In Part 1 and Part 2, we talked about grading your inventory and developing an action plan. But what do when your action plan items for old stock don’t pan out, and you’re still stuck with a surplus?
The Hard Psychology of Waste
Getting rid of old, unsellable stock that’s cluttering up your warehouse is absolutely one of the best things you can do for your inventory, but that doesn’t make it easy to throw away stuff that “might” one day sell – especially if you’ve experienced tossing something that a few days later someone comes in asking for. (I’ll admit we’ve had that happen a time or two, though it’s a lot less common than the opposite, which is that item that “might” sell just sitting in the warehouse forever).
If the thought of tossing inventory in the trash and writing it off feels “risky” to you – you’re pretty normal! A good inventory action plan will only view “tossing” an item as a last resort. In addition to offering increased commissions, sales, customer incentives/appreciation, etc. here are some other things we’ve incorporated into our inventory action plan to rotate out that old stock:
Vendor Opportunities
If you’re willing to hop on the phone with your vendors, there are a few perhaps unexpected ways that you can save some of your old inventory from the trash.
You’ll never know if a deal could have been on the table unless you ask for it.
EXCHANGE OLD STOCK FOR CREDIT
Contact your vendors. Let them know that you have a bunch of old items taking up space, and they’re keeping you from purchasing new stock. Many vendors are more than willing to buy back your old stock with an account credit that you can use to purchase newer items for your inventory. It’s not always a 1:1 exchange, but even at $0.50 on the dollar, that’s better than the trash. (In my experience, vendors typically won’t take back discontinued items.)
I’ve even seen a few instances where a new vendor was willing to pay credit for a showroom to throw away their competition’s stuff as part of a deal to get in the door and start working with a showroom.
Be bold – don’t be afraid to ask! You’ll never know if a deal could have been on the table unless you ask for it.
SELL OLD STOCK IN BULK
If you have a large amount of one item that you just can’t bring yourself to toss, you can also look into vendors that specialize in selling bulk overstock items. Websites like overstock.com can be a great resource to help move some old inventory and make room for the new.
Swap Outs
We tend to only think about new orders when we’re trying to move inventory. But what about older orders that haven’t shipped yet? With supply issues recently becoming more of a reality for most, swapping items has become a more acceptable business practice.
To be clear, I’m not suggesting “blind” item swaps, where a totally different item is switched in a customer’s order without their approval. You might be surprised to hear this – but most customers will gladly consider an item swap if you offer a discount, a no-cost upgrade, and/or let them see that the item you’re suggesting is an identical match.
How often have you reviewed your inventory and then gone back through previous orders to see if there are good opportunities to offer those customers a swap? It could be worth your while to take a peek before you take more drastic measures with your overstock.
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AN INVENTORY NINJA-LEVEL HACK:
When grading your inventory, group items into pricing tiers ($1-$50, $50-$100, $100-$200, etc.). Then you can offer new customers or customers whose items are on backorder a free upgrade to an item from the next pricing tier. You’ll be surprised how much “slow” inventory you can move by offering an upgrade!
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Events, Incentives, and Bonuses
In addition to holding events and sales for customers that feature our Hot Deals (our code for D and F graded items), we also offer our staff bigger commissions for selling overstock, as well as other bonuses and incentives. I realize that’s not a new idea for most, but if you combine the staff incentives with the Swap Outs idea above, suddenly it opens the door to incentivizing more than just sales staff.
For example: We recently implemented a large bonus for the WAREHOUSE staff that was attached to moving through a target amount of overstock. They were motivated to pay attention and be on the lookout for items that could be swapped out for something that was on backorder (or that hadn’t been ordered yet). They’d then contact the sales staff to see if that item was a good swap-out.
The results were incredible – the warehouse got the highest level bonus, and we moved through a TON of overstock! Your warehouse staff most likely has more contact with overstock items than anyone else. If they are incentivized to help the sales team find swap-outs, that can be a compelling addition to your inventory action plan.
When All Else Fails
If you’ve gone through all of the motions and jumped through all of the hoops, and you still have stock sitting in your warehouse that isn’t selling… my recommendation is that it’s time to bite the bullet and write it off. Take the tax break, get the space back.
Yes, when that one-in-a-million customer comes in asking for the 5-year-old fixture, you’ll have to tell her you don’t have it. But in the meantime, you can be better, more efficiently serving the hundreds of other customers that walk through your doors.
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Is Your Inventory Eating You Alive?
Inventory management is an essential part of our business. In this 3-part series, we’ve discussed developing an inventory grading system, how to attach useful and specific action items to it, and how to finally get rid of that overstock that’s weighing you down.
If you feel like you’re buried in boxes, then it’s time to change your inventory mindset and start making it work for you, not the other way around. To read more about this, check out Part 1 and Part 2.
