One of the key factors in running a retail business is having the goods to meet customer demand at any moment, along with a few sharp strategies to encourage people to buy. But trade does not always go as planned, and that produces the problem of dead stock, which can bring a business down with remarkable ease. Today we will introduce retail owners to that quiet threat — what dead stock actually is, and how to run the back-of-house stockroom so it does not build up in the first place. Read on.
What is dead stock?
You may have noticed that trade is good and customers are coming in steadily, and yet the profit is not hitting the target you set. So where has the money gone? The problem may not lie at the front of the shop at all. It is worth going in and looking at the stockroom, where you may find an important cause that has not had nearly enough attention: dead stock.
Dead stock is stock sitting in the stockroom that has not moved for a long time and can no longer be put out on the shop floor. It can arise for a number of reasons, and it turns into capital that is stuck — money that cannot be converted back into income or profit for the shop. Managed badly, it is not only a burden on your storage space but pushes the shop towards a much higher risk of loss.
What causes dead stock
- Goods returned by customers: most retailers will have had customers return goods because they were damaged or faulty. Sometimes the shop has to refund the customer and then take the returned item back into the stockroom.
- Damaged goods: stock has to be quality-checked before it goes out on sale, and many shops find items that are damaged and cannot be sold, so they are written off into dead stock for the time being.
- Out-of-date lines: another important cause of dead stock is a line falling out of date. Most of this stock still works perfectly well, but it is no longer in fashion; it has been out on sale for a long time and still has not shifted. Leaving it on the shop floor wastes space that could hold something else, so it has to go back into the stockroom.
- Goods nobody wants, or that simply do not sell: many shops carry lines aimed at a niche market, which they expected to sell but which did not go as hoped, so they end up unsold — and not wanted by the wider market either.
Waste and spoilage: another form of dead stock is goods that have gone past their date and become waste to be disposed of — capital thrown away for nothing. It happens most often in businesses that sell food.
Four ways to deal with dead stock
1. Run a promotion: discounts, swaps and giveaways
One of the simplest and most convenient ways of dealing with dead stock is to take lines that have fallen out of date or out of favour and put them out at a promotional price — a discount, a swap-and-buy offer, or as a free gift with another purchase. That clears the stock and turns at least some of it back into money and profit.
2. Find ways to bring more customers in
For a large retailer sitting on a lot of dead stock, a big event or a cut-price stock-clearance sale is another way to bring customers in by the hundred. As well as clearing the dead stock out of the stockroom, it promotes the shop and introduces it to new customers.
3. Store stock systematically, on FIFO
Dealing with dead stock through a FIFO system (first in, first out) is one of the most effective ways there is of keeping stock clear. Goods are arranged by expiry date, or by how long they take to deteriorate, with the oldest at the front so they are picked and put out on sale first. That reduces the problem of stock sitting so long that it degrades.
4. Use a stock management system
For shops that would rather not lose time to the headache of dead stock, choose a stock management system with features that keep track of every item coming in and going out. That lets you follow what you have left and see in real time which lines are approaching their expiry date, so you can hold exactly the stock your customers want — and see the back of dead stock.
As you can see, dead stock is a headache for every kind of shop. If you would rather not spend your time dealing with it or reorganising the stockroom, choose Qashier's POS system, the retail shop management system that covers everything and makes running both the shop floor and the back-of-house stockroom easy and quick. It lets you reach your sales and stock data anywhere and at any time on the cloud, tracks what you have left, and alerts you in real time when a line is running low, so you can run the shop more efficiently.
If you have questions, our specialists are on hand to help and advise throughout. If the product interests you, contact us for more details on our Line Official: @qashier.th or call 02-544-0267