Dead stock: Meaning, cause and solution

Dead, excess or obsolete, whatever you call it, stock that isn’t selling is costing your business dearly.

Dead Stock Meaning:

The term “dead stock” is frequently used in the retail industry, particularly when speaking about vintage clothing or streetwear such as trainers. Other businesses may call is overstock, excess stock or obsolete stock, but in essence these terms all refer to stock that is unsold and (likely) won’t sell given more time on the existing sales channels and marketing efforts. Seasonal items, discontinued SKUs, out of date models are all examples of cases where this may happen and we will go into the causes and solutions a little later.

Why is it called Deadstock? This term is quite literal, in that the stock is not turning over or “live” for sales. It has been discontinued and never been sold so all manufacturing/procurement and sales processes have ceased.

Causes of Dead Stock

Over ordering

High minimum order quantities (MOQs) or attractive volume discounts from suppliers and even human errors including communication breakdowns can all result in you having far more products than you can sell.

Supply delays

Issues with raw materials, sickness or transport can lead to products arriving late for important sales periods. For example, if Christmas products aren’t delivered to you until December you may have missed weeks of potential sales and how have a large amount of stock to sell in a very short time before they are no longer attractive to consumers. Similarly with seasonal goods such as paddling pools, if your shipment arrives 2 weeks after a heatwave you are likely to have missed out on a large volume of sales when demand spiked and shoppers went to your competitors to beat the heat.

The British Chamber of Commerce is currently suggesting that more than 1/3 of businesses they surveyed are expecting delays on the arrival of their products of up to 4 weeks, due to Houthi attacks on ships in the Red Sea. One of the busiest shipping routes globally, with 12% of annual global trade passing through its waters.

Inaccurate demand forecasting

Demand can be impacted by an endless number of factors from the weather, to pop culture influences, marketing, PR and even macro influences such as the political environment and consumer confidence. In accurately forecasting your sales can result in missed revenue if underestimated and deadstock if over estimated. Ensuring your forecasting is realistic and based on as much data as possible will help to limit the gap between forecasted and actual demand.

Poor return on marketing spend

Brands with grand marketing plans may increase stock of certain items it plans to dedicate more marketing spend towards,  such as brand collaborations, Influencer gifting campaigns or in the run up to an event such as the world cup. Projects like this can be difficult to forecast return on as they are reliant on the reputation and engagement of the external parties to sell the products as much as the spend.

Similarly, when testing new marketing channels such as TikTok or out of home advertising, there will be a period of testing and learning to find out which audiences are receptive to the assets, or there could even be negative reactions to assets developed, as we see when brands get ads reported to ASA (advertising standards agency) and are required to remove them. In recent history, this has been the case with brands such as Calvin Klein, M&S and H&M.

Brands should monitor their average customer acquisition cost and adjust any underperforming campaigns as soon as possible to give them the best chance of reaching their sales goals.

How to get rid of dead stock:

The worst thing you can do is to let dead stock pile up in your warehouses as this will only continue to increase the negative implications highlighted above.

The longer products that aren’t selling sit in you or your fulfilment partners space, the more storage costs will be applied and as the stock accumulates, there will be less space to use for the faster moving stock, reducing your ability to make the most of economies of scale and return per meter of space you are also paying rent on. This stock is not just not making you money, it is actually costing you more and more the longer you hold onto it.

Run a warehouse/sample sale

Running one off or in-frequent sales either from a physical location or online can be a quick and easy way to make a partial return on stock that isn’t suitable for normal sales channels, while also getting some brand exposure. Advertised through your businesses social channels to existing customers and even eventbrite, this kind of event can get picked up by specialist media and easily gain traffic as these items are usually heavily discounted – around 70%.

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Start a new sales channel

Many brands are starting communities for selling pre-loved, sample or dead stock. Using channels like depop, vinted and ebay to distance these sales from the promotion of the new stock. This can also be seen as a more sustainable practise to consumers and can easily be turned on or off when needed for a more flexible solution.

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Sell Mystery Bundles

Depending on the range and type of products you have, it may be possible to offer mystery bundles on your main ecommerce site. This will be a set cost for a number of items that can be prepared in advance. Having a limited number on offer can help to create a sense of rarity and entice new and existing customers to purchase.

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Offer them as free gifts

Similar to the above, offering these items as a free gift can be a great way to attract customers and increase basket size if combined with a minimum spend threshold, while not losing out on sales for other products.

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Partner with another business

Stock that is dead for your business may not be to another, for example subscription box brands, event companies or schools that would gain value from your items and potentially need them in large quantities. These businesses often have tight budgets so look for stock like this that may be available at a lower cost but has a high RRP to advertise. Partnerships like this can also have other benefits and work on an ongoing basis.

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Donate them

Lastly, in order to cut your loses and ensure you are not facing any additional costs associated with dead stock, you can often donate it. Charities such as the Trussell Trust and Fare Share will accept donations of food, Apparel and home items are widely accepted and even beauty products can be used by shelters and charities that help women back into work.

At Huboo we have helped to donate over 30 pallets of food to local organisations on behalf of our clients, as well as thousands of products to shelters and charities in and around Bristol.

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How to avoid dead stock:

Effective inventory management practises are essential to avoiding all sort of costly mistakes and incorrect forecasts. Fortunately in the digital age there are many tools you can use to help you keep track and make better decisions for your business. Here are a few factors to consider before ordering stock from a manufacturer:

Historical data
External environment
Marketing

Historical data such as previous years performance can be a great place to start. What are the trends year on year? Did you have loads of units left over last year? How have this years non-peak sales performed compared to the same period last year?

Layer external factors onto this. Political environment, industry trends, weather patterns. What do these tell you about consumer spending? What impact to they have on the audience and product range you are targeting? For example, high interest rates or wars could result in fewer people taking holidays. Regulations and attitudes towards sustainability could reduce demand for items made of certain materials etc.

Finally the impact of your marketing strategy. Has your marketing budget increased or decreased? Did you have any viral videos, pop culture connections or PR that may not take place this year? Have your competitors had any of these events that could drive demand towards their products over yours?

There are many tools available, specifically to help ecommerce sellers to predict this demand and place orders with suppliers at the right time. We are partnered with Inventory planner who help brands do just this but there are many other tools available.

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