4 ways to convert dead inventory into actual cash

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Running low on inventory can cost money. You may lose out on customers ready to buy your product. Or, in case your inventory doesn’t show as out of stock in time, you may need to pay a fine to cancel orders for products you don’t have. So, will doubling up your inventory help?

Strangely, no, not really. This is because excess inventory has its disadvantages too.

What is excess inventory?

According to Pranay Porwal, a category manager at Browntape, the multi-channel order and inventory management firm, excess inventory can arise on account of –

  1. Sellers manufacturing/ procuring too many units of a particular product
  2. Dead inventory arising due to –
  • End of product lifecycle
  • Lack of demand for the product

Pranay, the women’s western wear category manager at Browntape, says, “When it comes to clothing, the product varies in terms of sizes and patterns. Some designs may not suit certain body types. So, maintaining all sizes of this particular design may lead to dead inventory.”

Here’s an example, horizontal stripes make one appear stout. Already stout customers may avoid clothing with this attribute. So, large sizes of horizontal striped T-shirts may not sell well and your inventory may remain stagnant.

Why is excess inventory bad?

Irrespective of how it comes into being, surplus inventory is bad for online retail. This is mainly because of the costs associated with it. In the first place, you have to bear the cost of producing or procuring. Then there is the cost of storage. If you have your stock at a marketplace warehouse, you can expect more costs for storing goods that do not sell.

On top of this, you will have no space for new stocks. As a result, you need to arrange for more storage space or delay production and procurement. Delays will affect your sales timings and strategy; preventing you from reaching the sales numbers you have your sights on.

How can you liquidate excess inventory?

There is money tied up in every product within your possession. This can be utilised to acquire or make new goods, promote products, expand and more. That is why it is best if you liquidate your products instead of leaving them to gather dust and increase your storage expenses. We have put together a couple of techniques to help you make money out of your excess inventory. Here are the best practices you can implement –

#1 – Sell off your inventory

The best way to get rid of your excess inventory is by selling it. The only problem is you are stuck with excess inventory because these products are not selling. A couple of things you can try are:

A. Lowering product prices

To let go of your inventory bring down prices. Try lowering rates to bait customers to buy. The value for your product will depend on the amount of time your stocks have been lying idle. If the surplus inventory is out of fashion/ season, you cannot expect to make profits on it. Your goal should be to match cost prices, not profit margins. So, make sure you price your products appropriately.

B. Participating in flash sales

Flash sales are usually time-bound promotional offers. Flipkart and Amazon offer options for these kinds of sales. Both have deals of the day where sellers can offer discounted products for 24 hours straight. To avail of these promotion slots, sellers need to have marketplace fulfilment tags and appropriate discount/price ranges.

Amazon offers another flash sale option called lightening deals that runs for 6 hours straight. You can choose which of your listed products to put on sale here. However, Amazon has preset requirements for this. Sellers must be a part of its FBA programme, the discount lower limit will be pre-decided and so will the minimum amount of stock required for the sale.

C. Participating in end of season sales

When your products are in season, monitor what is not selling. Accordingly, take steps to put these goods up for sale at the end of the season to clear out your product racks. In case you do not sell seasonal products use the festive season time to get rid of your overstocked goods by offering irresistible discounts.

D. Offering combos and freebies

This will depend on the kind of products in your possession. For example, a free bag cover offered with a backpack or hair oil sold along with body lotion. Select your best selling items to accompany your excess products, in case of combos. When it comes to freebies you can offer the surplus product as a freebie or sell it with another product as a freebie.

#2 – Make your products known

In some cases, the cause of poor customer response may stem from of lack product visibility. Even weak marketing can make people lose interest in your product.

A. Unbelievable pricing

Pranay informed us that his team once promoted a client’s products at Rs.1 per unit. He said making profits was not the idea behind this move. The goal was to capture customer attention and acquire top spots in product searches on marketplaces. You can try the same, in case of new products that are not selling. However, consider the worth or your product before taking such a drastic step. You can offer a few units at this extremely low price (not necessarily Rs.1) then later on when demand rises you can charge more for the rest of your inventory.

B. Product stories

Instead of using product description content to describe your product, use it so sell an amazing experience with your product. Nowadays marketplaces let you use videos in addition to images to describe your products as well. These are attractive and give you better means of presenting your products to the public. With visual aids like these, you can attract attention, describe and promote your goods all at once.

#3 – Sell offline too

The main rule for most online sellers is to sell on multiple marketplaces to spread their risks. Try your luck with special marketplaces, like niche platforms that primarily deal with the products you sell. For example, try out different ethnic online marketplaces to sell off your excess inventory of traditional kurtis and sarees.

In case the excess products do not move online, try using offline networks. You can tie up with offline outlets or host clearance sales offline, at exhibitions.

#4 – Go back to your supplier

Sometimes, suppliers take back products that do not sell. You can check with yours to know what the terms and conditions are regarding returns and refunds. Make sure you check these before availing of your stocks. This way you can avoid any misunderstandings. Some suppliers may even take back unsold goods if you purchase their new stocks. Have a word with your providers to know for sure.

Excess inventory is bound to occur, in spite of all precaution or market trend studies. It’s just a natural part of business. But, with the help of these inventory liquidation techniques, you can minimise your losses and even free up some shelf space. Dropshipping options can help you minimise surplus stock or insufficient stocks. Paying attention to customer demand and big brand operations can also help you avoid acquiring low demand goods and in turn dead inventory.

Tell us about your experience with excess inventory online through the comments below. We’d like to know how you liquidated it.

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