What is dead stock and how to deal with that?

What is dead stock?

Take a look at your warehouse. It it very likely that with every change of the season, there’s an ever-increasing amount of products that simply won’t sell. That’s what we’re calling dead stock. Dead stock refers to the inventory that doesn’t sell and doesn’t have probability of selling in the future. 

Having too much dead stock inventory is harmful to your business. It occupies valuable warehouse space that could have been used to store higher revenue-generating products. Dead stock inventory should be disposed of quickly as it is not generating revenue, which results in unnecessary storage costs.

Dead stock is bad for business

It affects your business in the following ways:

• Occupies the office or warehouse space endlessly.

• Other products can’t use the occupied space.

• Blocks cash inflow and prevent the investment cost.

• Increase in storage space and warehouse cost.

Most common causes of dead stock

There are many other reasons why your business could end up with excess stock and require dead stock disposal.

To help companies solve the problem of dead stock inventory, we will represent the main causes of it.

Here are some։

1. Low Demand

When your company incorrectly forecasts the demand for your products, you will produce excess inventory that cannot be sold and will end up as dead stock inventory. 

2. It’s no longer in season

The more seasonal a product is, the less likely it will be able to sell during the rest of the year. Most businesses are able to hold a reasonable amount of seasonal dead stock, because they’re sure that they’ll sell the next time the season comes around. 

3. Defective Products

This is where there is something wrong with the product, whether it is poor engineering or design. If no action is taken to get rid of these inventories, it will result in dead stock inventory.

4. Lack of Communication

Dead stock inventory can occur as a result of miscommunication between your warehouse and management teams. Your warehouse team might produce more stock then necessary if the management does not communicate the amount of inventory needed to meet customer’s demand. 

How to deal with dead stock? 

If you find that your business ends up with product that cannot be sold and it is beginning to cost your business money, there are a few ways you can clear it out. Possibilities include:

1. Reduce the price

A significant price reduction might be enough to trigger demand for the product. You may not sell at a profit and perhaps suffer a loss, but clearing the dead stock off your shelves is better for the long-term health of your business.

2. Return products to the supplier

The simplest option is to just return the unsold stock to the supplier. Most suppliers only accept returns within a limited time window, so act fast if you discover stock is not selling as well as you expected.

3. Bundle up products

Bundling products is another effective way to offload dead stock. If your deadstock consists of several items coming under a common category of products like mobile covers, chargers, etc. then you can easily bundle these and create an interesting combination and put a good price on it.

4. Giving it away as a gift with purchase

Another way to increase the value of an order and get rid of dead inventory is by offering it as a free gift with another purchase.

This could be done by including it with one specific top-selling product , or by offering it as part of a promotion, such as, “Get a free gift when you spend over $55.”

5. Have a clearance sale

If your dead stock is a result of an common product, seasonal product, or product that may be obsolete, having a clearance sale can help free up space for new, more profitable products.

6. Donate it

There are a few ways that you could donate your dead stock.

One way is to donate products to charity where the items would be useful to them. Moreover, you would be helping out a charity in need, and it would help your customers think about your brand’s corporate social responsibility – an increasingly important factor when choosing where to shop.

Another more innovative idea would be to find a charitable partner where you could offer your dead stock as part of a promotion or collaboration to help the charity.

You may not make your money back on the dead inventory, but the brand recognition and reputation gained, as well as potential new customers in the future, can make up for it in the long term.

How to avoid dead stock?

Dead stock can be avoided if you:

1. Order smaller quantities

Order smaller quantities of newer or less popular items. There’ll be a higher per unit cost, but you’ll at least minimize the risk of dead stock. Also, ordering smaller quantities allows you to experiment with more products in the same category. It gives the customers more variety to choose.

2. Ask for customer feedback

Why not ask your customers what they think about your products? 

Conduct customer surveys and find out what other products your customers are looking for. It allows you to avoid pushing products on instinct and will only improve your products performance. 

3. Use inventory management software

More often dead stock is a result of a lack of inventory management.

Having a good inventory management system in place is crucial for any business. When you’re in control of your inventory and know exactly how your stock is organized, you can prevent errors and over-ordering.

This step is going to help your business eliminate dead inventory exponentially.

Conclusion

What did we learn? Thankfully, dead stock isn’t the end of the world.  

In short, if you follow above mentioned steps carefully you can quickly identify the current level of dead stock and decide how to best deal with this.   

Now that you know how to detect, prevent and respond to dead stock you can immediately start recuperating that lost revenue.