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Eliminating Dead Inventory

Why You Should Want Your Money Back

The title of this article; isn't that what people say when they want to return something to your business? They have a product they do not want and they want to have their money instead of the item.

In our business, it works a little different. When there is an item that does not sell as you had anticipated, most vendors are not going to take it back. Of course, if it is a food item that spoils, you wind up throwing it in the trash can. Unless you are sitting with a lot of cash in your business checking account, the only way you can get money to buy new inventory is by getting rid of the dead inventory in your business.

Just as the customer is insistent to get their money back when they return a product to your business, you need to be saying the same thing to yourself and then taking action to get rid of the dead merchandise. Then with the cash you receive, you can purchase new inventory from which you can make a profit.

So, instead of just looking up the cost of the item and determining a sale price for it, what can you do to get the item off of your shelf and the most money back into your checking account? Here are eight suggestions for solving this problem.

Create a dutch auction - Collect all of the dead items, clean and repackage them if necessary. Put a new price tag on them with the new price being the "full list price." Place these items on a table on a Monday morning and use a sign which announces any item on the table is now 10% off. The sign also announces that next Monday any item left on the table will then be 20% off, the following Monday everything will be 30% off, and for the fourth week everything remaining on the table will be 40% off.

Couple a dead item with a hot selling item as a bonus - Again, clean up the packaging, but now offer the dead item as a "free bonus" when the hot selling item, at full markup, is purchased. Perhaps as you are creating baskets for individuals or corporate customers, you can "tuck away" one of these dead items in each basket.

Create an end cap with all items being one price - Customers are often looking for a gift with a price category already in mind. If customers can look at a table, end cap, or display and see that every item is "$20 or less", they are more likely to stay in one place and make their selection.

Use a spotlight table - A spotlight table is placed at the front of the store so that it is the first thing a customer sees when they walk in the door. Think about how many times you have gone shopping, looked at several items, and then decided to purchase what you first looked at. The same strategy works in this situation. Signage promoting the benefits of the product, and the fact that the item is now in a new and prominent position will often change something from undesirable into very desirable.

PM Merchandise - You have items you want to get rid of, and employees who will appreciate a little extra spending money. Establish a bonus to be paid to the employee selling any of the items which you have placed on the list. Putting the item in a more prominent place, such as on an end cap, will not only get the attention of customers but it will also serve as a reminder to employees of the available bonus.

Grab box - Wrap the item in seasonal gift wrap, and create a grab box display. Grouping the items according to their usage, (food items, kitchen gifts, bath accessories, etc) peaks the curiosity of your customers.

Create your own sales flyer - With an item you want to get rid of, you may not have enough of the item for a newspaper ad. But even with one or two on hand, you can create flyers that are given to customers visiting your store as well as being placed in the bag of each customer making a purchase.

Door prizes - While using an item for a door prize does not get any cash into the register, it does eliminate your giving away a more valuable item that you could sell at your regular price.

As no buyer is ever going to completely eliminate the need to utilize one of these methods of selling old merchandise, there are several suggestions we can provide you with that can cut down on their frequency.

Create a min-max system - Sometimes we develop old inventory because we simply have excessive inventory. Have enough on hand to sell, but don't buy so much that you are always prepared for the customer that will take all you have.

Think in "onesie's" - When you decide to create a new department or niche, do so by ordering the inventory in quantities of one or two. When items are available only case pack, minimize your exposure by only ordering some of these initially.

Know when to say when - If you have found a new product category that is very popular, (such as the way Beanie Babies were), remember that these categories will become cold just as fast as they became hot. When you are about to order more, think about how much of the overall profit you will have to sacrifice if you have to dump this inventory when no one wants it.

Departmental assignment - Have every person in your store be responsible to watch over a part of the sales and warehouse areas. Alert them to the signs of merchandise that is showing age, yellowing, or ragged edges. Have a plan of action they can implement immediately after pointing out to you such merchandise.

This writer's Dad used to tell a story about the merchant who said he had no problem with marking down merchandise to get rid of it. To cover the deep discount he gave to move the merchandise off of his shelf, he simply marked another item up by a like amount. The idea worked until the day he found the $1,000 gift basket that contained only $75 worth of merchandise.

No one wants to wind up with that problem. The key to preventing it is to be as forceful with yourself and your inventory as that first customer was; I want my money back!

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This article is copyrighted by Tom Shay and Profits Plus Solutions, who can be reached at: PO Box 1577, St. Petersburg, Fl. 33731. Phone 727-464-2182. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.

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PO Box 1577
St. Petersburg, Fl 33731
(727) 464-2182
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