What is “Dead Stock” & What Should You Do With It?

A dead market. A dead deal. A dead-end job. Few good things in business (or in life, for that matter) are preceded with the word “dead”, and the same can be said of your inventory — dead stock is something you’d certainly rather avoid.

Stock that sits unsold — or worse, unsellable — can have a crippling effect on your supply chain, taking up valuable warehouse space, driving up costs, and creating needless bottlenecks in your otherwise slick operation.

But what constitutes dead stock? How does inventory become “dead”? And how do you deal with dead stock, or better still, prevent it in the first place?

If you’re looking for definitive answers to these questions, you’d be dead foolish not to read on.

What does dead stock mean?

To use a rather gloomy analogy, dead stock in business is like a “graveyard” for products that once had the potential for a vibrant life but are now languishing in a state of inactivity. Just as a cemetery holds the remains of those who’ve passed away, a warehouse with dead stock is filled with items that are essentially lifeless in terms of sales and utility.

In slightly less morbid terms, dead stock refers to inventory that is not only unsold, but for any number of reasons (as we’ll outline below) is unlikely to sell again in the future. This stock ties up capital, incurs additional costs, takes up valuable storage space, and can become a liability if not managed effectively.

But when does a product become “dead”? Well, dead stock can include products that are:

• Outdated or no longer current due to changes in technology or trends
• Obsolete because they’ve been replaced by newer versions
• Out-of-season, such as holiday decorations or winter coats in the height of summer
• Overstocked due to overestimated demand or unexpectedly poor sales
• Slow-moving due to niche demand or limited interest
• Damaged or defective, making them unsellable as new items
• Discontinued and no longer being produced by the manufacturer
• Past their expiry date, which may be the case for perishable goods like food or cosmetics

What causes dead stock?

Before you can you resolve your dead stock dilemma, it helps to know what’s actually causing it. Dead stock usually isn’t the result of a single misstep but a combination of factors. Ultimately, it’s down to inefficient inventory management, and can encompass anything from inaccurate stock forecasting to misjudging market conditions.

Here are just a few scenarios that can lead to obsolete inventory:

Over-ordering

Often the most common cause of dead stock, over-ordering happens when you overestimate how many units of a particular item you’ll need. Say you’ve got a key seasonal event coming up, so you fill your warehouse shelves with a product you think will be a hit — but actual sales are way below the expected levels. In this scenario, you’ve potentially got a glut of dead inventory waiting to clog your supply chain.

Poor demand forecasting

If your demand planning process is more “finger in the air” than meticulous and data-backed, this is often your products’ one-way ticket to the inventory graveyard. While you’ll rarely be able to forecast future inventory needs with 100% accuracy, consistently poor demand planning invariably leads to dead inventory since you’ll often end up with excess quantities of slower-selling (or decreasingly popular) lines.

Lack of sales

In some cases, dead inventory can simply be the result of poor sales. Perhaps a shift in the market has halted sales of a particular product line, or maybe a competitor has launched a new product and suddenly yours isn’t selling. On the other hand, it’s possible your business is simply suffering a seasonal sales slump. Either way, slow sales can mean you’re holding onto inventory you may struggle to sell.

Drop in demand

The world of ecommerce can be fickle and unpredictable, with trends often disappearing as quickly as they emerge. This means demand for certain products can fluctuate wildly, leading some to become quickly obsolete. If your product was flying off the shelves last month but demand has since nosedived due to waning interest, you might be left with stock you can’t shift.

Poor marketing

Closely linked to poor sales, a lack of a clear marketing strategy can also be a contributor to dead stock. You could have the leading product on the market, but if you’re unable to promote it effectively — maybe you’ve misjudged your target audience or your campaign messaging is overly complicated — you’ll likely struggle to generate sales and your inventory may eventually become outdated and obsolete.

Quality control issues

If you’re often having to write off stock because it’s defective or doesn’t meet the required quality standards, it’s likely because you don’t have a properly-managed quality control process. Defective stock often becomes ‘dead’ because, unless it can be repaired or returned to the manufacturer, it’s unsellable and may need to be disposed of — which can incur additional costs.

Why is dead stock bad for your business?

Dead stock is often more than a mere inconvenience. In fact, the consequences can be pretty wide-ranging, affecting the company’s financial performance as much as its operational efficiency. It can even influence consumer perception of the brand and negatively impact its environmental credentials.

Here are 10 reasons you’d be wise to try to avoid dead stock at all costs:

1. Increased costs. Dead stock can prove expensive for businesses in a number of ways; it can lead to higher storage fees and increased handling costs, while product write-offs and disposals can also be unavoidably costly.
2. Limited cash flow. Money spent on dead stock is tied up in unsellable inventory, limiting cash flow which could otherwise be spent on new products, marketing campaigns, or business expansion.
3. Squeezed profit margins. If you’re forced to heavily discount unsold or near-obsolete stock, the profit you make from each sale is likely to be minimal. In the worst cases, you may even end up selling products at a loss.
4. Inefficient use of space. If large swathes of your warehouse are dedicated to housing unsold or unsellable stock, this may be occupying space that could be used for faster-selling, more profitable products.
5. Operational bottlenecks. Excess dead stock can clutter your warehouse, making it harder to manage and locate other, more important inventory. This can slow down fulfilment processes and even affect order accuracy.
6. Limited flexibility. Agility is often vital in ecommerce, with retailers needing to respond to emerging trends and market changes. The more dead stock you’re carrying, the less able you’re likely to be to pivot quickly when needed.
7. Depreciation. Lots of products in ecommerce (those in fashion, tech, or perishable goods, for example) quickly lose value. Once they become obsolete, their potential resale value continues to diminish.
8. Environmental impact. Dead stock often ends up as landfill, particularly if it’s made from non-recyclable materials. If products need to be disposed of, processes like incineration emit significant greenhouse gases.
9. Reputational damage. If you consider your business a premium brand but you’re forced to sell outdated products at knock-down prices to clear dead stock, you might inadvertently be perceived as a cheap or low-quality retailer.
10. Limited growth potential. Dead stock takes time and effort to manage, and this can distract from core focuses that fuel business growth, such as product development, marketing, and customer service.

What can you do with dead stock?

So, you’re lumbered with numerous units of unsold (and seemingly unsellable) inventory. It’s taking up excess space in your warehouse that could be dedicated to your faster-selling, revenue-driving lines. It’s adding unnecessary bottlenecks to your fulfilment process, and it’s steadily losing value as it sits unloved and accumulating dust. What do you do?

Well, you have a number of options when it comes to dead inventory, and how you choose to deal with it will depend on your primary objective. For example, you might be determined to recover at least some of the revenue you’ve otherwise lost, or you may be prepared to take the financial hit and be more concerned with quickly freeing up space.

Here are some examples of how you might deal with dead stock:

Sell it at a discounted price

Perhaps the most obvious solution to dead inventory is to slash the price and sell it at a heavily discounted rate. The advantage of this, of course, is you can still generate some revenue from the unsold products, even if it’s much less than you’d get when compared to selling them at RRP.

This approach will inevitably hit your profit margins, but at this stage you may have to concede that turning a significant profit on obsolete stock is no longer viable.

Offer it as a free gift

Perhaps you’ve tried deep discounting but you’re still struggling to shift your excess stock. At this point you might consider going a step further and offering it for free — for example, you could include it as a complimentary item when a customer buys another of your products or spends over a certain amount.

The upside? Your freebie offer might even drive more conversions of your better-selling products — and potentially increase your average order value (AOV) — while at the same time helping you clear through your unsold inventory.

Repurpose, recycle, or upcycle it

This won’t always be an option, of course, but certain unsold product types may be able to be recycled, upcycled, or even repurposed into different products. For instance, goods such as clothing, textiles, electronics, or plastics can often be broken down into their raw materials and used to create new items or components.

If this is an option you’d consider exploring, you can reach out to local recycling centres, partner with specialised upcycling companies, or consult industry associations for guidance on sustainable inventory management.

(Re)market it smartly

Perhaps your product suffered from an ineffective marketing strategy upon its launch, leading to slow sales, or maybe demand has simply abated over time. Either way, you might be able to give it a re-push (and clear some of your unsold stock) by getting creative with your marketing.

Let’s say there’s an emerging trend that could lead to renewed interest in your product, or you’ve discovered an alternative way to “spin” your marketing message (perhaps there’s a benefit you’d previously overlooked). Remarketing the product with a new angle could give your otherwise unsellable product a new lease of life.

Export it to international markets

Sales of your product may have ground to a halt in your domestic marketplace, leading the stock to effectively become obsolete, but have you considered whether demand exists in overseas markets? By doing a little international market research, you might find that expanding to new regions allows you to clear stock that is unsellable in your own territory.

Of course, shipping internationally comes at a cost (though a good 3PL will help you do so as cost-effectively as possible) but there may be revenue-driving, inventory-shifting opportunities awaiting in markets you hadn’t previously considered.

Donate it

If you’re unconcerned about recovering any revenue from your unsold inventory, why not donate it to a local charity, school, or community organisation? Computer equipment, for example, could be invaluable to local schools or universities.

Not only will this help you liberate otherwise unsellable stock, but you’ll have the satisfaction of knowing you’re supporting your community — which can be great for brand image, too.

Return it to the vendor

While this likely depends on whether your supplier contract includes a buy-back agreement, it may be possible to negotiate with the vendor to have them take the goods back. It’s admittedly quite a long shot, but not necessarily out of the question — especially if the products are still in pristine condition and in their original packaging.

How to avoid dead stock in future

Of course, while there are multiple ways to get rid of dead stock and (hopefully) maintain some of your profits, as with many things — prevention is better than cure. It’s pretty inevitable that you’ll have to deal with unsold inventory at some point, but there are steps you can take to minimise the likelihood of dead stock littering your warehouse. For example:

• Invest in inventory management software. Adopting a well-oiled inventory management system enables you to track inventory levels, sales patterns, and reordering points accurately and in real-time, meaning you can pinpoint slow-sellers and take remedial action before the stock becomes “dead”.
• Leverage demand forecasting. It’s essential to leverage historical data and statistics to forecast future demand as accurately as possible. By considering seasonal trends, economic factors, and key promotional periods in your forecasts, you can meet anticipated sales demand while avoiding overstocking.
• Apply the “just-in-time” (JIT) method. Just-in-time inventory means replenishing stock only when you need it, rather than keeping large quantities on hand. This approach can be particularly effective for retailers selling perishable goods like food or flowers, or items with a limited shelf-life like pharmaceuticals.
• Conduct regular inventory audits. Monitoring stock in real-time is one thing, but it’s also important to periodically review your entire inventory. By scheduling monthly or quarterly inventory checks, you can categorise items based on sales frequency and identify potential dead stock before it becomes a bigger issue.
• Negotiate flexible supplier agreements. It’s important to discuss your options for returning or exchanging unsold items when setting up contracts with your suppliers. Negotiating buy-back agreements for unsold products, for example, can help reduce the risk of you holding onto unsellable inventory.
• Diversify your sales channels. By expanding to different sales platforms and markets (for example, online marketplaces, physical stores, or international regions) you can reach a broader customer base while potentially moving through your inventory more quickly, reducing the likelihood of obsolete stock.
• Implement a “first in, first out” (FIFO) approach. The first in, first out method means selling through your older inventory first, which is especially beneficial if you stock items with finite shelf lives. It helps to organise your inventory so that older items are more accessible than newer counterparts, meaning they’re picked first.
• Gauge public interest in new products. Instead of gleefully ordering bulk quantities of your latest product in anticipation of it flying off the shelves, test the waters first — maybe allow pre-orders or offer a limited-edition run of the product to gauge interest levels before committing to larger inventory purchases.

Partner with 3PL to avoid a dead stock nightmare…

At Pro3PL, our industry-leasing Warehouse Management System tracks inventory in real-time, and you have 100% visibility over every stock movement. This means you’re always aware of how much stock you’re holding, how quickly items are moving in and out, and you can make quick, agile decisions based on market trends and customer needs.

By partnering with us, you’ll also have access to advanced reporting tools, meaning you can leverage historical data to accurately forecast future inventory needs — helping you avoid dead stock by ensuring you can meet demand without risking overstocks.

Want to find out more about how we can breathe new life into your supply chain? Get in touch or request a quote from us today.