5 Most Common Causes of Dead Stock in Retail
Merchandise that has not been or cannot be sold is referred to as dead stock. This type of product has never been worn, used, or sold and has been in inventory for an extended period of time. It often has original packaging and tags.
So what causes dead stock in your store? Here are the 5 most common causes:
In this case, there is something wrong with the product. It could be poor engineering or design. Shoe stores, for example, sometimes get products that simply don't fit customers' feet correctly. In some cases, it was marked as a size 9 but fit like a size 11. Defective products are the least troubling type of dead stock because you can return them to be fixed. For example, you can contact the manufacturer and request a return authorization (RA) for the merchandise. The vendor will issue you a credit for the stock and in many cases even pay for the freight back to its warehouse.
Customers Hate It
This is the worst kind of dead stock. You bought it, but the customers hate it. The best thing to do in this situation is to minimize your loss by slashing the price and moving them out as fast as possible. Having merchandise in your store that customers do not like hurts the other stuff in your store, and since cash is king in retail you need to get whatever cash you can and move on. Otherwise, that product is just losing you more money sitting there. Slashing prices to rid yourself of this kind of dead stock could mean price cuts of as much as 50 percent or more.
You Love It
Too many times, retailers hold on to dead stock as a result of ego. They refuse to admit they made a bad call on that product and want to prove everyone wrong. As with products customers hate, this type of dead stock costs you money. Aside from not selling, this dead stock is taking up space on shelves that could have been used to fill in products in greater demand. It's best to admit you made a mistake, free up whatever cash you can by dumping the dead stock, and focus on more profitable products.
Poor communication between a buyer (often a store owner) and the sales staff can lead to inventory sitting as dead stock simply because no one knows how to sell it or understands why a customer would want it. To prevent this, make sure there is a plan in place to educate those on the sales floor about every product on the shelves.
You may have different products that are too similar to one another, and the sales staff may be pushing one while the other just sits on the shelves. Before introducing new items to your store, invite your staff to view samples of those items along with what you already sell. This visual exercise can really help identify duplicate items in ways looking at pictures cannot.