If your company has excess inventory, you are not alone. Many businesses unintentionally overorder inventory or undersell a certain product. And occasionally, that stock turns into excess stock—items that will never be able to sell. Regardless of the reason why your company has excess inventory on hand, understanding how to efficiently dispose of excess inventory will help you minimize the harm to your company’s bottom line.
In this article, we’ll explain surplus inventory, provide information on inventory liquidation, and show you step-by-step how to do it. Finally, we’ll discuss a few ways that better inventory management techniques might help your company avoid having excess inventory in the first place.
What exactly is surplus stock?
Inventory that your company has on hand but does not anticipate selling is considered excess inventory. The most common reason for this is that the excess inventory simply outweighs the anticipated demand for the specific product. When a product is nearing the end of its lifecycle and your company is unable to sell it as-is, inventory has become excess inventory.
Excess inventory, which is also known as surplus inventory, excess inventory, overstock, or B-stock, is a liability that can provide your company with a variety of issues, including:
- High carrying costs
- Reduced profit margins
- Resources wasted managing inventory that’s virtually unsellable
- Resources diverted from the rest of a business’s inventory management strategy
Businesses frequently find themselves with excess inventory as a result of inaccurate demand forecasting, poor inventory management, a lack of knowledge about the types of inventory they need and when they need it, or as a result of unanticipated events like supply chain crises, natural disasters, or even global pandemics that resulted in abrupt, extreme changes in consumer behavior.
Regardless of the reason why your firm has extra inventory, liquidating the excess inventory can assist your business in recovering some of the expenditures related to the excess inventory.
Businesses often find themselves with excess inventory as a result of inaccurate demand forecasting, poor inventory management, a lack of knowledge about the types of inventory they need and when they need it, or as a result of unanticipated events like supply chain crises, natural disasters, or even global pandemics that resulted in abrupt, extreme changes in consumer behavior.
Regardless of the reason why your firm has extra inventory, liquidating the excess inventory can assist your business in recovering some of the expenditures related to the excess inventory.
What is the liquidation of inventory?
Inventory liquidation is the selling of inventory by a company for cash, often at a significant discount. Although a business’s liquidation is frequently followed by its closure, this is not always the case. In fact, even when the rest of the business is operating smoothly, many companies use inventory liquidation to dispose of surplus inventory.
Your company can either “liquidate” inventory on its own using a variety of strategies or you can employ an inventory liquidator to take care of the task on your behalf. There are many options to sell excess inventory in today’s environment, so take some time to think about which ones are ideal for your company’s profit margins.
What purposes does inventory liquidation serve?
There are a variety of reasons why a business may choose to liquidate excess inventory, including:
- Minimizing profit loss by shedding excess inventory from a business’s balance sheet
- Reimagining a business’s offerings, especially after a rebrand, merger, or pivot
- To prepare for a bankruptcy filing
- To “clean up” a business’s poor inventory management strategy and prepare for better days ahead
Keep in mind that “softer” inventory liquidation strategies—such as bundling and discounts—aren’t really liquidation at all, but precursors to liquidation that can help you mitigate more drastic profit losses at a later date.
How to liquidate inventory?
If your business is facing excess inventory, it’s important to find effective strategies to liquidate it and minimize financial losses. Here are some popular ways to liquidate surplus inventory:
- Refresh or Repackage Excess Inventory
Consider reevaluating how you sell, market, or package the inventory that is becoming difficult to move. Repackaging or creating bundles can make the products more appealing to customers. Bundling items together, especially with a popular or high-demand item, can increase their desirability and help clear out excess inventory.
- Boost Exposure
Increase the visibility of your inventory to attract potential buyers. Showcase the products through targeted marketing emails, rearrange them in your store, or feature them prominently on your website. By increasing exposure, you can capture the attention of customers who may have overlooked the inventory initially.
- Offer Discounts
Before resorting to a full-blown liquidation sale, consider offering discounts on the products that are at risk of becoming excess inventory. Discounted prices, buy-one-get-one promotions, or free gifts with purchases can incentivize customers to make a purchase and help clear out the surplus inventory. Be strategic in your discount offerings to maximize their impact.
- Engage with Suppliers
Reach out to your suppliers and discuss the possibility of returning excess inventory. While it’s not a common practice, some suppliers may consider buying back inventory from loyal customers, particularly if they can acquire it at a discounted rate. Open communication with your suppliers can lead to mutually beneficial solutions for liquidating excess inventory.
- Self-Liquidation
Take advantage of online platforms and marketplaces to independently sell your excess inventory. Online marketplaces like eBay, Amazon, or your own e-commerce website provide opportunities to reach a wider customer base and showcase your surplus products. Be cautious of potential scams and ensure you protect your business interests while liquidating inventory online.
- Consult a Liquidation Company
If other tactics fall short or you have a significant amount of excess inventory, consulting a liquidation company might be a viable option. These companies specialize in buying excess inventory and can provide a lump sum payment for your surplus products. While you may not recoup the full cost, it offers a way to recover some value from the excess inventory.
- Donate Excess Inventory
Consider donating your surplus inventory to charitable organizations. Donating can help you support worthy causes while also potentially providing tax benefits. Consult with your accountant to understand the tax implications and ensure compliance with regulations. Donating excess inventory allows you to clear space, support communities, and potentially mitigate some profit loss.
Remember, the best approach for liquidating your excess inventory may vary depending on your business and the specific products involved. Evaluate the options available and choose the strategies that align with your business goals and financial objectives. By effectively liquidating excess inventory, you can optimize your inventory management and ensure a healthy bottom line.
How to reduce surplus inventory?
Inventory liquidation should be a last resort when managing your inventory. To prevent future liquidation, it is crucial to implement effective inventory control strategies that allow you to order the appropriate amount of inventory at the right time. By adopting a comprehensive inventory management strategy, you can gain insights into your current inventory, and its location, and determine when replenishment is necessary. By analyzing inventory records and generating reports, you can make more accurate predictions about future product demands.
To enhance your inventory management approach, there are various systems available. However, inventory apps like 365liquidation offer a user-friendly and straightforward solution for organizing your inventory. These digital tools not only save time, and money, and reduce stress but also provide you with a better understanding of your business’s actual inventory requirements.
If you want to sell your excess inventory liquidation then email or call us info@liquidateproducts.com or (224)619-7639.