As each season comes to an end, consumer demand shifts and a new rotation of products become best-sellers. This leaves eCommerce brands with last season’s unsold items occupying valuable storage space in their warehouses or fulfillment centers. Keeping aging SKUs can have a significant negative impact on your cash flow and daily operations. Here are five strategies for dealing with unsold, aging inventory.
One of the first things you should do with aging inventory is to think about location. Your go-to strategy should be to move slow-moving SKUs to non-prime locations in order to utilize prime locations for fast-moving, frequently-purchased SKUS. By doing this, it will be easier to pick SKUs that are ordered at higher volumes – resulting in customers getting their orders quicker. Aging inventory can be put into storage locations (usually higher up) that aren’t prime real estate in your fulfillment facility. By analyzing your SKU velocity, you’ll have a better understanding of how much aging inventory you have in your system and the types of plans you’ll need to work through this.
By selling aging SKUs to liquidation companies, you can quickly clear warehouse space and create revenue in the process. Though selling to liquidation companies may result in lower business margins, you’ll at least be making something for inventory that wouldn’t be able to be sold otherwise. These combined benefits may make liquidation a worthwhile strategy.
In many cases, putting items on clearance and holding sales on your online site is also a great opportunity to clear excess and/or aging inventory. Sales can be a great way to make sure seasonal inventory moves. For example, nearing the end of summer? Offering discounts on select styles will encourage customers to buy product and help you deplete that inventory. For extremely aging or unsold inventory, having a steeply discounted clearance “final sale” section of your site is another great way to clear product. You can also offer certain items “for free” in a special bundle.
However, it is extremely important that your brands’ warehouse management systems and inventory systems are synced. Likewise, having the proper stock levels is key for a successful sale or clearance fulfillment. If a clearance sale is in your plan, be sure to have established operational project management techniques in place so that your customer’s brand experience is not negatively affected.
Depending on what types of products your brand sells, donating aging product may be a smart (and fast) strategy to clear inventory. While no monetary gains are made implementing this strategy, donating inventory may benefit you in the form of tax deductions. Additionally, this can build and maintain your brand’s image as one who takes on certain social responsibilities and contributes to helping those in need. This reputation can be used as a marketable tool to attract more customers, as research suggests that 87% of consumers will purchase something because a brand demonstrated a commitment to a cause they cared about. So, while donating may result in an initial loss of revenue, the long-term benefits are worth it.
These are just a few strategies you can implement in your business to help deal with aging inventory. Choosing the right strategy involves assessing your brand needs and budget. Smart brands should think about the “lifecycle” of their inventory and create a sales plan based on this. For example, Ashley Stewart’s CEO likened the way the brand manages inventory to “thinking like an investor” or having a bond portfolio. Remember, the longer the inventory sits on your shelves, the more value it loses.
If you are struggling with creating an inventory management strategy, contact Dotcom Distribution today.