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Year-End Liquidation: 7 Ways to Move Your Excess Inventory
All year long, your business prepares for the
holiday season. It’s the “make-or-break” time of the year, and you need to make it count. Business can’t stop once the elves retire for another year and all of that “red and green” needs to move out to make room for the pastel shades of spring.
As you look ahead to your year-end liquidation, there are a number of important things you can do to ensure excess
inventory makes it out of your warehouse and into customers’ shopping carts.
1. Slash prices: This is likely a no-brainer for your retail business. If you have extra garland and ornaments sitting on the shelves after New Year’s Day, then markdowns are a must. All depending on what the profit margin is for certain items, you will want to discount them 25 to 75 percent. Or a BOGO (buy one, get one) deal is also a great alternative that gets shopper adrenaline flowing. Once you decide on your end-of-season sales, let potential customers know about it! Heavily promote markdowns on your business website, social media, promotional email blasts and any other marketing platforms.
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2. Switch things up: When customers walk into any retail store, they’re drawn to the big clearance signs at the back of the store, in search of the best bargains. So once you mark down merchandise, build a large display to best showcase all the special discounts. “Bargain bins” at the front of the store are also a popular way to draw attention and move sale items.
3. Reach online shoppers: You may want to offer the same deals online as you do at your physical location. Or do as many retailers do, offer even better deals for your online fans. And it doesn’t have to stop at your web address. Other online marketplaces like Amazon or EBay are also excellent places to make some cash from excess inventory. You also have the option of the auction model or setting one low “buy it now” price. Through these sites, you may reach a whole new customer base that you can carry over to your own ecommerce site or brick and mortar store.
4. Hold a sales event: When it’s getting close to the end of a season or the holiday is only a week away, there are certain items you just want off your store shelves. And many times just sticking a “20 percent off” sticker on them isn’t as attractive as you may think. So, it could be smart to hold an entire promotion around a certain item. To kick start your liquidation and create a sense of urgency, create an impactful sales event with the whole dog and pony show to go with it. This will engage customers and may even draw new crowds to your business. The bigger the event the better – because crowds create a sense of excitement. And that turns into more sales, both now and hopefully in the future.
Vanessa Cooreman-Smith from Flourish Boutique told
Vend that is the case for her business.
“Twice a year we have a big overstock sale where we encourage a door buster mentality and discount things as deeply as we can to free up our capital for new items,” she said. “We also do online flash sales where we mark down poor performing styles (and mix in a few good sellers as loss leaders). “
5. Bundle products: Consider bundling certain products together and selling them for less than if customers would buy them separately. This tactic works best for small to medium-sized items. For example, perhaps you have a summery scented shower gel left in October, when you really want to make room for the pumpkin spice and apple scents. Perhaps offer the out-of-season scents free with the purchase of a newer product. And it’ll be an offer your customers can’t refuse. Not to mention, you move the product out of your store faster, without such a big hit on your profits.
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Bundling is the second most common technique for liquidation, after discounting, according to
recent study by
Software Adice. The research found that 90 percent of respondents implement bundling in their business. But before bundling products, make sure it makes sense for your store and the products you sell.
Or how about offering leftover items as a free gift with purchase? If you think your
surplus inventory could still be useful to your customers, a free gift with purchase could be a profitable option. A good way to go about this is to offer the products free to those who spend more than a certain amount at your store.
6. Use a liquidation company: You might be in a place where you don't have the time or manpower to accomplish any of the above-mentioned
liquidation techniques. If so, then you could hire a liquidation company to do the legwork for you. These organizations specialize in taking stock out of merchants' hands and resell it. But before doing this, you must remember that most companies won't take everything and will likely sell items at very low price points. On the plus side, you'll be able to free up space and capital, but the downside is you most likely won't see any profits.
7. Get a tax break: Another inventory liquidation alternative is to donate excess items to charity. You don't get the up-front profits, but you can take advantage of the tax deductions. Plus, along with donating your slow-moving inventory, you can also donate supplies and equipment you no longer use or need.
Gifts-in-kind organizations, like
NAEIR.org, can take your extra products and offer them for free to various nonprofits, schools, churches, and businesses in the United States. In return, your company “can earn a federal income tax deduction under Section 170 (e) (3) of the U.S. Internal Revenue Code,” according to the company.
“The IRS Code says that regular C corporations may deduct the cost of the inventory donated, plus half the difference between cost and fair market value. Deductions may be up to twice-cost,” Gary C. Smith, president, NAEIR.org, wrote in
his blog. “Let’s say you’re a retailer of office products and you buy a desktop stapler for $2.00. Your price to the home office consumer is $4.50. Your deduction is $3.25. If the markup is considerably higher, deductions are limited to twice cost.
Smith added that if your business is an S corporation, partnership, LLC or sole proprietorship, you qualify for a straight cost deduction.
Further, when you make a donation, it not only eases the year-end liquidation process and clears your shelves; it also puts your focus back on your current big sellers, while helping deserving nonprofit organizations.
The end of the year always comes around, and you will always need to do year-end liquidation to some degree. And you need to be prepared. The aforementioned inventory liquidation techniques are all valid ways to get your store and warehouse ready for the upcoming season. So why not try one or more of them to see which one works best for your unique business needs?
An
automated inventory management system is also a must as you move out of the busiest shopping season of the year and into year-end liquidation. As you try out different tactics to clear your excess inventory, it’ll provide real-time, accurate data on what works and what doesn’t. Then, when next year comes to a close, you can make more informed decisions and a better liquidation game plan.
What year-end liquidation techniques have worked for your business?
