It’s a New World of Inventory
Today’s businesses need to be lean with their inventory, diligent with cash flow, and look to maximize recoveries. The majority of brick and mortar businesses that closed throughout the pandemic may now be faced with the challenge of selling all types of excess inventory, such as last season’s styles, discontinued items, or even products with near-dated expiry.
According to a recent study by McKinsey & Company, “The expected value of excess inventory from Spring 2020 apparel collections is estimated at $160 billion to $185 billion worldwide, more than double average levels.” **
While maximizing returns on an inventory item is the ultimate goal, we often overlook opportunity costs, ie. “What other resources are being drained by me sitting on this inventory?” So we encourage you to ask yourself these questions:
■ Is your inventory tying up cash flow that could otherwise be spent on more profitable stock?
■ Is your inventory costing you shelf or warehouse space that could otherwise be used for product that turns over quicker?
■ How much time are your staff dedicating to this inventory?
Top 4 Ways to Sell Your Excess Inventory
Just as the human race has always done, we adapt in times of crisis and challenge ourselves to think outside the box. Luckily there are a number of relatively simple options you can try to sell your excess inventory:
1) Put items on clearance – This moves inventory, attracts customers to your store or online and perhaps they’ll buy other things as well. The route for this depends on whether your customers are businesses or consumers. If you sell directly to distributors or businesses, then approaching them with a different or special deal on finished goods might be beneficial. Regarding the end-consumer, often people will be swayed by a deal on an out-of-date model compared to getting the latest and greatest version.
2) Explore the options of donating the inventory to a charity – In addition to helping a charity, there may be tax advantages to donating inventory vs liquidating. (Always talk to your accountant first!)
3) Sell everything in one shot to a company specializing in excess inventory.
There are definitely benefits to working with or selling to an experienced liquidator. Quite often you’re able to move all of your dead stock in one quick sale, freeing up valuable resources, including cash flow and warehousing space. This allows you to focus on your newest inventory.
4) Return to Vendor (RTV) – We often advise businesses to work closely with their vendors and suppliers. It may be beneficial to inquire with your vendor about the possibility of returns. Depending on the type of relationship you have with your suppliers, perhaps there may be an opportunity to sell the inventory back to the supplier at a price that works for all parties. A supplier may take back the inventory for less than you paid for it, but that amount may be more than you could have recovered elsewhere
What’s Your Next Best Move?
When choosing the best inventory reduction option for you and your business, be sure to take into account any variables or opportunity costs associated. Essentially it comes down to time vs. resources and money (i.e. Asking for more money for inventory which costs you that much in warehousing over the next few months, it may not always be more profitable and sometimes worth taking less to avoid the headache)**https://www.mckinsey.com/industries/retail/our-insights/fashions-digital-