How to Deal With Unsold Holiday Inventory
By Eric Goldschein, editor and writer at Fundera.
It happens at the end of every year: Small businesses around the country overstock their shelves, hoping that they’ve ordered enough to last through the holiday season. And then the holidays end, and they’re left with shelves of unsold inventory.
Unsold inventory is doubly painful because every item that doesn’t sell continues to cost you money in the form of shelf space, as well as the opportunity cost when you tie up your working capital.
It’s unlikely that you’ll predict how much inventory to carry down to the very last order ahead of time. So if you have unsold holiday inventory, what can you do with it? Here are some ideas.
Reprice your flagging inventory
Have you noticed, in the weeks leading up to Christmas and New Year’s, that some of the items you bet big on aren’t flying off the shelves the way you thought they would?
Get ahead of the curve and start “re-pricing” your inventory, rather than discounting it straight away. Pricing optimization software gives you a holistic look at the market and might help you understand why your inventory isn’t selling as it should: Maybe a competitor has it for a few dollars cheaper, or a fad has lost its luster. Then you can match your price accordingly.
Just because you have the ability to change the prices of your products on a by-minute basis doesn’t mean you should, but take advantage of new information to reprice when necessary.
Change up your presentation
Your issue might not be the product itself, but how you’re marketing it. If your inventory missed the boat for the holiday season, try repackaging its presentation for the new year. Move it to a different part of the store, or make it more prominent on your ecommerce site. Sometimes something as simple as seeing a product in a new light can change people’s view of it.
Host or get involved in special events and giveaways
Your inventory doesn’t need to sell to bring value to your business. Use your unsold inventory as your offering in a free giveaway, or bring it with you to pop-up events as a way to boost its—and your—exposure. If someone at one of these events likes your product, you can tell them there’s more where that came from.
Start discounting once it’s officially “unsold”
You gave repricing a shot. Once your goods have officially gone unsold, or are “dead,” it’s time to start discounting them. Dead inventory costs the U.S. retail industry a reported $50 billion a year—don’t add your products to that number.
Mark your unsold inventory down by 10%, then 20%, and so on. Discounted inventory is a good way to draw in budget shoppers and keep foot traffic passing through, but don’t discount so heavily that customers catch on that all they have to do is wait for you to start putting your wares on sale for 95% off. Find your item’s floor— your absolute minimum price you’ll sell it for—and discount up until then.
Bundle it with more popular items
If you struck out with one item, hopefully you hit a home run with another. If that’s the case, you may find some traction bundling your less-popular inventory with the more popular stuff. Put them together on the shelf in your store, or offer to add it to people’s carts when they check out online for a small additional charge.
Sell through online marketplaces
If an item didn’t sell well on your site, it might find a more receptive audience on a third-party platform such as Amazon Marketplace, eBay, or Etsy. Take the time to smartly market and target these items by using precise keywords in the descriptions.
Be careful with this step: You don’t want to make a habit of selling an item at full price, only to turn around and offer it for less on a third-party platform. The hit to your brand won’t be worth recouping your losses. Do this sparingly with items that resonate with particular, niche audiences.
Donate what you can’t offload
Once you’ve done what you can to make some money off of your inventory, or at least break even, it’s time to cut your losses. Again, dead inventory can continue to be a drain on your bottom line—better to move on and free your shelves up for new product.
Donate your unsold inventory, but don’t just drop your stuff off a local thrift store and expect a tax credit. Your contribution must be made to a “qualified public charity” or “private operating foundation,” for the use in the care of infants, the ill, or needy. That way, you’ll qualify for the charitable deduction in addition to doing good. Speak with your accountant to understand exactly how your business might take advantage.
Turn a return into an opportunity
Returns can be painful, not to mention costly. But while you don’t want to encourage returns, you can also look at them as an opportunity to build a relationship with a customer you might not have had otherwise.
Make your returns policy as painless as possible, and you’re more likely to induce a sale in the first place. And you can bet that a customer who feels dealing with you is a hassle won’t return for another purchase anytime soon.
For next year: Start managing your inventory
It may already be too late, but if you are sitting among piles of unsold inventory while reading this article, it’s time to start figuring out how you can avoid the “bullwhip effect” next holiday season.
Invest in automated inventory management software that can help you plan more accurately for the months and years to come. Good software reviews your historic sales reports, reviews market changes and trends, and helps you “pull” inventory from your supply chain when your current stock is running low. This will turn your mountain of unsold goods into a molehill.
Unsold inventory can be a costly and emotionally draining side effect of planning for the holidays. Don’t panic: It happens to a lot of businesses. Get creative with some of the above tactics, and start planning for next year to minimize your losses going forward.
Besides, there’s always another holiday season right around the corner. Time to get ready for Presidents Day!
Contributed by Eric Goldschein, editor and writer at Fundera, a marketplace for small business financial solutions such as business loans. He writes extensively on marketing, entrepreneurship, financing, and small business trends.