Excess inventory can challenge retailers, affecting their cash flow and operational efficiency. However, there are several effective strategies to manage and mitigate this issue. Here’s a ranked list of the top ways retailers deal with excess inventory, along with examples:
1. Discounting and Clearance Sales
Offering products at discounted prices to entice customers into purchasing items that are otherwise not selling.
Example: A clothing retailer might put last season’s fashion items on a 50% off clearance sale.
Product
Original Price
Discount Price
Days to Sell
Summer Dresses
$50
$25
30
Wool Scarves
$20
$10
45
2. Selling to Off-Price Retailers
Off-price retailers purchase excess inventory at reduced prices and sell them at a discount.
Example: A home goods store might sell its overstocked furniture to an off-price retailer like TJ Maxx.
Product
Original Price
Sold to Off-Price Retailer at
Retailer Selling Price
Dining Tables
$200
$100
$150
Office Chairs
$80
$40
$60
3. Bundling Products
Combining less popular items with popular ones to create a value pack which increases sales.
Example: A tech store might bundle a slow-selling tablet with a popular smartphone.
Bundle Components
Individual Prices
Bundle Price
Days to Sell
Tablet + Smartphone
$150 + $300
$400
20
Earphones + Charger
$30 + $20
$40
15
4. Repackaging as Incentives
Repackaging products and offering them as incentives or freebies with other purchases.
Example: A skincare store repacks unsold hand creams and offers them as free gifts with purchases over a certain amount.
Incentive Product
Original Price
Free with Purchase Over
Hand Cream
$15
$50
Face Mask
$10
$30
5. Donations for Tax Write-offs
Donating excess inventory to gain tax deductions while supporting community causes.
Example: A bookstore donating excess books to local schools and libraries.
Donated Product
Original Value
Tax Deduction
Donation Recipient
Children’s Books
$500
$500
Local School
Novels
$300
$300
Community Library
6. Buy Now, Pay Later
Offering flexible payment options to customers, encouraging them to purchase higher volumes.
Example: An electronics retailer offers buy now, pay later options for their overstocked inventory.
Product
Original Price
Buy Now, Pay Later Terms
HDTV
$1000
4 payments of $250
Home Theater System
$500
5 payments of $100
7. Selling Online
Utilizing e-commerce platforms to reach a broader audience for excess inventory.
Example: A specialty boutique setting up an online store or marketplace to sell unsold apparel.
Product
Original Price
Online Price
Selling Platform
Cocktail Dresses
$120
$90
Rent The Runway
Sunglasses
$50
$35
Amazon
8. Automation and Inventory Management Systems
Using technology to streamline inventory processes, reducing the likelihood of excess stock.
Example: Implement an inventory management system like Lark to optimize stock levels.
