example, let’s say you have a high-demand item and some customers have back ordered it. Your first instinct may be to order more items to prevent future back orders.
But what if demand for that product slows down? Then, you’re stuck with dead inventory.
- Solution: While back orders aren’t always a good thing–especially if customers grow impatient with waiting–you still don’t want to over-order inventory. Use stock management tools to order the right amount of products.
Long Lead Times
Sometimes, your dead stock isn’t an issue with your inventory, sales planning, or even your products. There are situations where logistics is the problem.
Imagine that your inventory takes a long time to ship to your warehouse. By the time it arrives, there’s less demand for the item, and you’re struggling to sell this inventory.
- Solution: Some eCommerce stores may order inventory from a local supplier instead of an international one. You may also have to order your inventory in advance, especially if competition is high.
Related Content: Inside the Amazon Partnered Carrier Program
How to Sell Dead Stock
Let’s say you have dead inventory and are unsure what to do with it. If your items aren’t perishable but are outdated, there are many ways to offload your products.
Here’s how to get rid of dead stock:
- Offer dead stock for sale: This is one of the most common stock liquidation strategies. Even if products are out of season, there will always be bargain shoppers looking for the best deal. List dead stock in your clearance and discount sections.
- Host a giveaway: Hosting a contest or giveaway is a great way to eliminate dead stock and increase brand awareness. Plus, these customers will feel compelled to buy from your brand in the future. Just note that not all social channels allow giveaways.
- Product bundles: Bundling products helps you reduce dead stock and also makes your customers’ dollars go further.
- Sell dead stock to another company: There’s always a new eCommerce company looking for inventory, and they’re more inclined to purchase your unused products rather than work with a supplier. Plus, this can help you create new business partnerships.
- Return them to the supplier: If you can, return your dead stock to the supplier. Even though you may not get your money back, you’ll save on storage costs.
- Diversify your sales channels: Maybe certain items aren’t selling on Amazon, but you may have an easier time offloading them on eBay. Try new sales channels to see if there’s a demand elsewhere.
- Donate: If all else fails, you can donate these items. While Goodwill and Salvation Army are popular options, don’t forget to consider your local homeless shelter, holiday charities, families in poverty, and children in need.
Related content: How to Liquidate Inventory on Amazon
Are You Struggling With Dead Stock?
Dead inventory can cut into your profits, hurting your entire operation. As you can see, the problem has many causes and solutions. But if you don’t know how to reduce dead stock, it may be time to hire a professional.
With our Accelerator service, we will apply expert e-commerce marketing and advertising strategies to increase brand awareness and create product demand. We will also conduct a competitor analysis, inventory planning, sales forecasting, and a SKU audit to drive revenue.
Click here to learn more about our services.
Stephanie Jensen has been writing e-commerce content for seven years, and her copy has helped numerous stores rank on Amazon. Follow her on LinkedIn for more insight into freelance writing and creating high-quality content.