Dead stock is a term that refers to unsellable inventory. For obvious reasons, dead stock can cause some serious problems at your eCommerce company, just to mention lost money. What causes dead stock? How can you avoid this problem? And what can you do if you already struggle with dead stock? It’s time to find out!
Dead stock is a common problem in many commercial sectors. It concerns both brick-and-mortar and eCommerce stores. In general, we say that you face the dead stock problem when you can’t sell your inventory for months so that it becomes unattractive or outdated. In other words, it’s unsellable. Your customers don’t want to purchase such products and most likely won’t be interested in them anytime in the future.
The dead stock problem especially concerns companies selling products that quickly become unattractive, primarily due to their age or the fact that they have been replaced with new models. This means that stores operating in the following niches are particularly exposed to the risk caused by dead stock:
- Sports equipment
- Laptops and smartphones (electronic equipment in general)
- The broadly understood FMCG products (monitor the expiration dates!)
If you sell products in one or more of these categories, this article is your must-have!
What causes dead stock?
We can name at least four major causes of the dead stock issue:
- Over-ordering: If you order more products than you can sell, you are on a direct path to piling up your inventory.
- Poor inventory management: You don’t know what’s happening with your inventory. You can’t see when the problem has started.
- Lack of/insufficient marketing efforts: If you don’t promote your store regularly (or efficiently), dead stock will come knocking at your door.
- Ordering the wrong products: Sometimes, you have a hunch that this product will be your next bestseller, and then… it’s not.
What problems does dead stock generate?
There are a few of them, and each one is equally deadly to your business, comfort, and/or cash flow. First of all, you waste your money. You’ve purchased some products, paid for them, and now they are just lying around pointlessly. Second of all, dead stock takes up space in your warehouse, so there’s less room for products that you can actually sell, which results in not making as much money as you could. And thirdly, dead stock causes stress. You constantly think of ways to deal with this problem instead of thinking about growing your sales.
How can you deal with dead stock?
Thankfully, there’s good news. You CAN deal with this problem, even if this problem seems unsolvable. There are at least three strategies you can utilize in order to deal with dead stock. Let’s take a closer look at them!
IT’S TIME FOR THE “SALE OF THE CENTURY”!
That the quickest and most straightforward strategy: Put all of your dead products on sale. Of course, you won’t be able to make as much money as you predicted, but at least you can get the money back and free up space in your warehouse!
People love sales, especially when they are over -50% of the retail price. If you have more dead products, think of creating a special section on your website. Something like “special offers”, or “outlet”, or “great deals”, it’s up to your invention.
Make sure you promote this section everywhere you can. Send a special newsletter explaining that there’s a new section on your website, tell people how much money they can save, and encourage them to buy. Believe us, -50% can work miracles!
If your dead stock doesn’t comprise expensive equipment, you can think of adding these products to other orders as freebies. Naturally, this means that you won’t make any money on them, but you will at least get some storage space back. This strategy is almost exclusively for cheap products like groceries or cosmetics.
In fact, adding a freebie is an excellent way to build good relations with your customers and create a positive image of the store. People who get freebies will be more eager to buy more in the future. So, in the long run, this strategy can be very profitable!
If you want to make money on your dead stock (which is perfectly reasonable), think of creating product bundles. Product bundling is also a quick and straightforward way to sell more and raise your AOV (Average Order Value). In fact, we decided to write a separate article about product bundling, and you can read it here!
How can you avoid the dead stock problem in the future?
Firstly, you have to be aware of what got you into trouble. Only then will you be able to find a remedy. Do you remember our list of potential dead stock causes? Here are the solutions to each one of them:
Try to calculate how many products you can actually sell. Analyze your historical data to find that out. Of course, you have to order more products before Black Friday or Christmas, when eCommerce companies celebrate massive sales growths, but don’t make it your everyday practice.
POOR INVENTORY MANAGEMENT
As an eCommerce entrepreneur, you have to understand the need to monitor your inventory regularly. If you see that some products don’t go, think of necessary corrective actions. Also, make sure your WMS (Warehouse Management System) operates correctly and is frequently updated. And another attractive to solution is work with a trusted logistics operator (yes, like Omnipack!) who will monitor stock levels for you.
LACK OF/INSUFFICIENT MARKETING EFFORTS
We mention this question in almost every article. You have to take good care of your marketing activities. It’s the only way to grow your business and make sure you sell products you have in your inventory. Check your marketing campaigns and think of ways of optimizing them. If possible, start working with a professional performance marketing agency. They will know what to do to bring more customers to your store!
ORDERING THE WRONG PRODUCTS
If you decide to start selling new products that you have no experience with, make sure your research is thorough. Try to find out what really sells and why. Don’t order different products only because your intuition says so. If you have any doubts, ask your current customers (via newsletter or social media profiles) if they would be interested in purchasing a given product.
Now, you know everything you need to deal with the dead stock issue. And if the logistics processes seem to be the source of your problems, drop us a line! Omnipack is an experienced eCommerce logistics leader in Poland, and we are more than happy to take care of your stock and improve your logistics.