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!
