The great and unhealthy of deadstock ecommerce merchandise
Ecommerce merchants face many obstacles in the online business space.
A common but persistent problem is raw material products.
The accumulation of inventory can increase operating and storage costs. As more products get into the warehouse, the cost of storing unsold items can drain your company's valuable financial resources.
In addition, seasonal trends and products make it difficult to eliminate inventory completely.
How can you solve this problem? This article explains how to avoid and eliminate inventory as it piles up in your warehouse.
First, let's start with the definition of deadstock.
What does deadstock mean?
Deadstock is synonymous with dead inventory.
These are items that have not yet been sold and are very unlikely to sell. If you don't use an inventory management system, these goods are likely to pile up and be forgotten in your warehouse.
An alternate definition of “inventory” refers to goods that are no longer sold in stores. In this case, like unused or unworn shoes or vintage clothing, these goods are sold at much higher prices.
For the purposes of this article, we will not examine the latter definition in this post.
Is Deadstock Bad For Business?
Deadstock comes with a price.
Retailers cannot amortize the cost of making products if they never sell.
As a result, unwanted items take up space in your warehouse. A longer stay means more storage costs for your company.
How do you calculate the inventory? Calculate the cost of clinging to these useless products to understand the ramifications for your business.
List the rental charges, utilities, equipment, insurance, and security used to protect your items.
Ideally, companies make up for these costs through sales, but inventory levels in your warehouse continue to stagnate. Instead of making a profit, retailers pay to keep these useless goods.
There are also opportunity costs associated with deadstock.
The space these items take up could have been used for "headstock" or highly profitable and best-selling items that will make immediate profit for your business.
How to avoid deadstock
In my experience, you need to avoid inventory as much as possible.
Business of Fashion reports that dead inventory for U.S. retailers costs around $ 50 billion a year.
When the standard retail brand margin is about 60%, a $ 40,000 deadstock equates to retail sales of about $ 100,000 and a gross margin of $ 60,000.
I have advised many ecommerce stores and I can tell you that it is best to avoid stock levels than wait for them to snowball at a later date.
So today I'm going to share tips on how to avoid stockouts.
1. Improve inventory management For less deadstock
Inventory management is a major cause of inventory.
Fortunately, an inventory management system can ensure that your inventory is properly monitored and managed.
Here are some popular inventory management systems:
- inFlow Inventory: An inventory management system that can manage up to 100 products.
- Sortly Pro: A cloud-based inventory management system that can process up to 100 transaction entries per month.
- Odoo: a free, open source ERP (Enterprise Resource Planning) solution.
- ZhenHub: A cloud-based inventory management system for small and medium-sized businesses (SMBs).
There is no right or wrong inventory management system. Instead, find a solution that suits your needs.
Once you have a system in place, keep track of the products on your shelves as well as the products that end up as dead inventory. In addition, you need to identify the products that have had little or no sales in the past year.
An intelligent inventory management system can identify bestsellers, acceptable return dates, expiration dates and flop items that you are better off without.
2. Reduce potential deadstock items
Pay attention to what is and what is not being sold.
Take into account the latest market trends. What are the most popular products that people love? How long will this trend last?
Seasonal produce might sell like hot cakes for the first few weeks, but the excitement eventually subsides.
A good tip is to reduce potential stocks by selling them at the end of the season.
For example, Patagonia, The North Face and H&M often have end-of-season sales to sell their jackets and coats after the winter season ends. This way you can get rid of dead items and make room for the next season's collections.
Perishable goods cannot be sold after their expiration date. It is precisely for this reason that you need to monitor items that are nearing their expiration date and then sell them at discounted prices.
Tools like Wasteless use AI to avoid food waste through a dynamic pricing model. Using machine learning, they can use variables like brand popularity, seasonal popularity, and expiration dates to determine the real-time price of perishable goods.
Of course, your profit margins on discounted products are lower than expected. However, a discount will help you get rid of unpopular products. It is much better than storing these goods in a warehouse and paying more for storage.
At the very least, you have the opportunity to offset manufacturing costs and break even.
3. Know your target audience
This happens all the time: you promote the product, but it doesn't sell.
If an item doesn't sell despite numerous promotions, your target audience likely doesn't want it.
Every time you source potential products for sale, you need to understand the terms and conditions that you are dealing with.
That is why market research and surveys are critical to your success. The socio-economic profile, gender, location, and interests of your audience can predict the outcome of the sale of your business.
Before you pay the manufacturing cost, make sure your consumers want the product.
First, create a marketing person for your online store. It doesn't have to be complicated.
Here is an example of a marketer taking into account the demographics and characteristics of your consumers:
Another idea is to conduct market research through regular surveys to determine your customers' needs. I strongly recommend getting current customers as respondents as they have learned about your product and likely fit your target market profile.
Survey Monkey recommends asking these questions to assess product / market fit.
- How did you find this product?
- How would you feel if this product were no longer available?
- What are the advantages of this product?
- What alternatives would you use if this product were no longer available?
- Did you recommend someone use this product?
It is best to conduct surveys regularly to identify opportunities in your target market.
Also, understand the items and trends that customers love and consider them for future product releases. Using inventory management software, you can identify products that sell out quickly to ensure you are selling the products that customers need.
More bestselling items are key to eliminating inventory. Even if you can't always sell 100% of the items in your inventory, knowing your customers and assessing the product / market fit will help reduce inventory build-up.
4. Diversify your products Avoid deadstock
You can choose to sell bestselling items only to avoid inventory entirely.
However, you need to make sure that most of the best sellers in your store do not have the same functions or characteristics. Otherwise, you can get more deadstock too.
Too many similar items can mean cannibalization. Some customers may prefer one brand or item over another, resulting in low sales for other goods.
This is common with retailers selling similar items from multiple brands.
Diversify your product inventory to avoid this consequence.
A good tip is to add complementary products to existing items in your ecommerce store. To start with, complementary goods are products that are used together. They may be completely different from an item you sell, but their combination of complementary goods will sweeten the deal.
For example, if you're an iPhone retailer, add iPhone cases and accessories to your arsenal. As the latest iPhone falls in value, it may become more mainstream. More people will buy your suitcases and accessories in the future.
Alternatively, you can offer a selection of related products instead of selling them separately.
For example, Harry & # 39; s – a men's grooming brand – offers a "Truman Set" which includes a foam shave gel, blades and razors in a convenient package.
How do I get rid of deadstock?
If you already have inventory, it's time to get rid of it.
Here's what you need to do:
1. Return deadstock items to suppliers
If you are in the window to go back, this might be your best option.
In the short term, you pay a small fee, but at least you can avoid a large loss and increase in inventory.
As long as the items are in good condition, you may be able to return them to the supplier. However, first check the suppliers' return policies to make sure they allow this method.
Most suppliers have a restocking fee of 10% of the goods. You will likely be given the option to pay with credit instead of cash.
2. Place deadstock in release sections and bundles
What if you sold some items at a discount but they don't sell? You can go further.
Find out the lowest price that you can sell these products at. Then you bundle related and complementary products and sell them as a set.
For example, Glossier bundles related articles and offers them at a reduced price. Many beauty fans prefer a full set that sells at a discounted price rather than buying a single item at no discount.
If you have a lot of supplies of the same item, get rid of them through freebies and freebies. Consumers love getting free items, so they may be forced to return to your online store and make a purchase.
During the holidays, you can bundle items together to create Christmas gift sets with a selection of products.
For example, Soko Glam bundles miniature-sized skin care products and sells them as a gift set for the gift-giving era. Customers placing orders over $ 135 will receive a Dreamy Satin pillowcase while supplies last.
3. Sale to deadstock buyers
You will likely lose some money, but getting some money back is better than losing it completely.
Here are some inventory buyers to consider:
- Wholesale: If you have a lot of machines in good condition, you can sell them to wholesalers. Popular suppliers of boutique wholesale clothing include Sugarlips Wholesale, Bloom Wholesale, Wholesale Fashion Square, Tasha Apparel, Magnolia Fashion Wholesale and LAShowRoom.
- Amazon Seller Central: Amazon has a Seller Central where you can adjust prices or adjust your competitor's lowest price.
- Ebay: Inventory consisting of repaired or returned products could be sold on eBay at a drastically reduced cost.
- Consignment shops and warehouses: These buyers usually buy clothes, housewares, and old items that can be sold at low prices.
- Remaining stock liquidators: These companies can buy much of your inventory and resell it in their own stores at cheaper prices.
4. Donate deadstock to charities
If a product doesn't sell, you can donate it to charity.
Charitable donations are a popular option for clothing retailers. You can sell deadstock items to discount stores like T.J.Maxx or the Outnet as a last-ditch effort to make sales.
Some foundations like The Salvation Army and Oxfam accept donated clothing.
We bet there are many charities in your communities and cities. You can donate to any organization. However, make sure it is legal to do so. Find a reputable charity to sell your items through.
While you may not be able to sell these goods, you can apply for a tax write-off on your donation. If this initiative is managed well, your business will look great.
Conclusion
If you want to eliminate commodity products, make an active effort to find products that can be sold.
Use an inventory management system to keep track of unwanted items in your inventory. Bundle raw material products and sell them as gift bundles or give them away as promotional gifts. As a last resort, you can even sell commodity products to wholesalers, consignment stores, Amazon or eBay.
There are many ways to avoid dead material building up and to remove unsold items from your inventory.
How do you avoid inventory?