Having sufficient inventory enables retail businesses to conduct smooth operations. Not having enough stock in stores result in the opposite outcome. In the pursuit of precisely meeting customer demands, retail establishments are likely to overstock products. When that happens, many store areas bear the impact.
Overstocking can occur even when retailers pay close attention to the number of items they procure. It is an inevitable circumstance that can emerge in retail stores belonging to any niche. While preventing overstocking is a good idea, retailers must also be prepared to manage those excess products. Because surplus products don’t sell. They are known as dead stock.
In this article, we take a closer look at what dead stock is, how it affects business, what causes it, and how to handle it. Let’s get started.
What is dead stock?
Retail stores possess items that are smooth selling. In addition to that, there are items that sell extremely slow, or just don’t sell at all. The stock of the latter type is known as dead stock. It is detrimental to business prospects, especially when retailers ignore it.
Dead stock is a burden that causes overhead costs to rise. While it is the result of overstocking, there are several reasons for how they occur. An example of dead stock is perishable items like food and medicine.
Swiftly handling stock that doesn’t sell and takes up too much space in the store is critical. Dead stock is a liability.
How does dead stock impact business?
Deadstock weighs down business prospects in more than one way. It negatively impacts several retail areas. Letting dead stock exist for prolonged periods of time can bring store operations to a grinding halt.
- Loss of money – The purpose of procuring inventory is to sell it off for a profit. When the stock doesn’t move out of the store, it renders investments as lost.
- Increasing storage expenses – Stock, be it big or small, requires space in a store. Unsold inventory occupies shelf and warehouse space. That creates bottlenecks for procuring and accommodating new stock.
- Management costs – Having dead stock in the store means constant monitoring of those items, having employees move them around, and more. Those add to overhead costs.
Common reasons for dead stock
The most common culprits that cause dead stock include:
- Incorrect prediction of inventory demand
- Purchasing products in bulk because their selling price is low
- Selling inventory at a high price
- External changes such as changes in trends and economy
How to handle dead stock
- Offer it as an incentive – One way of getting rid of dead stock is by offering it to customers as a free item coupled with another product. The tactic also works wonders in encouraging customers to buy products because of the incentive.
- Bundle products – Bundling the dead stock item with a related product is another great way of offloading products. Coupling irrelevant products together is not a good idea as the bundle will have less value.
- Return stock – The realization of having surplus stock within a few moments of procuring it gives retailers the opportunity to return it. Some suppliers may permit stock returns within a specific timeframe.
- Donate – Not having dead stock costs less than having it. Another effective way to get rid of it is to simply donate the stock. By doing so, retailers also create a positive impression among their customers.
Manage dead stock with a POS solution
The best way to prevent and handle dead stock is to use a POS system. The solution contains modules for forecasting inventory demand and for creating reports. By carefully analyzing them, retailers can make informed decisions concerning what to purchase and how much to purchase. As a result, retailers can prevent the liabilities of having dead stock such as increase in expenses and wastage of storage space.
Deadstock has severe negative impacts on retail businesses. Retailers must take measures to both prevent and manage it when it arises. The best way to do both is to use a Point of Sale software application. The software’s inventory modules help curb unnecessary expenses and procurement of stock. Instead, they improve returns on investments.
Get SmartPOS, the ultimate POS solution for boosting retail prospects and eliminating dead stock. It is fast, secure, feature-loaded, and easy to use. Reach out to us to know more.