A new survey by Inventory Planner suggest that nearly half of retailers are stuck with excess stock even after the New Year sales. The survey found 44% of sellers still have goods they cannot sell after post-Christmas and January discounting. Furthermore, the ‘returns tsunami’ which traditionally hits hardest in January will only make the problem worse. The results come from a poll of 500 retailers from Inventory Planner. The company provides forecasting and planning software for businesses.
Inventory Planner data shows that last year, 25% of excess stock was written off altogether. The survey suggests UK retailers are sitting on an average of £65,000 worth of excess stock which has little value. This stock is also costly to store. The data provides a reminder to retailers and brands about the dangers of being caught with excess stock. 59% of retailer indicated there would be ‘dangerous ramifications’ for their business if they failed to sell excess stock.
A bigger problem for larger firms
Excess stock is a bigger problem for larger firms than SMEs. A total of 62% of large retailers (£100m-£500m turnover) confirmed they had excess stock. This compared to 42% of SMEs (£100,000-£1m).
The problem goes right across all sectors with baby and toddler the worst affected (67% with post-holiday overhang). Followed by fashion (58%), health & beauty (53%), DIY & Gardening (43%) and homeware (41%).
Six out of ten retailers (60%) are planning to offer even more discounting to try to shift the unwanted products.
Inventory Planner CMO Sara Arthrell said, “Excess stock is a huge issue for retailers at this time of year. In Addition, there is a tsunami of returns which always comes in January after peak trading will make these problems even worse.
“The key to avoiding inventory waste is by forward planning and having rapid response software. This allows retailers to pivot quickly to fill order gaps and ditch items early which are not selling.”
A factor in Made.com’s failure
Excess stock was a key factor in last year’s collapse of the online furniture retailer, Made.com. Before floating, the company operated on a ‘just in time’ model, only buying inventory to fill orders. However, analysts have suggested much of the proceeds from the IPO were invested in stock. An excess of which contributed to its downfall.
Arthrell adds, “Made.com’s crash was a wake-up call to everyone in retail about the dangers of excess stock. “Many retailers struggled with product shortages during the pandemic due to understandable supply issues.
“Now they are faced with the opposite problem – a glut of unsold merchandise which is eating into profits. Discounting cripples margins and is not sustainable over the long-term with the cost of living headwinds all retailers are facing.”
“That’s where technology comes in. Inventory planning provides accurate replenishment recommendations based on years of purchasing data so you are never under or overbought on inventory.”
Enterprise Times: What this means for business.
This is a serious headline. 25% of excess stock was written off altogether by retailers in 2022. For any brand or retailer this inevitably has an impact on the bottom line of any organisation. Excess stock is always a huge issue for retailers and brands at this time of year. As Sara Arthwell suggests, they also face at this time of year, the double whammy of returns and fraudulent chargebacks. A solution to inventory waste is utilising advanced forward planning and having rapid response software as part of the technical stack. The software enables retailers and brands to pivot quickly to fill order gaps and ditch items which are not selling.
