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Excess inventory can become a nightmare for a business owner. From running out of storage space to higher storage fees, having more inventory than you can sell is a huge problem. On the flip side, having excess inventory can be great for those with trending products. It allows you to meet demand without running out. But we kinda figured if you’ve stumbled on this article, you’re seeing surplus inventory as a problem. That’s why in this article, we’ll share what the causes of excess inventory are, some advantages and disadvantages of overstock, and how to sell excess inventory. Alright, ready to dive in? Cool. Let’s go!
What Is Excess Inventory?
Excess inventory is when you have too much inventory in stock that doesn’t sell through. While you want to have enough inventory for trending products, some products may turn out to be slow-movers resulting in a loss of sales.
Advantages of Excess Inventory
1. You Can Sell High Quantities
Who says excess inventory is always a bad thing? Not me. One of the advantages of excess inventory is that you can sell high quantities of products. In most cases, entrepreneurs buy stock when they land on a winning dropshipping product. This strategy allows them to save money on product costs since it’s already proven to be an in-demand product. Amazing! If you’re selling high quantities of products, you’ll likely want to own your inventory. Otherwise, your success will rely on someone else’s inventory levels. And if they run out, you might not know until you place several orders, which can lead to frustrated customers. But if you own the inventory, you know exactly how many products you’ve got in stock.
2. You Can Deliver Faster
Another one of the advantages of excess inventory is that you can deliver products faster. Let’s notice but set aside the three-week delays that dropshippers face from shipping from China. And instead, let’s look at how quickly you can deliver when you have products in stock. If you have excess inventory, you’ll always have products on hand to ship out to customers. When you fail to order enough inventory for an in-demand product, there are shipping delays from suppliers, which can drastically slow your growth. So, in some cases, if you’re selling a popular product, for instance, you’ll want to have excess inventory to ensure you have enough products to meet demand.
3. You Control Ordering
One of the advantages of holding excess inventory is that you have full control over that. You choose how much or how little to order. You determine what the demand is and the exact numbers you’ll need to fill it. It’s empowering to have that level of control in your business. Many entrepreneurs who dropship their products are out of luck when a seller runs out of inventory for a popular product they’re selling. Or worse– if a product is delisted from a platform as the product begins to peak. Having too much inventory doesn’t become a bad thing. It gives you the control you need to run a successful business.
Disadvantages of Excess Inventory
1. Expensive Storage Fees
Now, let’s dig into some of those disadvantages of excess inventory. Well, for starters, those storage fees are pretty expensive. If you have too many products that aren’t selling as they should, you essentially lose warehouse space. Products that would crush it on the sales charts don’t have anywhere to go. So you’ll be forced to buy limited quantities or buy an even bigger storage space. And those dollars can add up fast. Ultimately, you want products to move so you can continously add new inventory to your store or website.
2. Product Might Not Sell
Another challenge of excess inventory is that you might become the owner of products that never sell. This disadvantage is most common for those who have subscription box services. For example, a small business owner may estimate that they’ll have 100 subscribers for their box in August. However, when August rolls around, they realize they only had 50 subscribers. The additional 50 products they ordered can’t be reused in a second box as customers expect to get new products every month. And so they take a loss due to excess inventory they can’t resell to their customers. Of course, an alternative would be to allow people to buy previous boxes if you have unsold inventory. This method can be effective in selling excess inventory.
3. You’ll Need More Cash On Hand
Having excess inventory means that you’ll need more cash on hand. If you have unsold inventory, you aren’t making money from those products. However, you’ll still need to find products that do make your business money. You’ll still need to buy stock for your store, so you find products that people love. You’ll need to have some savings in place to buy inventory and keep your business afloat. You’ll also need more money to pay for bigger storage spaces. Overall, even if products aren’t selling, you’ll need to have enough money to pay for rent, ads, and other business expenses you may have.
Causes of Excess Inventory
1. Overestimating Product Popularity
One of the causes of excess inventory is overestimating the product’s popularity. The reality is the product projections you make should be using some data. For example, if you’re dropshipping a product and noticed that it’s picking up in popularity. You might decide to buy some inventory for the product because you see it’s popular. However, even still, you should expect that the product’s popularity will be temporary as most trends are. So rather than excitedly ordering tens of thousands of products, you might start with a much smaller number based on the performance you’ve been seeing. As a retailer, it’s hard to know whether a product’s popularity is long-term or short-term, so that insight will have to come with experience. But in general, you want to order enough to sell through with minimal losses.
2. Overestimating Customer Projections
Most of the causes of unsold inventory are due to overestimation. It’s possible to overestimate the number of customers you have. Take, for example, a subscription box with monthly subscribers. You might overestimate how many customers will order your box. This poor estimation may result in overstock for several products. As we mentioned earlier, you could always sell past boxes to rid yourself of your excess inventory. However, in the case of a retail business, you might not have enough customers to sell through either. Maybe your business doesn’t get as many walk-ins as you projected during a busy time of year. If there aren’t a lot of people seeing products, you’ll likely sell less inventory. Ultimately, you want to overexpose your products.
3. Weak Sales or Marketing Background
One of the biggest causes of excess inventory lies in an entrepreneur’s ability to sell products. Some businesspeople will run a single Facebook ad expecting a big win only to experience a huge loss. Marketing isn’t as simple as creating an ad. It’s not as easy as posting a single social media post. The secret to success in marketing and sales is compound marketing– Slowly building something up so that the success compounds on top of each other. That’s when you start seeing results. But that means you need to slowly add products, test them, experiment with different marketing strategies to see what works. And keep building up, consistently doing this every day.
How to Sell Excess Inventory
1. Sell on Exchange
One of the ways you can sell excess inventory is by selling on Exchange. There are several inventory and retail stores on Exchange. You can find the inventory business listings here. You can choose to sell your inventory-based business on Exchange to get rid of inventory you can’t sell. This may be a last resort if you aren’t able to sell any of your inventory. As you can’t only sell your inventory on Exchange but your entire business. If you own an ecommerce or retail store that uses Shopify, you’ll be eligible to list your business for sale on Exchange.
2. Sell to Dropshippers
Another way to sell excess inventory is to sell to dropshippers. Dropshipping is when a manufacturer sells goods to an entrepreneur, retailer, or individual but ships them to the customers on their behalf. In this case, you’d play the manufacturer’s role by shipping the goods directly to customers on another business’ behalf. If you have a lot of excess inventory, this may be a great way to reduce it. Since you won’t have to sell products, you can rely on marketers and entrepreneurs to push your inventory. All you need to do is ship the products to their customers to help them out in the process.
3. Sell In Bundles
The best time to sell is when people are buying. So, if a customer is buying one blanket, you might want to have a funnel created so that you upsell another blanket. People sometimes even buy duplicates of things they like. This is common for replenishing products like candles, food, drinks, toiletries, detergents, and more. If something finishes with time, people might choose to stock up on those items. So, if you sell an item, even if it’s non-replenishable, try to encourage upsells. If someone already has their credit card out, it’s easier to sell the products since it’s something they’re already buying.
4. Find New Audiences
Sometimes entrepreneurs end up with excess inventory because they’ve exhausted an audience group. For instance, if you sell to the US only, eventually, you’ll have sold to everyone interested in the product in that market. Naturally, the next step is to expand to an international audience. You can also promote to different segments. For instance, maybe you sell brain teaser puzzles to children. You might decide to also experiment with selling them to nursing and retirement homes to help keep the minds of the aging population sharp. Try to look at your excess inventory from different angles to help you sell to new audiences.
5. Sell On Marketplaces
Another way to sell excess inventory is to sell on marketplaces. You’ll likely have to pay additional fees in a marketplace as they bring the audience to you. And if you store your items at their warehouse, those fees will add up quickly. However, this can be a population option for many who want to get rid of surplus inventory. If you’re struggling to sell this inventory due to weak marketing experience, you might choose to pivot your strategy to marketplaces as they do the selling provided that you bring the right products. You’ll still need to know how to choose products wisely to make this work effectively.
6. Take New Photos
The impulse buy is all about having the right photos or videos to compel a browser into becoming a buyer. If you find that people aren’t interested in your product, it could be that you didn’t position it compellingly. If your goal is to sell excess inventory, you might choose to take new photos and videos. You’ll want to position them in different styles to see which one converts the best. Then, once you’ve found your winning picture or video, you’ll want to use that to sell out of your inventory for good.
7. Put An Emphasis on Excess Inventory
Most people design their stores or websites to draw attention to certain products. If you find that certain items aren’t selling through, maybe it’s time to add more emphasis to those slow movers. If your excess inventory is hiding out in storage away from the public eye, someone can’t buy it. Position the products nicely. Maybe pair it with something else to help customers imagine its use. Showing how the product could be used or worn can help people envision themselves with it.
Excess inventory can be a double-edged sword. On the one hand, it can be the reason you succeed in business by having more than enough of a trending product. On the other hand, it can be the cause of the demise of your business with high storage fees and a lack of sales. Fortunately, there are multiple solutions for selling excess inventory, such as the ones listed and others such as offering discounts, making it a freebie deal for best-sellers, encouraging your employees to sell it, or writing it off as a donation to a charity. If you’re currently trying to get rid of your surplus inventory, we hope that this article helped you come up with a solution to sell out of those products for good.