Causes And Impacts Of Dead Stock

What is deadstock?

Any unsold inventory piling up leads to the accumulation of stock, which later becomes the dead stock. An inventory without sellable value may be due to low quality, expiration, or off-season. It may include items that are returned.

Accumulating dead stock is not healthy for your business operation. Therefore, offloading them is a must to maintain profit margins. Yet optimizing the inventory levels is not easy. It is the lack of effective inventory management processes and systems that cause this inflation. Thus to retain sustainable growth, businesses should look into addressing this issue.  

Causes of dead stock

It is crucial to avoid deadstock. You need to know what leads to the stock accumulation at first and why they keep piling up. Some common causes for deadstock are: 

Over-ordering 

Placing orders without understanding is the quickest way of accumulating dead stock. It is a challenge to know the exact amount of stock required to fulfill future orders. Implementing an inventory management system to track important metrics would help estimate the inventory turnover ratio. It ensures better decision-making, thereby avoid over-ordering.

Forecasting Inaccurate demand 

Miscalculation takes place when you fail to track the right data. Thoroughly analyzing past order data would increase the accuracy of your forecast. One way to avoid errors in data storage is to utilize an automation app that auto-adjusts the stock level whenever a new order is placed. This ensures that you’re better informed of real-time changes within your inventory to decide on reordering. 

Poor marketing/sales efforts

Ineffective marketing and sales strategies lower customer awareness and purchasing intention. The same goes with technical aspects such as slow loading speed. Failure to convert leads into customers results in piling up products, which leads to deadstock in the long run. 

Defective products 

There’re also cases where your products fail to meet the customers’ expectations in terms of quality. You don’t want any incidents to happen with your customers. Otherwise, your reputation would be massively damaged. Therefore, it is important to ensure quality control. This will contribute to building up a good relationship with your customers.

Is dead stock bad for your business?

A warehouse shelved with dead stock is of no use to your business. In fact, it costs the business money in three subtle ways.

Unsold inventory

This is when initially purchased inventory which is expected to be sold out becomes the dead stock. If an item doesn’t bring in profit, then you should probably stop investing in it.  

Lower profit margins

There is a sizable impact when the stocks stay around for a longer time. The dead stock chips the profit margin away.

High inventory storage fees

Stock-up items also take up space in your warehouse that should be spent on more valuable products. Hence it is important to remove unsellable inventory. 

3 ways to avoid dead stock

Offloading dead stock is challenging, but you can get rid of them by following these practices.

Put them on sale

A unique opportunity appealing to shoppers is clearance sales. Market the dead stock with a discount price, even deep sales, and see it be sold quickly.

Free gift

You may delight customers by offering a freebie consisting of unsellable products. This expresses your care towards your customers while you’re getting rid of low-demand items. You hit two birds with one stone. 

Donate

There’re businesses that donate inventory and write-off. It is an excellent way of appreciating businesses and giving back to communities.


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