If you have a surplus of aged inventory (and most retailers do), recognize that you did not acquire this problem in one day. And it won’t get solved in one day. But to free up dollars for new purchasing and replenishment, you need get rid of old inventory! Aged inventory restricts your cash flow.
Aged inventory is also a report card on your buying. Depending on how much of your stock is aged, you might consider changing how you buy new product.
Some approaches (marking up the product or re-merchandising) simply prolong the problem. It’s better to take action rather than wait and hope.
TAKE THE FOLLOWING IMMEDIATE STEPS:
- Return to the vendor based on an agreed-upon percentage of your sales, or each time you place those replenishment orders, ask if you can return one piece for every three ordered.
- Incentivize your sales team. Paying them a cash on each piece can be extremely effective.
- Take everything over 12 months old and have a storewide sales event, keeping all fast-selling or new stock in the vault.
- Donate it to charity (check the cost limit with your accountant.)
- Barter with it at every opportunity (catering for events, flowers, music, etc.)
- Stock over three years old is dead; look at scrapping this product
TAKE THE FOLLOWING LONG-TERM STEPS:
- Always negotiate with your vendors to return aged inventory (12 months and older) based on an agreed percentage of your sales. 20% seems to be acceptable to most vendors.
- Do your RTVs (Return to Vendor) twice a year at minimum.
- Stock balance between stores. The cost far outweighs getting rid of old stock.
- Mark it down. No matter how unattractive it is, at a certain price it will sell.
- Depending on the price point and the number of units, consider a markdown at six months.
- At 12 months, take your first markdown.
- Continue markdowns at six-month intervals.
- After you have marked something down three times (24 months), consider scrapping it.
We will all make buying mistakes, so budget for markdowns and scrapping in your merchandise plan. You don’t want any unanticipated hits to your gross profit, which could result in not making your goal. The key to aged inventory reduction is to take action quickly and frequently. A healthy and profitable inventory is one that turns!