Excess merchandise can become a problem for any business that does not have proper inventory management tools in place. It is a situation that involves a waste of resources and a loss of revenue, whichever industry the business is operating in.
It is important for a business or an online store to deal with excess inventory sales. An e-commerce website or a retail shop that is in this situation needs to sell excess inventory. When you have too much stock, you need to come up with strategies to clear it out or sell it off. To do that, you need to change your current promotional and pricing strategies, because your priority is to clear the stock that you have piled up before you can introduce or manufacture fresh stock.
What is Excess Inventory?
When you have more stock of a particular product or a complete product line than you can sell within a timeframe, you are in a situation of having excess inventory or excess merchandise.
In such a situation, the best thing for a business to do is to figure out ways to sell excess inventory. If it cannot do that, it will have its space occupied with old and excess merchandise, which will stop it from manufacturing and keeping new stock that is more in demand by the target market.
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Selling excess inventory can be tricky. The reason you have excess merchandise is probably because there is something wrong with your product that it’s not able to sell, or has become outdated, which means it is now too late to sell it. Therefore, you need to act smart and experiment with your pricing strategies to sell excess inventory.
Excess inventory sales are observed to be held by businesses or online stores that have already tried all other forms of marketing strategies to get rid of their stock on time. They are used as the last resort to clear out stock when there is no other way to cash out the money stuck in the excess merchandise. To sell excess inventory, you need to have a long-lasting plan figured out that will help you increase your revenue by raising your prices again once your inventory sale is over.
Before discussing the strategies that help you sell excess inventory, let’s talk about the situations that cause a business to end up with excess merchandise.
4 Reasons You Might Have Excess Inventory
If you have excess merchandise, it clearly means you have not been managing your inventory well. You might have been too caught up in the other aspects of your business that you forgot about overstock inventory problems, which put you in this situation that’s now curbing your sales. Here are four reasons you are probably in this situation.
1. You Are Not Managing Your Orders Properly
Order management is key to effective inventory management. It is one thing to manage your marketing activities to drive demand for your products. But it is also equally important to keep track of when sales come in and customers place orders with you. Failing to do that will get you stuck in a situation of excess merchandise, and then it will be difficult to sell excess inventory.
If you are running your business via an e-commerce store, you need to have proper tools on your website that help you manage your orders effectively. The best order management tools help you keep track of the status of each order. If there is a problem or hiccup in the delivery of any order, the system should notify you about it on time, so that you can come up with a timely solution, or at least inform the customer about the issue.
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If you manage your orders carefully, not only will your sales run smoothly, but your customers will also be satisfied. It is not good for your brand image and sales to keep your customers waiting too long in case there is an error with an order. Even with an inventory sale, it is best to track your orders as and when they come.
2. You Are Focused More on One of Your Product Lines
A business can have many product lines, especially if it is doing well in sales. Some businesses handle multiple product lines by cross-merchandising. When a business penetrates a new market, it often considers product line extensions or coming up with an entirely new line of products.
In these scenarios, it is normal for the business to shift its focus from its existing target markets to the new markets it penetrates, out of the excitement of getting an additional stream of revenue from there. This could become a problem if your shift of focus causes you to ignore the marketing efforts geared towards your original or existing customers, leading you to stock up excess merchandise for the products you were selling to those customers. If that happens, you would need to sell excess inventory at a relatively lower price. When you liquidate inventory instead of making proper sales, your profit margin is relatively low.
To avoid having to sell excess inventory, you need to keep your focus on marketing and promoting all your product lines at the same time.
3. The Demand For Some of Your Products Has Changed
A good business is one that constantly keeps track of the changing market trends and competitor analysis. Market demand keeps changing all the time. People’s preferences and tastes for specific products revolve around the circumstances they go through in life, and the substitutes they have available in the market. If you do not keep track of these factors regularly, you might not only miss opportunities for business expansion but also ignore any drop in sales you might face.
If you have not been focusing on the changes in trending products, you might face a dip in demand that you wouldn’t have expected. When you do not reduce the number of units manufactured for a product that’s going through a drop in sales, you would have to sell excess inventory at lower profit margins later on. This is not good for your business and needs to be taken care of in the preliminary stages of the issue.
4. Your Competitors Are Ahead of You
Sometimes, you might lag in the competition you have with other firms operating within your industry. If you do not conduct your SWOT analysis properly, you wouldn’t know much about all those firms that compete with you. They might come up with better quality products and offer them at lower prices without you finding out until it’s too late. You would only realize the gravity of the situation when you’ll sell excess inventory at clearance prices.
If you do not want to get trapped when you have to sell excess inventory and incur losses, you need to always monitor your competitors’ strategies so that you can put up with the competition. There might be new players emerging or older ones coming up with more creative marketing plans.
These were four reasons you might be stuck in selling excess inventory. Now let’s talk about some solid actions that you can take, which help you either avoid a scenario where you pile up excess merchandise or sell excess inventory in a way that actually allows you to make good money out of it.
3 Strategies to Make Money With Excess Inventory
Normally, when you sell excess inventory, you incur losses, or at least, you get lower profit margins. But in certain scenarios, you can flip the situation in your favor and end up making more money by selling excess inventory. Here are 3 different ways to do that.
1. Sell it Online
If you are running your business through brick-and-mortar outlets, you can increase your sales by selling your products online. This is useful if you are looking to sell excess inventory. When you sell online, you can target an expanded customer base.
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What you’ll need to do to sell your products online is build an ecommerce website, if you do not already have one. By using Strikingly, you can build and launch a complete online store in just a few hours, without having to hire a web developer or write any code on your own. Just sign up for an account in Strikingly, and choose the best design for your online store out of the many store templates we have available on our platform.
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2. Hold an Inventory Sale for Clearing Stock
If you run an inventory sale, it is preferable to inform your customers about your intention. If you are running a boutique, for instance, and want to have a sale for clearance stock, it is best to announce that. When customers find out that you are selling excess inventory, they will be enticed to buy from you in bulk so that they can save money on bulk purchases.
If you are running an online store, you can put up banner ads to inform your customers that you are selling excess inventory and offering lower prices.
3. Start Bundling
Bundling products is a way of upselling your excess merchandise so that you can make more money while you sell excess inventory. It means you create a mix of your products that are slow at selling and offer them all together as a package or bundle at a discounted total price.
Bundling your products like this gives an incentive to customers to buy even those products from you they wouldn’t have bought otherwise. By offering bundles in your inventory sale, you can still end up making more money than keeping the excess merchandise piled up for a long period.
Now that you know how to make more money when you sell excess inventory, you can use these strategies to minimize your losses. It is still better if you can avoid the problem of excess merchandise altogether.
By running an ecommerce website built in Strikingly, you can get access to multiple tools and features that will help you keep track of your orders, customers, and sales in a way that you won’t be avoiding any of these key aspects of your business.
Strikingly is a feature-rich website building platform, where we support you in every way to ensure the smooth growth of your business.