Nearly half of retailers have excess stock with returns set to worsen the situation
Almost half of retailers are stuck with excess stock even after the New Year sales, according to a survey by Inventory Planner.
It found that 44% of sellers still have goods they cannot sell after post-Christmas and January discounting. And the ‘returns tsunami’ which traditionally hits hardest in January will only make the problem worse.
Last year 25% of excess stock was written off altogether. And UK retailers are sitting on an average of £65,000 worth of excess stock which has little value and is costly to store.
The results come from a new poll of 500 retailers from Inventory Planner, which provides forecasting and planning software for businesses. The data comes from a new report which provides a stark warning to retailers about the dangers of being caught with excess stock.
Almost six out of ten retailers (59%) told Inventory Planner there would be ‘dangerous ramifications’ for their business if they failed to sell excess stock.
Excess stock is a bigger problem for larger firms than SMEs
A total of 62% of large retailers (£100m-£500m turnover) said they had excess stock compared to 42% of SMEs (£100,000-£1m). The problem goes right across all sectors with baby and toddler the worst affected (67% with post-holiday overhang), followed by fashion (58%), health & beauty (53%), DIY & Gardening (43%) and homeware (41%).
Six out of ten retailers (60%) are planning to offer even more discounting to try to shift the unwanted products.
Inventory Planner CMO Sara Arthrell said: “Excess stock is a huge issue for retailers at this time of year. And a tsunami of returns which always comes in January after peak trading is going to make these problems even worse.
“The key to avoiding inventory waste is by forward planning and having rapid response software which allows retailers to pivot quickly to fill order gaps and ditch items early which are not selling.
Excess stock was a key factor in last year’s collapse of the online furniture retailer, Made.com. Before floating, it operated on a ‘just in time’ model, only buying inventory to fill orders. But much of the proceeds from the IPO were invested in stock – an excess of which contributed to its downfall.
Arthrell added: “Made.com’s crash was a wake-up call to everyone in retail about the dangers of excess stock.
“Many retailers struggled with product shortages during the pandemic due to understandable supply issues. Now they are faced with the opposite problem – a glut of unsold merchandise which is eating into profits.
“Discounting cripples margins and is not sustainable over the long-term with the cost of living headwinds all retailers are facing. That’s where technology comes in. Inventory planning provides accurate replenishment recommendations based on years of purchasing data so you are never under or overbought on inventory.”