because they became outdated or were never sold. While some companies find ways to sell dead inventory in a secondary market, holding and managing obsolete stock has several costs. One good way to eliminate dead stock is to have an inventory liquidation sale where a business sells closeouts and gets rid of excess inventory. Goods can be moved through closeout websites or discount stores to consumers who like to bargain hunt and search for deals and specials on toys, housewares, home décor and lawn and garden closeouts.
Dead Stock is more of a problem for e-commerce businesses without any effective inventory control or inventory management in place. Companies that use management systems or software are far less likely to be left with excess stock on their warehouse shelves. Closeouts in 3PL warehouses are common even though these are often large distribution centers and are faced with having to sell excess inventory. A business may shut down it’s 3PL warehouse to save money on storing old inventory or overstock merchandise. with Dead stock can also be termed ‘dead inventory’, ‘obsolete stock’ and ‘excess inventory/stock
The terms dead stock and excess inventory get used interchangeably because they both involve a business holding large amounts of inventory. However, they represent very different business outcomes; excess stock is an opportunity, whereas dead stock is a liability. Put simply, the definition of excess inventory is when supply outstrips customer demand. This results in slow-moving products with expensive holding costs, often in outside warehouses or 3PL warehouses. But if a business acts fast, it can prevent excess inventory from becoming dead stock that must be sold off to liquidation companies, overstock buyers and buyers for unwanted inventory. Strategies such as hosting clearance sales, product bundling, or diverting inventory to different store locations enable can manage excess inventory effectively and even strengthen their bottom line. It is always best to sell excess inventory and not be the kind of business that lets stock sit idle and become totally dead stock. It is always better to sell excess inventory for any price rather than let it sit in the warehouse collecting dust and losing value. An inventory liquidation sale is a sure
way to clean out your warehouse, generate cash, and get rid of dead merchandise. You can also list products on closeout websites where you may even get more money. In sum, the more products you have, the more storage is going to cost you. So the faster you get rid of closeouts, the better off you will be. If your inventory is made up of fast-moving products with high levels of demand, this isn’t necessarily a problem. But if a high percentage of your inventory is dead stock, you’re wasting valuable warehouse space. This is compounded by the fact that storage costs come bundled with other expenses, including insurance, labor, handling, and warehouse utilities.
There are also opportunity costs that are difficult to quantify but are no less damaging to your business. For example, choosing to discount dead stock or sell it via Amazon and eBay may help to shift products, but this has ramifications beyond reducing your profit margins. Continuous discounts can devalue your brand and attract shoppers who are less brand loyal and more interested in getting a good deal. Once you’ve set these expectations among shoppers, it’s very difficult to change them. Closeout websites and deal sites are fantastic ways to sell your excess inventory, but be careful not to train your customers to wait for deals.
With the pandemic causing extreme demand unpredictability and disruption of supply chains, dead inventory has become an even bigger issue. When the outbreak first hit in early 2020, ‘non-essential' retailers around the world found themselves with vast quantities of unsold products to manage, left within their stores or somewhere in their warehouses or on rails or ships. As shops reopened, retailers applied markdowns to contain losses on closeouts, but in general, and despite these actions, the amount of dead inventory and obsolete merchandise was massive.
Now, as many retailers are still in the recovery phases and lockdowns loom in many parts of the world once again, dead inventory remains an urgent (if not more urgent) matter. As the crisis altered customer habits and accelerated customer demand for overstock and liquidation inventory, it was even more complex for retailers to have the right merchandise in the right location at the right time. The result: many retailers now have inventory in the wrong place.
The cost of dead inventory is not just the purchase cost of the product plus the (typically onerous) handling costs. The opportunity cost (the missed opportunity to sell the item) must be added to the equation. When not managed properly, dead inventory, closeouts, unwanted merchandise and obsolete goods can become the silent killer for businesses, squeezing working capital and the bottom line.
Merchandise USA specializes in inventory liquidation sales, closeouts, and buying overstock inventory. We have been excess inventory buyers for 37 years and specialize in toys, housewares, lawn and garden, and all other consumer merchandise.