As uncertainty abounds and the market continues to tighten, it is critical for your business to be as lean as possible. Inventory management is often overlooked but important to consider when tightening the belt. One major reason business owners and entrepreneurs hate dealing with inventory is because it requires constant attention, consistent effort, and it’s a never ending battle!
The most common issue is slow moving and excess inventory. This usually happens at the beginning of the year and end of a season when new products are demanded. It is better to clear your stock as opposed to clinging on to these items hoping that someone will suddenly buy them.
Here are some things to consider when discussing slow-moving and excess inventory:
- Cash is King
Your business needs a healthy cash flow. As such, selling an item at a low margin or even a loss can be better than taking up shelf space.
- Sell by 90 – 120 days
If items have not been sold within this timespan, find ways to get rid of them.
- Hoarding hurts
The opportunity cost of keeping a slow-moving item is the possibility of stocking an in-demand item.
- You are not alone
All retailers deal with slow-moving and excess inventory. If they can handle it, so can you!
With that, here are some great ways to convert slow moving inventory.
Sales + Discounts
Popular and proven, cut the price and create demand for the good. You can try anywhere from 35 to 70% which seems like a lot but remember these items need to go. Examples of different sale types:
- Clearance sale
- Flash sale
- Seasonal sale
- Specific item sale
Bundle offers + Promotions
Another popular option, bundling is when you take a group of products and sell them together for a slightly lower price than if they were sold separately, for eg meal combos at fast food restaurants. You protect your margin while moving merchandise. Examples of different bundling types:
- Bundle multiple units of the same product
- Pair slow-moving products with fast-moving products
- Pair with complementary products
While there should be a prior contractual understanding, there is the possibility that the suppliers can facilitate returns or exchanges. Once the excess inventory is someone else’s problem, it is wise to analyze why the item was a slow mover, was it wrong for your market? Was it over priced? Under priced? Would you, in different circumstances, buy it again? What would you replace it with?