As a retail business, your inventory is one of your most essential resources. That’s why proper inventory management is fundamental to your success. Things can go wrong, however, and you may get left with dead stock when they do.
Dead stock is inventory that remains unsold for a prolonged period. More often, the term refers to stock that never is - and never will be - sold. It’s those lines and items that clog up your warehouse and never pique your customers’ interest.
For any firm, dead stock can get really costly. You lose what you paid to buy or make it, what it costs to store it, and potentially also have to fork out to dispose of it. That’s not to mention the opportunity cost of not being able to use your warehouse space for other items.
As well as ‘dead stock’, you may also encounter the term ‘deadstock’. This is an entirely different phenomenon. Deadstock refers to discontinued products or lines. A model of games console that’s no longer made or distributed is an example. On some occasions, deadstock can become sought after due to rarity.
Dead stock is something all brands strive to avoid. Many different things can cause it nonetheless, however.
One of the principal causes of dead stock are errors in inventory management. You may get left with far too much of one line, for instance, if someone reorders by mistake or in too high a volume.
A downturn in sales can also create dead stock. You might order what seemed the right amount of inventory, only to see it go unsolved. Perhaps consumer demands shifted suddenly. Or maybe you didn’t check your retail calendar and missed an event that changed customer needs.
Sometimes issues with the inventory itself make it impossible to sell. Some items spoil if they’re not purchased within a particular period. Other products may have defects that will put customers off.
As dead stock can be very damaging to your bottom line, you’ll want to avoid it as much as you can. There are a few different ways of doing so.
By improving and streamlining your inventory management, you can dodge the mistakes that cause dead stock. Robust inventory management systems give you an accurate, real-time view of your stock. Automation in this area, too, can help eliminate human error.
You can help yourself avoid dead stock with better market research. Make sure customers desire any new lines before you commit to producing or buying them. You could actively reach out and ask or set up a voicemail service for consumers to call.
One of the disadvantages of online communications is that things can slip between the cracks. It’s easy, for instance, for a team member to forget to update your ecommerce store. That might mean that a product you have lots of in the warehouse isn’t even listed on your site. Ensure your online content is always up to date, and you limit the risk of dead stock.
Even if you follow all the tips above, you can’t always avoid dead stock. If the worst happens, then, you must know how to respond. There are a few things you can do to manage dead stock:
Changing consumer needs, mistakes in inventory management, and simple spoilage can all cause dead stock. It’s those product lines that sit on your warehouse shelves gathering dust. The most successful brands work hard to avoid having any dead stock on hand.
There are plenty of ways to minimize the risk of dead stock. They include streamlining your inventory management and paying closer attention to the needs of your customers. If you do end up with lines that are moving glacially slowly, though, act quickly. Using those items as gifts, donations, or selling them at cost can help your dead stock issues.