Excess inventory is expensive to keep around; the longer you hold on to excess or stale stock, the more you lose to handling and storage costs, depreciation and shrinkage. Crucially, so long as your excess and stale stock has value, by holding on to it, you are tying up capital that could otherwise be invested elsewhere in your business. Whether you have a warehouse of old stock, or just a few shelves, here are some proven strategies to turn your excess inventory into an opportunity.
Take a hard look at your inventory
The first thing you should do is to critically examine your stock with a view to identifying stale stock and poor performing items. It can sometimes be difficult to accept that stock is now worth much less than previously expected (and perhaps even less than the acquisition cost). It can also be a time consuming process depending on the size of your inventory. For these reasons, it can be good to have a staff member or team comb through your inventory first. It is important to be realistic; using objective measures such as the inventory turnover ratio can help to objectively pick out stock that has poor future sales prospects. If stock is not selling well, it has to go.
Sell excess inventory in one fell swoop
If your business is particularly in need of cash, or if you need to clear a lot of space quickly, an inventory liquidator may be able to help. An inventory liquidator purchases excess stock in bulk and on-sells it. Naturally, the price an inventory liquidator offers may not match the value you could otherwise realise from your stock, but in some situations (such as if your business needs capital quick) it can be the most straightforward option.
If you have a reasonably large amount of stock, but not enough to sell to an inventory liquidator, try listing your stock as a bulk lot on an auction site such as eBay, Amazon, TradeMe and Gumtree.
Offer significant discounts
This is perhaps the most intuitive option where a business is overstocked. The simplest approach is simply to steeply mark down overstocked items; the thinking being that cheaper prices will motivate customers to buy. Selling overstocked items one by one is a slow approach; other approaches are to offer generous bulk purchase discounts or to bundle several overstocked items together and sell them for an overall discount – these strategies move more stock more quickly.
Repurpose the stock
Some stock can be difficult to move, even after a discount. That’s not to say that the stock is devoid of value. The best use for some inventory may not actually involve selling it. Some inventory may be able to repurposed for internal use, like as a business supply or as a reward for staff.
Other inventory may be able to used for promotional purposes or as rewards in a loyalty program. Remember, the appeal of a freebie may have a stronger pull in some cases than a discount on the sale price. The advantage of offering free gifts or rewards is that it can attract customers while not ‘cheapening’ the image of your products in the same way that discount prices might.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.