Turning your dead stock into cash

It’s a fact: dead stock is no fun. We’re talking about that portion of inventory at your store that just won’t sell. This is a common and persistent issue in the realm of online businesses. In this blog, we’ll tackle the question of how to avoid being left with stock that doesn’t sell.

By now you probably know that we are all about examples, so here’s another one:

Meet Tess,

a purchasing agent at an e-commerce business that sells internationally. Every day Tess comes to work, makes her morning coffee and starts checking sales reports a.k.a. endless Excel sheets. Cells colored in blue mark products that are making a profit, yellow cells mark the Italian market, pink cells show results in the UK, green cells mean… Wait, what do the green cells mean again? She has so many metrics to keep track of that it’s only natural she forgets her own system sometimes. Tess starts checking results for a popular backpack and sees that 950 items have been sold last week. Pretty good. Since she bases her inventory orders on sales numbers only, she decides it’s time to order more.

*tense music plays in the background*

The wholesale price for one item is $10 and Tess orders 3000 units. That’s 30k. Quite a bold move there, Tess. She executes the order and after three long weeks, the delivery man finally parks his van outside the company’s warehouse. Sadly, the product‘s life cycle has come to an end. The numbers start looking grim and even though the advertising team tries hard to make it popular again, the curve stays flat. They are left with 3000 brand new pieces worth $30k.

They basically have two choices.

The first one is to still try to sell the stock and focus on a market where it sells the most. Obviously they won’t make profits, they will even generate a loss. Still, it will help them get rid of the excess items, improve cash flow, and make room for their bestsellers.

The second option is to wait. To literally sit and wait a couple of months or even a year to try their luck again and hope that they will manage to sell it another time.

Waiting for a silver lining in this story? There is none.

Truth be told, none of these two options really work. The company has to change their entire system of ordering inventory for the sake of working more efficiently.

So what should Tess do to avoid dead stock?

She should stop giving so much importance to the number of sold items and base her decisions on the product’s ROAS or CPO instead.

If you have read our previous blogs, you may be thinking “here we go again”. And yes, it’s true: if Cupid shot an arrow into our hearts, little pink bubbles titled “target ROAS” and “target CPO” would probably come popping out. But when you set those metrics and consider them while making decisions, you will see why we put so much attention into getting this message across.

Why target ROAS/CPO are always the aces up your sleeves?

Imagine that you sell 4000 candles in 14 days. This means that these candles have a lot of potential and ordering more will help your business thrive. Right? We wouldn’t be so sure about it.

An avid reader of our blogs would know to take a closer look at the product’s ROAS. They might notice that it has been slowly but surely decreasing. Just 14 days ago, the product’s ROAS was 7. However, in the last 7 days it sank to 3. Since your target ROAS is 4, this means that ordering more products might mean you are on the road to a very dusty warehouse. If Geri Halliwell would make a song about your future inventory it would probably be called: It’s raining dust!

The real cost of dead stock

Dead stock could be detrimental to a business. Not only does it take up valuable space in your warehouse, it also presents a bad investment. It presents a lack of cash flow, which could be a death trap for businesses. You invested your money in the inventory which is now gathering dust. Nevertheless, the costs are mercilessly coming in and you have cracked open even that old piggy bank you have had since you were 10. Still, expenses and bills seem to be flying in like they are in the Hunger Games and you being broke is the only way they will survive.

All the mentioned costs are usually offset by the revenue from the sales. Yet the dead stock products are obviously not making any. On the contrary: they keep adding to the costs rather than covering them.

What causes dead stock?

There could be numerous reasons, but some of the most frequent include:

  • the end of a season or product life cycle
  • new competitors on the market
  • too high prices
  • lack of demand

Besides, some e-commerce sellers make purchasing decisions based on their gut feelings. SAY WHAT? Chills all the way, right? As we know, decisions made on the basis of gut feelings and past successes take you on the fastest route to the Bankrupt City.

There’s no denying it:
Sitting on dead inventory threatens your existence as an e-commerce seller.

What we’ve learned:

  • Dead stock is a persistent issue in the world of e-commerce
  • It can bring plenty additional costs that could be detrimental to a business
  • Too much valuable time is spent looking at the number of purchases
  • The road to smart ordering of inventory begins with target ROAS/CPO

It’s always the dustiest before dawn

The e-commerce sector is such a dynamic market that juggling multiple tasks, ad accounts, clients, and countries can leave you with little time to form thought-out decisions on your inventory. We completely understand and really don’t want you to experience a complete breakdown.

But if that’s the case, it’s time to invest in tools that will help you make smarter decisions and reduce the amount of dead stock.

ROAS monster enables you to track a single product’s performance across different countries, ad accounts, and shops. Consequently, you can make quicker decisions and base your inventory on ROAS and CPO, not just sales. And this is only one of the plenty of amazing features the tool offers!

Stop your money from going down the drain!

Schedule a demo and start your FREE TRIAL.

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