Dead inventory poses a problem for all retailers. It always begins small with a couple of products. Over time, and almost without being noticed, it grows. The problem is something to ignore, at first that is. The modest growth rate is something that strikes most retailers as harmless, therefore causing retailers to take actions that are nothing compared to the events to come. Extra merchandise is confronted with markdowns here and there but really, these have little to no effect in the long run. Month after month, the extra merchandise builds upon itself until finally, retailers realize that the measures were nothing near what they needed to be to dispose of the merchandise.
If this situation sounds familiar, below are some ideas to help you get out from under it and turn it into cash.
First, an overwhelming amount of inventory requires patience and persistence. This situation didn’t happen overnight and it won’t be fixed overnight either. Because a large amount of inventory is often accompanied by a cash flow crunch, retailers often panic. The solution, however, needs to be one of persistence that delivers consistent, incremental results.
Another idea is to ask if the merchandise can be returned to the vendor. Many vendors will be hesitant to respond with a simple no, and many might accept returns with the promise of an additional order or a test order that they want you to try. By opening dialogue, a retailer can actually help a vendor if they have other outlets for the merchandise.
Breaking up dead inventory into different categories is another good idea. The three categories that are helpful to use are low hanging fruit, sludge and everything else. Low hanging fruit is the most desirable inventory. It is the most marketable, and the easiest to turn back into cash. Feature the item to sell it, as it often sells quickly. Sludge is the bottom and the worst of the worst in terms of inventory. Sludge should be isolated from the low hanging fruit because sludge simply hurts all of the merchandise left that still looks good. Sludge hardly ever sells, so donating it to charity is most likely the best place for it. Everything else falls in the middle of these two extreme categories. After the low hanging fruit is gone, use everything else as the primary merchandise to move. Whatever you do, however, keep it away from the sludge.
Dead inventory must truly be separated from all else as it can have a negative impact on business and is different than typical clearance merchandise. It’s older, and in no particular demand. Because of this, dead inventory needs to be remerchandised to go anywhere, as customers may just feel that it is not even worth its sales price. In particular, the sales price needs to be irresistible. Give customers no reason to refuse the merchandise, even if it is sludge.
Whenever you are confronted with a buildup of dead inventory, the ideas above can help move merchandise and start up cash flow to the business once again. The effort must be one of patience, but slow and steady wins the dead inventory race.