What Is Dead Stock?July 7, 2021
In Ecommerce, dead stock is inventory that isn’t selling and likely won’t sell in the future. It is usually stored in a warehouse or a retail store’s stock room. This inventory mishap tends to happen when a business doesn’t have great inventory management or if there are issues with the product itself.
Read on to learn why you should eliminate dead stock and ways you can avoid it.
Top Reasons Why Dead Stock Is Bad For Business
Dead stock is not good for business. Here are several reasons why:
- Lost opportunities: Products that are considered “dead stock” have no chance of selling. This means you are losing out on opportunities to generate profit. In addition, dead stock takes on space that more fast-selling, profitable items could use.
- Actual loss on your investment: With dead stock, you are not creating any profit with the merchandise you’ve invested in.
- Holding costs: The cost of storing dead stock can add up over time. This includes your warehouse, utilities, insurance, and more.
Dead stock harms your business, but fortunately, there are ways to solve it. Let’s take a look at the most common causes of dead stock and identify possible solutions.
The Causes of Dead Stock
- Lack of sales
Lack of sales is one reason why you could end up with dead stock. This tends to happen if your target market doesn’t like your product because it is too expensive, out of fashion or obsolete, or your competition has a more attractive product.
If you know your dead stock is the result of a lack of sales, you need to rethink your strategy and get rid of your products fast. You can use strategies like:
- Significant discounts: This is likely the easiest way to get rid of dead stock. Clearance sales and holiday or summer discounts are some examples of the special offers that stores use to eliminate dead stock from their inventory. Offering discounts can help your products to get attention from customers who would have otherwise missed or ignored them.
- Product bundles: This is a strategy where you put two or more items together to create a new type of item sold at a different price. The advantage of this strategy is you can bundle your fastest selling items with a less popular item as a complimentary offer. This is so you can get rid of slow-moving items so they don’t remain dead stock and diminish your profit margin.
- Poor inventory management
The second most common cause of dead stock is poor inventory management. This means you are ordering too much stock at once or at the wrong time.
Using simple calculations like reorder quantity, and inventory turnover ratio can help you create an effective schedule for ordering products from manufacturers.
- Try the optimal reorder quantity formula to help you calculate the total number of product units you should request from a supplier or manufacturer. Ideally, the amount requested should not be so high that you spend excessively on warehousing and inventory, but you also shouldn’t order so little that there isn’t enough backup stock causing the opposite problem – running out of stock.
- Keep an eye on your slow-moving products or items that are about to expire. Look for ways to offer promotions and discounts for these goods and ensure that items which are about to expire are sold as soon as possible.
- Survey your customers to understand their needs. This will help you to keep your store stocked with goods that your customers will be interested in.
- Use demand forecasting It can be helpful in preparing you for any unusual spikes or lulls in demand.
Third Party Logistics Providers Can Help
If managing inventory sounds like an overwhelming task, you should know that you don’t have to handle order fulfillment alone. Third party logistics providers like Fulfillment Works can help you to keep the right amount of stock on hand and fulfill orders efficiently.