The holidays are over but many businesses still have significant amounts of seasonal inventory left in the warehouse. Meanwhile, they expect approximately 11% of sales will be returned resulting in even more inventory. The longer these items sit in the warehouse, the more costs they incur and the harder they become to get rid of.
Big box stores often have the ability to rid themselves of excess inventory by wholesaling to 3rd parties to sell to discount retailers or via Amazon. Additionally, they may have the ability to sell through their own outlet stores. But for small business, selling through these retailers can quickly become cost prohibitive and they’re not even recouping their cost of goods sold (COGS). Long term, how does discounting impact your brand equity and, aside from massive price cuts how do you rid your inventory of seasonal items and recover the COGS?
Here are three steps to rid holiday overstocks and effectively manage seasonal inventory:
Step 1 – Inventory visibility across channels
Perhaps an item sold online but didn’t perform well in-store? Or certain locations undersold while others are out of stock on select items, sizes or colors. It’s important to maximize the visibility and availability of inventory, across all selling channels, to keep selling at the highest price possible.
If an item is returned to the store it should go back into inventory immediately so that it is visible not only on the shelf in that location but online as well. Enabling a buy anywhere, fulfill anywhere, return anywhere shopping experience offers the best chance to sell remaining inventory at the highest price point possible
Step 2 – Minimize the number of touches
Each time an item is moved, it increases the COGS. If an item is returned to a store, whether it was purchased there, or online, the ability to put it back into inventory, without shipping it to the warehouse, will save you from incurring additional shipping fees (in turn increasing the COGS and decreasing your profits). Enabling drop shipping for online orders from brick and mortar locations will save those additional costs of shipping the item from the store to the warehouse and then to the customer.
Step 3 – Understand how you got here
Ultimately overstocks are a fever. They are a symptom, but they aren’t the problem. To avoid overstocks in the future you must go further up the supply chain and understand where things went wrong.
Is this a one-off situation or a trend you are seeing at the end of each season?
Where did things go wrong? What do I not have visibility into that would enable me to plan better?
With overstocks, the problem will come down to a merchandising problem or a planning problem.
When it comes to merchandising, retailers need to determine if their products were priced too high for the market, or maybe simply too late to market to take advantage of the latest trends.
When it comes to planning, there are more questions to ask.
- Were your forecasts based on historical sales?
- Do you have accurate inventory visibility enabling you to produce based on a demand-based production model?
- Were there issues with your vendor or supplier relationships that caused product to arrive late?
- Did you have receiving issues that held up availability causing your product to be available too late?
Getting an answer to those questions and avoiding the profit killer of seasonal overstocks requires a modern software system that not only handles financials and ecommerce, but inventory management as well.
Click here to take a free NetSuite product tour to learn more about managing your inventory in real-time.