Don’t get caught off guard with inventory glut – use Fuse’s WOS report to monitor your inventory overages and underages in real time.
Retailers are facing a growing number of challenges in 2022. Heading into the year, brands were planning for relatively strong demand and attempting to build inventory to avoid stockouts as a result of continued disruptions to the global supply chain. Instead, they were met by slowing and shifting consumer demand as consumers re-adjust to the post-pandemic world and tighten their budgets in the face of a looming recession.
Meanwhile, many delayed shipments that didn’t make it in 2021 are getting shipped late in 2022, which has caused many brands to be saddled with too much inventory, resulting in a cash flow crunch. Don’t worry, you’re not alone – many retailers are struggling with the same issues. For example, in Q1 2022, Target and Walmart reported a 43% YoY and 32% YoY increase in inventory, respectively.
- Target Warns Profit Will Drop Due To High Inventory Levels
- Target and Walmart Are Victims of Their Own Inventory Success
- Macy’s, Gap and Other Clothing Stores Are Stuck With the Wrong Items
Getting caught in a cash flow crunch because of inventory shouldn’t be a surprise. You should know weeks, if not months ahead, with the right inventory planning solution. If you’re not forecasting and actualizing your inventory cash flow daily, consider investing in a tool that will automate that process.
If that sounds familiar, here are some steps you can take if you find yourself stuck with too much inventory suddenly:
1) If your inventory has not shipped yet, stop it!
- If you understand INCOTERMs, make sure you understand exactly at which point the inventory passes into your possession.
- For example, if you have FOB or CIF terms with your supplier, the supplier owns the inventory until it passes the ship’s rail at the named port of shipment. Asking the supplier to pause production and/or not transport it to the port means that you’re not yet on the hook for that inventory.
2) Try to renegotiate payment terms with your suppliers; see if your supplier can cut you some slack and accept payment terms like net 30, net 60, net 90, or even net 180
Pro tip: if you commit to buying specific quantities in the future when cash flow is better, a supplier may be more willing to cut some slack in the short term
3) Understand just how much you are overstocked SKU by SKU
- A detailed understanding of which SKUs you need to move the fastest is key to responding properly to overstocks. Although it’s tempting to slash prices across the board or pour marketing into ads for summer sales, taking a more nuanced approach can put the business in a healthier state, and prevent overcorrection. Selective inventory movement prevents a scenario where you are stocked out of core items, but still have a glut of unwanted inventory.
Getting rid of excess inventory
- Discounting is an obvious way to move stock but can be harmful to brands in the long term; consider less damaging promos like BOGO (Buy One Get One), GWP (Gift with Purchase), or bundling to move specific inventory, rather than across-the-board price slashes.
- Consider selling wholesale to smaller brick-and-mortar boutiques. Rather than the long negotiation times and hefty margins that you might need to sell to large retailers like Target and Walmart, boutiques can move quickly and often accept smaller bulk discounts like 15-20% instead of 40-60%. As travel opens up and more foot traffic goes into boutiques, this can also be a good avenue for brand exposure.
- Faire and other wholesale marketplaces might be a great place to free up inventory.
- Mirakl and similar platforms can help you get access to marketplaces like Madewell and Bed, Bath, and Beyond. These platforms allow you to list your products on marketplaces, but fulfill from your 3PL or warehouse. Essentially, you can leverage their marketing to drive your sales.
- Consider donating inventory for a tax write-off. Sometimes inventory write-offs can help balance the books through sizable tax write-offs. Places like women’s shelters, homeless shelters, and education centers need all sorts of goods. Everything from apparel to personal care to toys and crafts can be used by non-profits. Plus, you can help your local community!
Hope you found some of these tips helpful! As always, we are here to help.