03 Aug Inventory aging or dead stock – The new-age retail problem!!. Six mantras for effective stock management
The first valuable lesson that I learned in retail was “Inventory is an asset”. But off lately, thanks to the current retail scenario, it has become the new-age retail problem.
Inventory problems represent waste.
They tie up company money, need material handling and consume valuable space. It reflects on the balance sheet & highlights bad inventory management to any business investor.
How to Overcome Inventory problems or Deadstock?
Define the problem:
Analyze the reason for the slow sales movement in the product. Analyze the problem, is it obsolete inventory or close to expiry products;
Old fashion garments, condition of inventory i.e. saleable or not; or is it defective.
Take a deep dive into the analysis:
Breakdown the overstock or aged inventory by the number of weeks or months of supply on hand, and determine the value of these categories.
Unforgettable Lessons learned by me in inventory management:
1)Focus on Historical sales and trend to forecast your merchandise
A great way to learn and grow is to review past performances, especially in the last quarter of the year.
Is your sell-through slower than your previous year (same period)? Did you stock up too much? Which consumers keep coming back – which ones do not?
2) Never shy away from making bold decisions.
If your business is amidst the inventory aging or dead stock issue. Fire your Planning team because it is a good sign that your planners are trying to run your retail business through spreadsheets rather than spending time on the shop floor by studying the consumer’s behavioral trends and preferences.
The second lesson that Retail taught me is, “Businesses don’t run by spreadsheets”.
One needs to be on the floor all the time with the team, trying to shuffle merchandise, reallocating the floor display plans, re-arranging the looks of mannequins, trying to experiment with your merchandise is the only way to manage your retail inventory problems.
If your Buying team or Planning team is spending more time on their laptops and systems, it is a “warning signal”.
3) Reverse logistics is your Net Margin eater.
Aging inventory is not like “old wine which gets better with time”.
Already damaged products or packaging are likely to get further damaged, the longer they remain in the warehouse.
Products with any kind of technology component to them lose their market value with every passing month, as tech is changing with the speed of light.
Quicker an item gets liquidated or sold and moved out of the system, the more value it is likely to recapture.
Ways to deal with Inventory aging or dead stocks.
1) Updating your floor sets.
Move the non-moving merchandise into the key aisles, mix and match with hot selling items, create new visual merchandising & displays.
Re-marketing the slow-moving inventory and re-purposing it with some thematic promo displays.
2) Selling the merchandise to stock-lot wholesalers at throwaway prices.
Even though selling to wholesalers may result in lower margins, you would at least convert stocks to cash.
3) Garage clearance SALE
Organize warehouse and Garage sales to clear the aging inventories.
4) Use it as Gift with Purchase
This tactic works best for low-cost items.
If a product is tough to sell, use it as a giveaway or incentive instead.
You can, for example, offer it as a “gift” to get people to like your Facebook or Instagram pages.
Bundling, the second most popular method used by retailers across all sectors (next to discounting).
Learn more about Bundling, read here.
6) Organize Flash sales event in your stores
Events are the crowd puller if coupled with exciting offers and circus-like carnival theme.
It instills an image, ‘if I don’t get it now, it won’t be there later’ mentality and sales will soar. The sale becomes more about the event than it does discounts.”
This is my personal favorite as well, I used to do flash events during my tenure with a departmental store brand “Woolworths”.
It helped us not only clearing aged inventory, but it also helped us generating feet-ins which ended up purchasing full-priced merchandise in return.
If you are a retail business owner and are facing Inventory issues, then feel free to email me on firstname.lastname@example.org for finding innovative ways to turn your dead inventory to cash flow.
About the author:
Ritesh Mohan is a passionate retail professional with over 21 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. Ritesh specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management. He believes in empowering business owners with his wisdom & experience of over two decades in the industry.