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6 Ways to Reduce Excess Inventory
by Marcia Layton Turner
At some point, virtually every manufacturer, wholesaler, or retailer will discover that they have excess inventory taking up precious storage space. These are usually flawed products that customers are no longer interested in buying. Even though this stuff may be obsolete, out of style, or simply not in season, your excess inventory is usually still worth something.
So what are your options for converting those pallets of product into cold, hard cash? You have several choices. Your best choice will depend on how quickly you want to get rid of your surplus inventory and how much you want to make from it. Here are six actions you can take that can help reduce excess inventory and raise cash:
Ask About Returning It
Depending on how long you’ve held the inventory, your distributor or wholesaler may be willing to take it back and issue a refund. It's more likely that you may only get a credit toward future purchases, but that's better than a pile of merchandise you haven't been able to sell. Start by exploring what your supplier's return policies are, and see if they're willing to buy it back from you.
Join a Barter Network
If you can't sell your inventory, consider trading it—ideally at full retail value—for other goods and services your business needs. While there may be fees associated with selling within a barter network, you may still be able to make a profit on items you want to be rid of. Looking online for trade exchanges is a great place to start. You can also ask around your local business community, and see if you can partner with other entrepreneurs whose needs and services overlap with your own.
Announce Flash Sales
Customers love deep discounts and may be more motivated to buy if you restrict your sale to a limited time, like 24 hours or a single weekend. Try offering more than the standard 10 or 20 percent off. Think about slashing prices at least 50 percent off to entice your customers to buy. These events can take considerable time and planning, but it's possible to break even—or even make a profit—depending on what you have invested in your inventory.
But whatever you do, don't position it as a "clearance" sale. Customers often think of clearance merchandise as the dregs of your inventory that no one else wanted.
Unload Inventory Online
Many small businesses today are heading online to get rid of extra inventory, either moving product in lots or individually. There are websites that allow selling lots, or bulk shipments to be sent in and sold through sponsored programs with warehouse fulfillment. Other boutique websites can be a good fit for companies that specialize in customized and creative items, and that don't mind photographing and shipping individual pieces themselves. And there are sites with locally available product listings, which is another outlet for large pickup items.
Selling to liquidation companies can clean your warehouse out of most, if not all, of your excess inventory in one fell swoop—but you likely won't earn more than pennies on the dollar. On the other hand, you can open up your storage space and raise money to reinvest in new merchandise. There are well-known companies you can sell excess merchandise to, as well as plenty of businesses that specialize in taking certain products off your hands. Review the kind of extra inventory you have and research your liquidation options.
Donate for Tax Write-Off
There are many companies that donate their returns and leftovers to nonprofits and charities. If you want the merchandise gone immediately, reach out to local charities about accepting your donation. Believe it or not, you may actually do better in the long run by donating your goods to charity. You may be able to take a tax credit that could be above what you originally paid for the products, though not quite as high as the full retail value. Be sure to consult a financial advisor for details.
Depending on the priorities and needs of your business, these strategies can help you clear out obsolete or slow-selling merchandise to make way for higher-profit items.
About This Author
Marcia Layton Turner writes regularly about small business. Her work has appeared in magazines such as Entrepreneur, Bloomberg Businessweek and Black Enterprise, as well as at CNNMoney, Amex OPEN Forum, and Entrepreneur.com.
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