It’s not uncommon for the number of SKUs a business sells to grow as the business does. When this happens, it gets much more difficult to manage inventory, and we can end up forgetting about those products lying on the shelf that nobody has bought.
Without proper inventory management, dead stock tends to accumulate over time and eat away at your profits. In this article, we’ll cover everything you need to know to understand and get rid of dead stock, and even prevent it from ever accumulating in the first place.
In this article
What is dead stock?
Dead stock, sometimes referred to as ‘obsolete inventory’, are products that a business no longer expects to sell. Such products might be outdated due to low demand, for passing their expiration dates, because they’ve been discontinued entirely, or other reasons.
We only attribute the term ‘dead stock’ to stock that has never been sold. Returns that haven’t been resold, for example, are not considered to be dead stock.
Why you want to avoid dead stock
Having an excessive amount of dead stock can really hurt the profitability of a business. And the bigger the monster in the closet gets, the more resources you’ll need to direct towards removing it. Here are the biggest reasons why you should always avoid having lots of dead stock.
Unnecessary storage costs
Non-moving stock doesn’t just take up space; it costs your business money to keep it in storage. You could be using that storage space for products that actually sell, increasing sales and lowering inventory costs.
The time and money spent on keeping dead stock and actually getting rid of it could be much better spent elsewhere. For growth, businesses need to be smart with their money, investing in places that drive the highest return.
It would be much better to make an investment in marketing, sales processes, product development or a large list of other business activities, rather than using capital to remove dead stock.
Risk of depreciation or obsolescence
Dead stock can be particularly bad if you’re selling goods with an expiry date, like food and drink, supplements, or cosmetics. Obsolete items can’t be sold at a discounted price, placed into bundles, or even donated. The only way to get rid of expired stock is to waste it, at your expense.
Even if you’re not dealing with products that can expire, stock that hasn’t sold for a long time can still depreciate in value or fall out of trend.
What leads to dead stock?
The businesses that tend to accumulate excessive dead stock are the ones with a long list of SKUs or that have grown rapidly. In both circumstances, inventory housekeeping is difficult without the right knowledge or tools.
Below, we’ve detailed some of the most common reasons dead stock occurs.
Lack of inventory visibility
How can a company be expected to keep track of inventory issues – and be proactively in preventing them from happening – if they have poor visibility of their stock?
Inventory visibility is an often overlooked aspect of running an eCommerce business, and often only enters the conversation when a company has already run into problems, such as having excessive dead stock.
By having the tools to foster good stock visibility earlier – like real-time inventory management software – you can be proactive in preventing issues like dead stock before they become a problem.
Forecasting is all about having the right amount of stock at the right time. You can use historical inventory data to track the peaks and troughs in demand throughout the year, which informs that amount of stock you order.
A lack of proper forecasting can result in either too little stock — which can result in a stockout — or having too much. Dead stock can arise as a result of the latter, as you can order stock that there isn’t a demand for, and so it ends up gathering dust on the storage shelf.
Flawed pricing strategy
It’s important to regularly review your pricing strategy, particularly in relation to where your competitors are pricing similar goods.
If your market research concludes that there is demand for your product and it fails to sell, it could be because your competitors are undercutting you. While multiple factors dictate where you choose to price your product, if customers don’t see value, they won’t pay the price of admission, resulting in excess product trapped in storage.
Lack of promotion
Similarly, if you know there is demand for your product and you’re confident in your pricing strategy, dead stock might accumulate if you fail to promote it effectively. That’s not just informing your customers that a product exists, it’s about celebrating its value and making it stand out from the crowd.
How to shift dead stock
So you’ve identified a bunch of SKUs that haven’t sold, and want to clear them out of storage while recuperating as much cost as possible. Unless you’re dealing with expired products, you should always avoid simply throwing them in the trash (or, more likely, paying someone to throw them in the trash for you).
At the very least, you should donate dead stock to a charity or cause that could make use of them. However, if you’d like to make clearing out dead stock as cost-effectively as possible, here are some options.
Promotions and marketing
In the first instance, it’s always worth trying to breathe new life into your dead stock by running a fresh round of promotion and marketing. It’s a low-risk way to gauge interest and perhaps sell your forgotten stock at full price.
Consider building a social media campaign around the specific SKUs you want to push, and place them front and centre on your website. You may or may not wish to apply a discount at this stage – it depends on how confident you are of making a sale at full price.
Discounts and bundles
If you’ve spent some time showing off your dead stock but it’s still failing to sell, now’s the time to think about offering a discount or placing the stock into a bundle.
Before offering a raw discount, you could try applying a discount when customers reach a certain threshold in their basket, or offering the discount out to your most loyal customers.This can work in both your and your customer’s favour; you can shrink your dead stock while simultaneously building customer loyalty.
Another creative way to address dead stock is by selling mystery boxes. These curated packages of assorted items can be a fun and intriguing option for customers who enjoy surprises.
By bundling slow-moving products into mystery boxes, you can generate interest and excitement, increasing the likelihood of selling off items that were previously stagnant.
Selling wholesale is a strategic approach to tackle dead stock in your inventory. By offering your excess or slow-moving products to other retailers or wholesalers at a discounted price, you can quickly free up valuable storage space and generate revenue.
Wholesale buyers often purchase in larger quantities, which can help you move surplus stock more efficiently than selling items individually
Keep inventory moving with James and James Fulfilment!
If you’re struggling with stock visibility or need help with turning dead stock into sales, James and James can help. James and James are a 3PL who are backed up by custom-built, award-winning inventory management software that’s designed to provide eCommerce businesses with unrivalled stock visibility.
Our software, ControlPort, lets you see exactly which products are failing to sell, and breaks down how much that dead stock is costing you. Our Client Services Team will work with you to identify SKUs that are costing you money, and help you devise a plan to shift that stock in the most cost-effective way.