What Is Dead Stock and How to Avoid It?
Dead Stock Definition
Dead stock is a term used to describe a product held in inventory that was never used or purchased by consumers before it was removed from sale. Dead stock is often warehoused and can be a common issue in companies that do not use modern inventory management software. Dead stock costs money not only because the company cannot recoup the cost of the goods, but also because it takes up storage space in a warehouse that could be used for more in demand products. Simply put, dead stock is inventory that did not sell, and now the company is stuck with the price of the product and the carrying costs of holding onto it longer than planned.
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How to Avoid Dead Stock
How to avoid dead stock:
- Use inventory management software – this helps keep track of inventory and alerts a business to potential issues so they can be addressed appropriately. This can also alert a business to when an item is Ã¢â‚¬Ëœdying,’ so that a plan can be made for the item to be phased out.
- Ordering smaller quantities – smaller quantities of a newer product offer protection for a business until they know how well the product will perform.
- Survey the market – ask consumers and perform market research in order to learn what products are in demand.
What to Do With Dead Stock
What to do with dead stock:
- Bundle it – another option is to bundle your dead stock with existing products that are performing better, and offer both items at a discount. While profit margins may take a hit with this strategy, businesses often are able to recoup their initial cost price of the dead stock.
- Return it to the supplier – if the product is current enough, there is a small chance of selling back your dead stock to the supplier and potentially recouping some of your initial investment.
What Is Dead Stock FAQs
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.