How to clear slow-selling stock and still make a profit
As the end of a season approaches (and even mid-season), retail businesses find themselves pondering the same old question. How can they shift their slower-moving products and save themselves from a mountain of excess stock that just won’t sell.
It might feel daunting, but there are ways to clear through the backlog and protect your profit margins at the same time.
Let’s look at three practical steps you can take to get started.
Photo by Stephanie Belton
Check how your stock is performing
A little analysis can work wonders when it comes to understanding your stock performance, and one of the most useful tools in your merchandising toolbox is your cover calculation:
Stock units / Sales units = Cover
The higher the cover, the slower the product is selling. Assuming the product continues to sell at the same rate, that means you can see how long your stock is going to last. Let’s take a look at an example to see all this in action.
Imagine you have 1,000 units of Product A in stock and they’re selling at 100 units each week.
You also have 50 units of Product B in stock and they’re selling at 1 unit per week:
Product A: 1,000 units / 100 units per week = 10 weeks’ cover
Product B: 50 units / 1 unit per week = 50 weeks’ cover
It might be easy to assume that Product A is slow-moving (especially if you want to clear it immediately) but once you work out your cover, it becomes clear that Product B is actually the bigger problem.
In this situation, staggering your discounts is a great way to encourage customers to buy more of your slower-moving stock. As a general rule of thumb, the higher your cover, the higher the discount you need to apply.
So, you might look at offering up to 50% off Product B to encourage people to buy and help it move faster (and more in line with Product A). When it comes to Product A, you might be perfectly happy with the rate it’s selling. Or if you’d like to speed it up a little bit, you could discount it by a lower 10-20%.
Having said all that, it’s important to always check your profitability before applying discounts so you can be as sure as possible that your new reduced price won’t end up creating a loss for your business.
Market your stock effectively
Once you’ve adjusted your discounts, it’s time to make those offers as appealing as possible to your customers. There’s a bit of psychology for your enjoyment here, because brains are weird (but wonderful).
When it comes to how you present a discount, there’s a simple rule:
For items under £100, focus on the percentage discount ( “20% OFF”).
For items over £100, highlight the amount of money they save (“SAVE £40”).
Let’s look at two products that are both being reduced by 20% as an example. A £20 t-shirt with a label saying “20% OFF” is likely to sell more than one labelled “£4 OFF”. On the other hand, a £200 chair with a “SAVE £40” label is perceived to offer better value than “20% OFF”.
There are other ways to get creative with your marketing, such as bundling slower-moving items with popular ones at a slight discount (this increases appeal).
And it goes without saying, it’s always a good idea to focus your efforts on clearing problem stock rather than discounting items that are already selling well.
Plan ahead to avoid future issues
Markdowns and excess stock tie up your cash flow so it’s crucial that you factor these into your planning for the seasons ahead.
When planning future seasons, make sure you account for markdown activity and for your existing stock levels, and adjust your purchasing to avoid overstocking and building up another pile of unsold items.
Need help managing your stock?
You need a merchandiser! We’d love to have a chat about how we can help. It’s easy to set up an initial no-pressure call.
Or if you prefer a DIY approach, our markdown resources are here to get you started.
