Handling Excess Inventory

Blog / Bookkeeping

Handling Excess Inventory

Retailers far and wide have experienced the inconvenience of having too much inventory.  Quite simply, excess inventory is inventory that retailers are unable to sell.

Many problems arise when you have excess inventory. Obviously, inventory costs money, so when you are stuck with excess inventory, capital is tied up. This means less money to reinvest into the business so you may be foregoing opportunities to grow. Inventory requires physical space, either in the storage room or on the sales floor. Such space is invaluable to retailers. Therefore, physical space is best reserved for products that will sell quickly.  

Excess inventory can also result in an inventory write-down if the inventory can't be sold at the expected price. To prevent the accumulation of excess inventory, here are some ways retailers can handle excess inventory.

Best practices for handling excess inventory

Re-Merchandising

Poor purchasing on its own cannot be blamed for slow-selling inventory. Marketing and positioning play a significant role in getting products off of the shelf. Re-merchandising is an effective strategy for moving slow-moving inventory.

Product Positions

You should test various product positions on the sales floor. Moving products, changing display placement and adding new and attractive signage are all great methods for bringing attention to your excess inventory.

New Dust-free Products

Also, ensure that your products appear new and dust free. Products with old, worn out price tags are likely to be perceived as being inferior to newer products. Perception is paramount, so you should ensure your products are effectively positioned and displayed.

I remember growing up in my family’s hardware business.  Inventory was literally out of control.  Only my dad knew where things were and that meant that when he went out of town sales would actually fall.  Don’t get into this trap.  More is less.  Yes - you need products to sell products, but you need to balance this so that your store is not cluttered.   

Sales or Events

If you are in a rut, consider holding a flash sale or store-wide event to attract customers to your store. Large crowds imply a sense of urgency among consumers, leading them to believe that if they do not purchase now, you will be sold out later.

Bundling Products

Bundling products together is another effective strategy for liquidating overstock. Group products together and sell them for less than when sold individually. Pairing slow-moving merchandise with faster-moving merchandise will help sell slow-moving products. Or, try bundling complementary products, such as socks and shoes. Also, offer discounts for customers who purchase multiple units of the same product.

Loyalty Program

Another way to move excess inventory is to offer it to customers as an incentive. Consider the cost of your inventory to be a marketing expense. This is ideal for cheaper items and items that truly do not sell. Offer these products to your customers as incentives for signing up for your loyalty program. Or, offer them as incentives to increase the basket value of their purchases (i.e. spend $100 and get a free hat).

Buy Back

Lastly, speak to your vendors about buying back slow-moving 0r excess inventory. Ask if they are willing to exchange your inventory for credit or new merchandise. It might seem like a bad idea to pay a restocking fee, but getting your cash out and reinvesting it into something that will either sell more quickly or improve your revenue will probably result in a fast recovery of this loss.  

So get out your duster, shuffle your stock, and get your excess inventory out the door. Having a robust inventory management system is a great way to keep track of excess inventory. Our Enkel team can help streamline your bookkeeping process and ensure your inventory well managed and accounted for. Contact us today to learn more about our accounting and bookkeeping services

Omar Visram
About Omar Visram
Omar Visram is the Co-founder and CEO of Enkel Backoffice Solutions Inc. Headquartered in Vancouver, Enkel provides bookkeeping, payroll, accounts payable and accounts receivable services to over 200 organizations Canada-wide.