What Is Dead Stock?

Dead stock is merchandise in inventory that has not been sold. This could be potentially harmful to a business. Luckily there are ways to get rid of it and prevent it from accumulating down the road.

What Is Dead Stock and How Do You Avoid It?

Products have their seasons, which is why it's normal for companies to have excess stock from time to time. But what if that excess stock won't be sold at all? Then it becomes dead stock items.

Dead stock is merchandise and goods that have not sold, typically remaining within storage, taking up valuable warehouse space. Dead stock is similar to deadstock. However, these are often items that failed to make traction on store shelves that may have increased or at least retained their value.

Why Is Dead Stock Bad for Business?

Some may want to keep their dead stock with their inventory hoping they will one day sell it, but this may not be the best plan of action. It’s important for business owners to know that dead stock can actually be harmful to their business, and it can cost a company money in a variety of ways. For example:

  • Distribution Costs: When storing dead inventory, companies typically pay labor and utilities on the storage space taken up by the dead stock
  • Employee Wages: When there is an abundance of dead stock inventory to organize, it can increase the wages the company spends on its employees who take the time to organize it
  • Opportunity Costs: Dead inventory is a missed sales opportunity

How to Avoid Dead Stock

The reason why a company has dead stock may vary — like lack of internal communication between owner and distributor, poor purchasing decisions, or not implementing inventory management software into their daily routine. However, there are ways to avoid dead stock.

  • Evaluate why the products aren’t selling: Evaluating why products aren’t being sold can be done by asking a series of questions, such as: Are they being sold elsewhere for less? Is the product in high demand? Are they represented accurately on the website? Did they get a bad customer review? Are you promoting the item correctly? Do customers know it exists?
  • Know when to stop purchasing products for your inventory: It doesn’t mean you have been defeated if your stock isn’t moving. It just means that you should know when to move on from a product that isn’t benefiting your business. Use this as a learning opportunity to help understand what not to do the next time you make an inventory purchase.
  • Utilize data to help make your purchasing decisions: Sometimes inventory buyers get attached to products they want to sell, even if it continuously isn’t performing well — they may continue to restock the inventory because they like it personally. However, this could potentially be bad for business and lead to dead stock, which is why it’s important to objectively analyze data. Using data will allow sellers to make informed purchasing decisions, understand product pricing, and stay on top of industry trends. An inventory accuracy software solution can be used to help record, organize, store, and analyze this data, making it easier to review.

How to Manage Dead Stock

Sometimes encountering dead stock is unavoidable. Even so, there are ways to rid yourself of unused inventory that can still be beneficial to the company.

  • Free Gift With Purchase: When a business offers a free gift with purchase, they are taking items that either were given to them to utilize as a gift with purchase, or they take items that aren’t selling — usually the items of equal or lesser value — and offer them as a free gift with any qualifying purchase. The gift can either correlate with the product it’s being gifted with or it can be randomized. This can be especially helpful during the holidays. It is important to keep in mind that, depending on the brand of the product, this option may not be allowed. Research is recommended prior to finalizing this decision.
  • Product Bundles: Product bundles can be a great way to get rid of stock without having to make it free. This can be done by creating a gift basket and offering it for a price that is less than what it would be to purchase each item separately. Like the free gift with purchase, product bundles can be especially helpful during the holiday season.
  • Clearance Sales: Some companies may even take their abundance of leftover inventory and mark them all as clearance. Even though the items aren’t being sold at an ideal price, they are being sold nonetheless.
  • Liquidations: To liquidate inventory means to sell excess inventory, typically at a largely discounted price, in order to generate cash. Business owners should keep in mind that this is an option that is often associated with business closures. If this is the only option that is viable, they may want to evaluate how they will explain to the public that they aren’t closing, but are just selling overstock.
  • Offer Free Shipping: Customers may not want to pay shipping costs, deterring them from making an online purchase. By offering free shipping, it could potentially increase the website traffic flow and lead to more sales.
  • Research Excess Inventory Selling Sites: There are websites that have been created to help businesses sell excess inventory by purchasing all of their inventory and selling it on their own site. This is a viable option for those who need to get rid of their dead stock fast while still making a profit.
  • Donate: As long as you have no restrictions from your supplier, donating any dead inventory is an option that can make an impact on your community. Depending on what the inventory is, you can donate to your local women and children’s shelters, homeless shelters, animal shelters, food banks, and more.
  • Return to Supplier: If all else fails, talk to your supplier to inquire about a buyback option. Some may take your inventory back at little-to-no cost.

After You Clear Your Dead Stock

It can be a relief when you successfully get rid of your dead stock, however, the journey doesn’t end there. It can be just as important to maintain inventory organization as it is to prevent dead stock from happening. This is why it’s important to purchase inventory management software. Benefits of using inventory management programs can include that:

  • It helps speed up inventory management
  • It can be integrated with other software, such as QuickBooks
  • It can save money

It’s recommended that you do what you can to prevent dead stock from accumulating in the first place. However, if you find your company is in a bind, there are options available to help get rid of your dead stock.

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