What is dead stock and what are its causes?

What Is Dead Stock?

Deadstock, also known as “obsolete inventory,” are stocks or products that are unlikely to ever be sold. Inventory often becomes obsolete when a product reaches the end of its life cycle or ceases to be demanded in the market.

The main causes of dead stock

If accurately predicting trends and demand for a product were a simple matter, there would be no dead stock problems. And although the reasons why a business’s inventory ends up becoming obsolete may vary depending on the sector or market situation, there are some factors that your business should detect early.

Low-quality products

One of the most common reasons why products don’t sell as fast as expected is low quality. Consumers have a high level of demand and, if they do not perceive that a product is of quality, they will not buy it.

Instead, they will look for higher-quality alternatives, which will generate decreasing demand, and the excess inventory ends up becoming dead stock.

In addition, bad reviews (and how you manage them) will affect your sales and cause your brand’s reputation to fall. Even trending and high-demand products can become deadstock if their quality is not up to par.

Erroneous demand forecasting

An inaccurate forecast of product demand can quickly lead to excess inventory. Not deviating in the forecast requires a deep knowledge of the market and the demand for the product. But even so, some factors are difficult to predict.

In some industries, trends can change virtually overnight. It can happen that, when a new product is introduced with great success in the market, the existing options can become obsolete.

It can also happen that a product goes viral on social media overnight. As this is difficult to foresee, here the tricky part is reacting quickly to increase your inventory to meet that sudden demand.

In the opposite case, overestimating a product (that is when you have a higher expectation of sales) can lead you to acquire an excess of inventory that you can not sell, and that entails high storage expenses. It becomes deadstock as a matter of time.

Product catalogs that are too extensive

Offering a wide range of products to your customers is usually effective in attracting new customers and growing your sales. Consumers like variety and have plenty of options to choose from. But managing the supply and demand of all these products with a traditional supply chain that includes product storage is much more difficult.

Stockpiling a wide assortment of products increases the overall cost of your operations. The more products you have available, the more you must manage and sell. The risk of accumulating low-turnover inventory with the potential to become dead stock increases as more products are added.

Regular analysis of your inventory is vital to identifying your least successful and profitable products. With that data in hand, you’ll be able to adjust your offering and maintain a healthy, best-selling product range.

Poor marketing and sales efforts

If you sell products of good quality and high demand, but your inventory does not have the desired turnover, you may need to invest more resources in your marketing and sales strategies. Are they comprehensive enough? Do they address the specific needs of your customers? Do they have a clear direction?

Working with the top logistics companies in California can help you avoid dead stock and promote your business sales.

Poor communication between sales and marketing teams, a misdescription of the product, a poor website experience, or a lack of understanding on the part of the customer can also contribute to high-demand products not selling. A few adjustments here and there in your e-commerce can make a big difference in terms of sales and move you away from dead stock.