Knowing When To Let Go

You’ve been staring at the same inventory for so long it’s almost blended into the background. It’s time for an honest heart-to-heart: it’ll be best for everybody if you just part ways. We’ve put together some tips and a handy chart to show you how to make closeout and overstock decisions quick and painless.

Most shop owners and employees have experience with product they just can’t seem to find a home for. We all know these items: they take up shelf space, have packaging that’s noticeably haggard and faded, and have been recounted in so many rounds of inventory it’s like they’ve become permanent shop fixtures.

While it may seem harmless, letting these products stagnate on your shelves not only ties up your cash flow and open-to-buy freedom, it flirts dangerously with making your shop seem out of touch. These products have to go!

We’ve simplified a process to help you with your decision making when it comes to slow moving or stuck inventory. We encourage you to pay attention to this strategy in peak selling season, because waiting until you have time will not yield results when sales have diminished.

We’ll start with five principles to always keep in mind.

1. Create a Schedule

We recommend reviewing your red flag inventory at the end of every month. Introduce smaller discounts at first, but plan to incrementally increase them when necessary. It will soon become apparent which items need deeper discounts than others—because those items will still be with you. Stay organized and on a schedule, and inventory will start to open up faster.

Seasonal stress alert: It’s hard to find time during a busy summer to do this. We recommend taking an hour or two for review before or after store hours when you don't have to attend to customers.

2. Organize Your Display Area

It’s a common sight in clothing stores to see a dedicated discount area where customers can get a deal. It’s a draw and it works! Help yourself move through your product quicker by providing a dedicated area for your 'deal shoppers'.

And make sure you keep that dedicated area organized and looking good.  Don't create what might look like a junk pile. And don't put ALL of your inventory out for a single item. For example, if you have 20 closeout handlebar bags, put three to five out to create the illusion of scarcity. This will not only help you move those items faster, it’ll look a heck of a lot cleaner than having all 20 out at once.

Something to think about: You may need separate dedicated areas for hard and soft goods.  Experiment and see what helps you move product the fastest.

3. Rethink Lost Margin (Even If You Can't See It)

Nobody likes to lower their margins or lose money on an investment. But maybe a change in thinking will help lessen the blow.

When discounting items, don’t focus on the fact that you’re shrinking profits; focus on the fact that you’re opening up your inventory for newer, higher turning items. While it’s true that discounting reduces profit margin, so does stocking an item that will not sell. Carrying costs add up. The longer you carry an item, the more likely you'll have to increase the discount to get rid of it. Be bold. Be intuitive. Trust your gut to know when a deeper discount will drive the sale and strike while that iron is hot! Then you’ll get that dead product off the shelf and resurrect sales by restocking with a new item that WILL sell.

4. Get Your Sales Staff On Board

Once you’ve decided to introduce a discount, make sure your sales staff knows that these are items that need to move. We all like to sell the latest, greatest, and coolest products to customers, but that doesn't help move dead or slow inventory.

So when you institute a discount on those chosen products, or if you shift them to a designated discount table, do not abandon them there—they will not sell on their own. Enlist your staff to help out. Make sure your employees pay attention to your customers’ needs and show them items they can get a great deal on!Your customers and your bottom line will thank you.

5. Discern Front-End Problems from Ongoing Issues

Items that consistently fall in your overstock category need to be reviewed. Why is this happening? Were expectations too high? Did customer interest shift? Has a once-popular item been replaced by something new in the marketplace?

Identify why too much is being ordered, or why it's being ordered too often. Constant review of your inventory helps you distinguish a front-end problem from an ongoing issue, allowing you take appropriate action and alleviate larger inventory problems and stress.

Sell Your Stuff!

We’ve created a step-by-step procedure to help you decide how best to address slow to sedentary product. Here you’ll find the process explained in detail, followed by an abbreviated chart you might useful around the shop.

1. Identify Items That Need To Move and Categorize Them.

This is based on your 'gut check' or if you do any form of forecasting.

If it’s CLOSEOUT, the items will be discontinued in the near future (or already have been) and something newer and better will be drawing the attention of the customer.

If it’s OVERSTOCK, too much inventory was bought and it is not selling down fast enough at full price. (For argument sake, over a year's worth of inventory). Remember, these items are ongoing.  They will not be discontinued any time soon to the best of your knowledge... or QBP's.

2. Set A Stock Out Goal  

If it’s CLOSEOUT, the product needs to sell through, so the goal is usually a date.  What is realistic based on sales?

For OVERSTOCK, Set an inventory goal - Do a little math. If you have 100, but you're averaging 10 sales a month in prime season with four months left to go, you're probably overstocked by 50 units (give or take).  Set an inventory goal of 10 or 20 units.

3. Set A Discount

If it’s CLOSEOUT, Start with a reasonable discount, like 10%. Based on how well or poorly the item has sold, use your best judgment on where this needs to start.

With OVERSTOCK, you’ll have a goal and timeline, but we’d still recommend going the reasonable route, starting with 10%. Again, use your best judgment based on how well or poorly the item has sold.

4. Time To Review

  • Look at your closeout and overstock after some time has passed (30 days is our recommendation).  Has it been selling well at the current discount?

If it’s been selling -

  • Great!  Leave the discount if it seems like it will sell through at this price.

If it hasn’t been selling -

  • That's okay, nudge the discount up a bit more.  Continue to do this at your review cycle until you're getting the sales you want to see.

5. Review Again

  • If the answer is Yes, that’s great! Have a beer and order some cool new product on your next order.
  • If Not, that's okay, nudge the discount up a bit more.  In the case of overstock however, remember, these are items you WANT to stock, so don't go deeper than 20%.  You still need to sells these at full price when the discount gets removed.

Is it selling better yet? 

  • Hopefully, you’re enjoying that beer at this point. If it won’t sell though, you may need to write this inventory off.  Donate it to a cycling event (if applicable), give it to an employee that has worked hard or do whatever else is appropriate.  Not all inventory can be sold.  Such is life.  It's better to be done with it and move forward than let it take up any further shelf space.

For more tips on merchandising hard to sell items, especially clothing, read our article with Mercedes Ross here.

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