Why is deadstock a problem?
Dead stock poses numerous problems for brands, consumers and indeed, the world.
The issue has been steadily growing for some time but even back in 2018, companies like H&M had $4.3 billion worth of unsold clothes.
Estimates from 2017 suggest that 20-30% of retailers’ inventory contained dead stock. This is problematic because dead stock at this volume naturally has a ripple effect on other areas of the business.
For example, it can negatively impact cash flow due to money being tied up in stock. Further, brands must pay to store all this unsold inventory which further drains money from the business. And, of course, there is the hidden cost of time associated with managing the unsold goods.
It is undeniable that large volumes of dead stock severely impacts brands’ bottom lines – but it isn’t just revenue being impacted by dead stock.
To deal with dead stock, brands were previously discarding products or burning them to protect their images and price integrity.
Luckily, intervention from countries like France and the US have made burning clothes far more difficult and now luxury groups like LVMH and Kering have pledged to ban bonfires on all consumer goods by 2023.
What causes deadstock?
There are many factors that contribute to dead stock ranging from poor forecasting to changing consumer demands.
For instance, retailers selling multiple products that are similar can easily result in consumers shopping elsewhere. Sales and pricing are two other key influences as unpopular or expensive products can dissuade a person from making a purchase.
While the above reasons are largely tied to the consumer, businesses with suboptimal inventory management systems often contribute the most to dead stock.
Without real-time visibility over stock or the warehouse floor, it can be all too easy to make mistakes in the sales order or replenishment process and purchase more stock than needed.
How to deal with deadstock
There are solutions on the market – like K3|pebblestone – that offer brands with increased visibility to help prevent future dead stock instances.
K3|pebblestone, based in Microsoft Dynamics 365 Business Central, is an all-in-one ERP solution tailor made for the fashion industry.
The solution offers numerous functionality that can greatly aid with sales forecasting whilst drawing upon historical sales data to accurately predict how much stock will actually be needed.
Businesses can even create a sales order in consignment to return any unsold goods at the end of the season – helping them maximise their margins.
Clearly, dead stock is an issue that causes brands to lose money and it is extremely harmful to the environment; however, there are systems out there that can drastically help minimise the likelihood of dead stock.
Interested in learning more about K3|pebblestone? Contact one of our experts today to find out more!