Even if not defective, up to 5 billion pounds of unused goods are trashed every year, with the U.S. alone accounting for a whopping 3.5 billion pounds. Virgin materials that go into many new products have harmful environmental effects. Making matters worse, some products marked as dead stock never even get sold before they head to the landfill.
Dead stock is an issue that affects virtually any company selling products. Thankfully, some solutions can help improve your bottom line and bring more sustainability practices to your business.
Let’s dive into all that… stuff.
What Is Dead Stock?
Unlike discontinued items that can rack up high prices on eBay due to their limited availability, dead stock is inventory at the point of no return: obsolescence.
Dead stock means stock or inventory that can no longer be sold or has little likelihood of being sold in the future. Maybe it’s been on the shelf for too long or is excess, unused material.
Editor’s note: It’s easy to confuse “dead stock” with “deadstock,” a niche term mainly used by fashion consumers. Deadstock usually refers to discontinued items like sneakers or vintage clothing with their original tags attached. While dead stock has little value, deadstock items often fetch a high price on the secondary market.
Seasonal items often suffer this retail zombie-state affliction (sorry, Rudolph sweater!). Fabric or material also end up as dead stock due to surplus, changes in style, or unsatisfactory quality.
This wasteful side effect of sales can harm your business’s bottom line and the environment.
Let’s start by walking through the downsides and causes of dead stock. Rest assured: It’s not all bad news. There are ways to avoid excess waste in inventory in the first place and strategies to handle it when it does.
Why Is Dead Stock Bad for Your Ecommerce Business?
There are several reasons why dead stock is a liability to your business. The most obvious: If dead stock is not sellable, it creates a drag on your revenue. Storage costs and labor considerations are also associated with carrying goods.
When dead stock is due to buyer returns, you also lose the item's landed (or shipping) costs. There can be opportunity costs associated with keeping things that no one wants. You could be using that valuable warehouse space to store more in-demand goods. Or you may simply be paying higher storage fees or holding costs for keeping around dead weight.
While smaller companies may not face this need, bigger brands often have to pay to have dead stock removed or recycled, Katie McCourt says.
McCourt is the co-founder of the women’s underwear brand Pantee, which aims to help clean up the fashion industry by using dead stock material that would otherwise go to landfill.
Because beyond eating into your profit margins, dead stock can also create harmful waste and other environmental impacts.
Why Is Dead Stock Bad for the Planet?
Global annual plastic production increases each year and is up to over 400 tonnes.
Virgin polyester production has doubled since 2000—translating into 700 million tons of carbon dioxide emissions entering the atmosphere. When these synthetic materials and fibers break down, they can enter oceans and damage ecosystems.
It’s also no secret that the proliferation of fast fashion has created a waste problem. According to the World Economic Forum, clothing production has doubled within the past 15 years, and most material goes to landfill, with only about 12% getting collected for recycling.
In reaction to waste as a byproduct of consumption, individuals are often called upon to buy less or more wisely—creating a market for greener or more ecological products.
Companies have created successful campaigns around cutting back and using what is already in the closet or garage.
But the responsibility for sustainable practices shouldn’t lie just with the consumer. The effects of climate change, the recent pandemic, and supply chain issues have highlighted the need for greater efficiency well before something gets to the checkout.
So what can companies do to curb excess production? How can growing businesses reduce waste? We will guide you through thinking about these questions in your own business.
What Causes Dead Stock and How Can You Avoid It?
While all forms of sales and production are likely to cause waste, there are ways to minimize it.
It’s unlikely there would ever be a world where excess inventory doesn’t happen unless you are on a pre-order model, where you are only making something based on what the customer is ordering.Katie McCourt, Co-Founder of Pantee
When you are starting out, focus on one tactic at a time. “You just can’t do it all from the get-go,” McCourt adds. You can adopt several strategies to manage dead stock depending on your company's goals.
5 Ways to Avoid Dead Stock
As the saying goes, "measure twice and cut once."
The trick to avoiding overconsumption is to have a good sense of what order quantity will serve you best. Planning your inventory control could circumvent extra steps to get rid of dead stock.
Here are a few ways to get started.
1. Ensure production decisions are informed by market trends
Understanding the needs or wants of your customers and potential customers will enable more precise and marketable product specifications.
Look at year-over-year sales trends. If those are not available, aim to understand trends or seek advice from experts in your space. Calculate reorder points so you can determine when to replenish your warehouse.
2. Start small and try test runs
Even with the best evidence, you can’t always forecast surges or drops in demand. Many businesses err on the side of overproduction to avoid last-minute manufacturing scrambles.
Another tactic is to try out limited runs of products to see how they fare in marketplaces. You will be alerted to slow-moving products, allowing you to refine your strategy without investing in safety stock. If you are experiencing poor sales, try bumping up your marketing efforts before moving on.
3. Reduce the number of SKUs you produce
Aim for quality over quantity when it comes to inventory range.
Adding SKUs creates more data for your business to manage and the related storage and labor issues of excess stock. Minimizing your range can help avoid market cannibalization—when your products crowd out your sales.
Remember that too few SKUs can cause you to miss out on sales and customer acquisition opportunities. You must find the balance to sustain your sales and supply chain with hiccups. Technology can play a significant role (see point #5 on this list).
4. Avoid overcorrections for stock that runs out
You may feel emboldened by selling out of a particular item in your inventory. Be wary of overdoing it when you restock for backorders.
If you get overzealous, you could be left with too much of a good thing rather than an efficient system for inventory turnover. Go back to the basics by forecasting customer needs and staying on top of upcoming trends.
5. Invest in technology to manage your inventory processes
Inventory software will be vital to tracking your sales in real time and identifying any inefficiencies.
Accessing AI-enabled and cloud-based inventory management software can help you cut costs and boost profit margins while increasing inventory space and better tracking inventory movement.
There are many options available, which we will explore further—read on for tips!
6 Essential Tips to Manage or Repurpose Dead Stock
If dead stock happens, there are ways to deal that can help avoid dips in your cash flow, gain customer loyalty, or increase brand awareness.
1. Return dead stock to your suppliers
Some suppliers may allow you to return dead stock to them. Look into your contracts and agreements, as there may be costs involved, such as restocking fees.
You may not receive a full refund for returned goods. Still, this could be your best option if you are looking for convenience and regaining some cash flow.
2. Kit or bundle products from your online store
If you have unsold items in your inventory that could add value for your customers, consider throwing these in as bonus gifts on orders.
Freebies can make your customers happy, especially when they feel it adds value or is a bonus to their purchase. Use your insights into your customers’ habits and preferences to ensure you give gifts they will receive with gratitude.
Another option is to offer a discount by bundling certain complementary or related items. (Ask yourself: What are your customers often buying together, or what do they need after buying one particular item?)
This classic “Happy Meal” model can bring more purchasing satisfaction to your customers.
3. Offer a liquidation sale
Put up your sale sign to clear out items. Offering deep discounts and clearance sales can evoke customers’ fear of missing out on a good deal.
It could be that folks were waiting to try that new model or risky fashion style until it went on sale.
4. Donate items to a charity you support that can use them
Customers are looking to buy from—and employees are looking to work for—companies that are purpose-driven and give back. To boot, you can generate a tax write-off or income tax deduction against your business income.
The U.S. and Canada offer generous charitable tax credits to small businesses: Deduction claims are allowed up to 75% of their net income.
By coupling your dead stock management with goodwill, you can find new value in old stock you want to get rid of.
For authenticity’s sake, try to find causes you are interested in supporting and discussing. Make sure you aren’t donating unwanted goods which will end up in the landfill anyway.
5. Sell dead stock materials to be used by other businesses
In the fashion world, many businesses are rising from the mountain of dead stock material that is available. Repurposing dead stock into fashion is one way to get more use out of material before it ends up in waste.
Sustainable fashion can be successful. There is a lot of space for brands that are an improvement on fast fashion in terms of sustainability but are still accessible.Katie McCourt, Co-Founder of Pantee
Word to the wise: Customers and regulators are getting increasingly hip to the terms of greenwashing and overproducing for the sake of selling.
6. Recycle dead stock
Not all dead stock can be recycled.
Do your research to find what programs you can participate in. Set a date when you consider stock expired and ready to recycle or give away.
Don’t consider recycling a loss. Speak to your customers about your sustainability efforts, as consumers are increasingly looking for more environmentally sound choices.
How to Eliminate Dead Stock with Inventory Management Software
On the prevention side, there are technology and inventory management software solutions. These can be critical to your business in cutting costs, boosting profitability, and tracking your inventory. Plus, you have access to metrics to improve your business operations.
The range of options includes cloud-generated software and even some free inventory management software options (bonus!). The best systems offer key features like real-time inventory tracking, notifications, alerts, barcode scanning, returns management, and security and backups.
Evaluate the user interface of any software you are considering and how it will work with any software you already have. You should ensure the software is easy to set up and scale and offers real-time stock optimization.
Benefits like inventory forecasting can help you streamline production and prevent unnecessary excess or dead stock.
Waste Not—Avoid or Repurpose Dead Stock
Don’t panic if you find yourself with excess or dead stock.
There are several ways to handle it to improve your sales and bottom line, build brand awareness, or increase your business’s sustainability efforts.
Keep in mind that inventory tracking is crucial to the process. The Ecomm Manager has more resources for exploring inventory management options.
And don’t forget to subscribe to the ECM newsletter to stay updated on how to make your business more sustainable—and profitable.