What is Dead Stock in E-commerce Fulfilment?

Effective stock management is of vital importance to any e-commerce business. Without an effective stock management system, businesses can easily run into issues with their stock – whether this be having too much or too little. One of the most common consequences of incorrect demand forecasting and over-ordering is the accumulation of dead stock.

Dead stock can present a range of challenges for businesses – but it can also be prevented. In this blog from Allegro Logistics, we outline what dead stock is, and explore how dead stock can be managed or prevented using robust inventory management.

What is Dead Stock?

The term ‘dead stock’ refers to inventory that doesn’t ‘turn over’, meaning it has not sold and is unlikely to sell. Stock may be classified as ‘dead’ for a number of reasons – such as it not being possible to return an item to the supplier due to it being outdated, out of season or having limited/no demand.

An example of this would be seasonal items such as swimwear that remain in stock after the summer season is over. As consumers shift to purchasing stock suited to autumn and winter seasons – swimwear that is not sold may become dead stock. The same could occur in reverse for winter items such as coats and thermals, as consumer demand changes from season to season.

Unfortunately, dead stock can impact businesses in several negative ways:

  1. Firstly, dead stock in itself represents an investment that is not yielding returns for a business, as the funds spent acquiring or producing the stock cannot be recouped through a sale.
  2. In addition, stock that will not be sold may also take up significant space in a storage unit or structure. Spending money on dead stock and its storage prevents funds from being better used elsewhere in a business.
  3. Stock that is stored for a long period of time will also gradually depreciate in value – this is especially so for products that are ‘trendy’ or seasonal.
  4. Perishable products that have a limited shelf life are also especially susceptible to becoming dead stock. This might include certain food or drink products or cosmetics that must be used fresh.

How to Avoid and Get Rid of Dead Stock

Harbouring dead stock can be extremely costly to businesses, so establishing effective methods of avoiding and disposing of dead stock is essential. When looking to curb the impact of dead stock on your business, it might be advisable to consider what causes the accumulation of dead stock in the first instance. This way, the appropriate steps can be taken to ensure that overordering does not happen again.

Ways to avoid dead stock include:

  • Being mindful of overbuying or overproduction: Accurately forecasting the demand for a particular item using existing sales data and customer interest forms.
  • Timelessness over trends: Businesses that sell large amounts of trend-based stock may face more challenges with dead stock as the appeal of ‘trendy’ products is likely to change with seasons and changing tastes. With this in mind, businesses may wish to avoid the incorporation of too much seasonal stock into their offering. Instead opting for more timeless items that maintain their appeal throughout seasonal changes.
  • Ordering small quantities of new items: When testing the popularity of a new product, businesses looking to limit dead stock might make smaller orders which allow them to assess demand before making a larger order.

In some cases, dead stock will exist despite best efforts. In the event of a business accumulating dead stock that they wish to get rid of, they may choose to sell off dead stock to end-of-line retailers such as eBay or donate stock to charity shops or shelters. Retailers that wish to tie dead stock into their continued operation, may choose to bundle products to maximise value for money or offer excess stock as a gift with purchase.

How to Manage Inventory Effectively

When it comes to reducing dead stock, effective inventory management offers businesses a simple, regularly updatable approach to sourcing, storing, tracking and shipping inventory. For businesses that don’t use inventory management software, dead stock can sit on warehouse shelves for extended periods of time unnoticed – taking up costly storage space and not generating any revenue. Inventory management software allows businesses to take control of their stock, both that which is selling well and that which may never be sold.

Inventory management software solutions can support businesses in their attempts to tackle and reduce dead inventory. Inventory management software solutions help keep inventory records updated and as useful as possible.

Stock management software offers businesses the ability to access details about their stock in real-time. Insights into stock levels allow businesses to easily identify which items are selling rapidly and which are moving slower. From this, businesses are able to make data-informed choices about what stock needs to be repurchased and which items are being stored in quantities that supersede demand. These details can inform changes in prices, strategy and order quantities.

Prevent Dead Stock with Inventory Management from Allegro Logistics

So, the key to avoiding dead stock and enhancing your business operations and profitability is proper inventory management. For that, you need a logistics partner to handle the nitty gritty so you can get on with developing your business.

At Allegro Logistics, we provide a secure and efficient warehousing and inventory management system for ecommerce and retail, backed by the latest technologies. This helps you prevent or handle dead stock with ease, using timely and consistent updates to always stay on top. For more information about how our services could help your business, request a quote today.

Check out our guide to buy now, pay later for ecommerce >

Learn how to manage direct-to-customer order fulfilment >

Read on with our beginner’s guide to demand forecasting for ecommerce fulfilment >

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