5 Most Common Causes of Dead Stock in Retail
Merchandise that has not 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:
- Defective Product. In this case, there is something wrong with the product. It could be poor engineering or design. In my shoe stores, we would sometimes get in products that simply didn't fit the customers feet right. In some cases, it was marked as a size 9 but fit like a size 11. Defective product is actually the best type of dead stock you can have because it can be fixed. For example, you can contact the manufacturer and request an RA (return authorization) for the merchandise, In this situation, 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 and slash the price and move them out as fast as possible. On one hand, having merchandise in your store that customers do not like hurts the other stuff in your store. Perception is reality. On another hand, 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. And by slash I mean slash - not some 20% off sale.
- You Love It. Too many times, I have worked with retailers who had dead stock as a result of ego. By this I mean that the retailer refused to admit they made a bad call on that product (mistake) and want to prove everyone wrong. As with the second category above. this dead stock costs you money. How? Consider the number of times you missed a sale because you were out of stock on an item. If you had simply "dumped" the dead stock and freed up some cash, you could have filled-in that item and not missed that sale.
- Poor Communication. This one is a result of no communication between the buyer (most times the owner) and the sales staff. I have seen inventory sit as dead stock simply because no one knew how to sell it. Or no one on the sales team knew why a customer would want it.
- Duplication. Not often considered is duplication as a the creator of dead stock. You may have products that are too similar and the sales staff loves the other one and not this one. So, it just sits on the shelves. In my shoes stores, we used to do a "style out" when we came back from the buying show. We laid out samples of everything we bought or were considering and looked for duplication. The visual really helped me see it. It is hard to do from pictures.