Tips to Liquidate Your Ecommerce Store’s Excess Inventory in 2021
Inventory management is crucial to run a successful ecommerce store. Believe it or not, a poor stock strategy can impact your brand’s health in many ways. One common problem of stock management is how to handle excess inventory.
In general, sellers prefer not to liquidate excess inventory. But every ecommerce store must let go of stock at some point. The good news is that liquidation is not a setback.
Letting go of stock can turn excess products into revenue. The problem is that sellers don’t always know how to start.
Therefore, we took on the task of writing some tips to help your ecommerce store liquidate excess inventory in 2021.
Why Liquidate Excess Inventory?
Every ecommerce store must liquidate excess inventory at some point. The problem is that some sellers may see liquidation as a sign of failure. But holding on to surplus inventory is a far more expensive strategy than liquidating it once and for all.
Normally, having surplus inventory is a problem after holidays or promotional seasons, such as Amazon Prime Day. The reason is quite simple: sellers expect to generate more sales due to an increase in product demand.
As a consequence, the following scenarios may occur.
You hold items that don’t sell fast enough, or that do not sell at all. This could be due to poor previous trend research or because an item’s lifecycle expired.
Sellers end up with excess inventory which and their projected revenue gets tied to the warehouse.
Your sales slowed down for a long period of time. This usually happens with seasonable products, like holiday decorations.
Slow-selling items take up storage space, hampering the turnover for fast-selling items. Therefore, you end up with a logistics bottleneck, delaying your shipments and deliveries.
This is a particular problem for Amazon FBA sellers. The retail giant expects a constant item turnover to free up warehouse space.
If products take more than 180 days to sell, Amazon charges sellers with long-term storage fees. These can range around $.015 per unit or $6.90 per cubic foot.
When to Liquidate Excess Inventory
If your find yourself in the situation of having excess inventory, then, you should consider liquidation as a last-resort strategy.
First, do some research. This is how you can start:
- Check if the products still have selling potential. For example, if you have seasonal items worth selling, recall your stock and wait for the right time to resell it.
- Use a sales estimator tool. This can help you determine if a specific product is worth being relaunched. If that’s not the case, then consider liquidating your stock.
- Review item categories. You can’t sell unless you have full stock. Perhaps a change in category might help you find an eager audience for dead or long-tail inventory.
- Maintain good seller performance metrics. Negative ratings and few reviews can have a serious impact on your sales. If that’s the case, try to mend these issues to attract more customers.
Once you’ve run out of scenarios, and you want to eliminate surplus stock, you can look at some liquidation options.
There is no right or wrong time to liquidate excess inventory. The goal is to prevent financial issues for your ecommerce store.
How to Liquidate Excess Inventory
Liquidating stock has a few positive outcomes. For example, you can free up capital to get better selling items. Also, you can resell your dead inventory to recover costs.
Here are a few more strategies to liquidate excess inventory and make a profit out of it.
Good ranks equal increased visibility and sales. If a product is low on the search ranks, then it’s time for an SEO makeover. Find and select targeted keywords that are directly related to your item. Then, place those terms in the title, description, and backend.
Buyers are wary of both high- and low- priced products. Search the market to determine the best sale price for a slow-moving product. You can also use a repricing tool to figure out the best prices, without eating at your profits.
- Clearance Sale. Set discounts on long-tail inventory and promote the clearance on social media. It’s also a good idea to include a clearance section in your ecommerce store. That way, customers will find discounts each time they visit your website.
- Targeted Sale. This one requires a bit more research. Narrow down a niche audience that will be more interested in a specific product. Then, carry out a targeted sale for these customers. This way, you’ll be eliminating stock and delivering a personalized customer experience.
Match long-tail stock with high-selling items. Create different pack options based on size, design or color, and sell them at a discount. You can also bundle related products to increase their value. Users will get an extra product and compliment their experience.
Invest in PPC campaigns to boost traffic into slow-selling products, and create awareness. These ads will highlight offers in sites like Amazon, Google, or Facebook to attract more shoppers.
- Giveaways. Free products create awareness and engagement. Plus, giveaways will attract more consumers to your ecommerce store.
- Use influencer marketing. Reach out to popular social media users. They can help you showcase your products to a wider audience. Consumers listen to recommendations, that’s what influencer marketing is about.
- Scarcity Marketing. “Kill’ a product by selling it. Create limited offers on products that you won’t sell anymore to boost sales.
Amazon FBA Liquidations
Amazon allows FBA sellers to liquidate excess inventory. So, if you are an FBA seller, you can submit a liquidation order to Amazon. The marketplace will negotiate with a third-party liquidation. This buyer can purchase the inventory for a 5-10% gross recovery value.
When the deal is complete, Amazon will pay you the sale’s net recovery value. Note that Amazon will also charge a processing fee (based on product weight and size) and a referral fee (based on item category).
- Try new marketplaces. Perhaps Amazon consumers didn’t take your product. Why not try to sell somewhere else? Take your dead inventory to a new channel, like Walmart or the Instagram store.
- Exchange products. You can also swap items with your supplier, or even another brand. Take products that you know you can sell and let them sell your excess inventory; it’s a win-win scenario.
- Sell to competitors. If a product is generic enough, you can consider selling dead inventory to a competitor. They’ll be more than happy to buy you the game for a decent fair price.
- Donate to Charity. Give away items like clothing and home appliances to charitable organizations. You won’t get your money back, but the right charity could provide you with a tax-deductible receipt.
Destroy Your Excess Inventory
Do you think the previous strategies may do more harm than good? Then you can have the excess inventory destroyed. Although it’s a last-resort option, destroying surplus stock may be the best strategy if you plan to keep selling the same items.
It’s also a safe way to protect your brand. Competitors won’t seize your product to sell it as their own. You’ll also prevent counterfeits from showing up in the marketplace.
Stock Management Best Practices
The key to prevent inventory liquidation is to set up a solid inventory management. This is not an exact science, of course.
But there are two great practices you can use to improve stock turnover:
1. Buffer Inventory
A sales surge can happen at any time. Therefore, you should keep some safety stock in the warehouse to meet demand.
To figure out the “proper” amount of buffer stock, consider a product’s sales for the past 6 to 12 months. Then, apply this formula:
Safety Stock = (Maximum daily sales x Maximum lead time) – (Average daily sales volume x Average lead time
2. Turnover and Sell Through Rates
The inventory turnover rate states how fast you sell and restock your inventory. Here’s how to calculate it:
You should also calculate your sell-through rate. This metric compares sales against the purchased stock.
Keeping track of both metrics will shed a light on stock turnover and profitability.
Remember that liquidation is a last-resort strategy. If your ecommerce store has excess stock, do some research.
Figure out why some products are gathering dust in the warehouse. Chances are you can devise a strategy to boost sales, without sacrificing stock.
But when all possibilities are spent, don’t hesitate to liquidate excess inventory. It may take some work, but liquidation frees up spaces and releases tied-up capital.
Plus, you can always resell slow-moving items elsewhere to earn some net recovery value. Not to mention, you’ll cut down on storage fees.
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