1. Excess inventory ties up cash flow.
Surely you sell your products with the goal of turning your inventory into profit? Of course! This way you can pay for your daily expenses. But if you’re sitting on your overstock, your working capital is tied up in your products and can’t be used for expenses, investments, or new products.
2. Excess stocks can cause higher storage costs.
Over time, your overstocks accumulate in the warehouse and lead to space problems, which inevitably come with higher costs. Whether it’s rent, maintenance, or insurance, more goods often mean higher warehousing costs. But labor costs will also increase as managing the goods, up to inventory, will require more staff. Shouldn’t that empty space in the warehouse be better filled with products that turn frequently and generate more revenue?
3. Overstocking can lead to inventory deterioration.
Unfortunately, most products are not price-stable, they lose value over time. So you will often be able to sell excess quantities only at large discounts.
Once control in buying and selling is neglected even a little, this quickly results in loss of profits. And the longer you wait to take action, the greater the value loss will be.
4. Overstocking wastes resources
An accumulation of unsold products always means a waste of resources – whether energy or labor costs – we know that now. It gets really bad when products can’t even be sold at large discounts anymore, because for example, the expiration date has passed.
The only sensible way seems to be disposal, to get rid of the overstock. The awareness of your customers has changed a lot in recent years. Many increasingly prefer companies that act ecologically and socially sustainable, therefore, destroying goods can lead to major image problems.
CONCLUSION:
By indiscriminate handling of excess inventory, your profitability can be greatly negatively influenced. Once you are sitting on a lot of overstock, the price reduction seems to be your only sensible option. Of course, this affects your margins. Your warehouse is full and costs are painfully increasing. Even if you plan to dispose of your surplus, your costs and therefore profitability will rise again
SOLUTION:
So, what is the solution to this unpleasant situation? Talk to an expert with long-term experience. At D2C Recommerce, we can help you manage your overstocking. Whether you only want our consulting service, want to push the marketing of your products with us, or want us to buy your overstock – we are the right contact! Focus on the processes that generate revenue. We will take care of the rest.