Retail overstock is undoubtedly becoming a significant concern for retailers, and they will need to optimize their inventory management to remain competitive in the marketplace. Retailers can address this issue by implementing better inventory control and visual merchandising strategies.
According to a report by Reuters, retailers were sitting on over $550 billion of excess inventory in July 2022. Another report by NBC estimates that retailers in the U.S. have about 20% of surplus inventory. It is the kind of stock you wish would get purchased quickly to receive revenue without too much of a loss.
The pandemic disrupted the supply chain leading to shipping delays. As a result, many retailers are now "stuck" with unsold merchandise. Although they can sell it to a wholesale company to resell at a lower cost, they will likely incur a significant loss.
We will explore the financial consequences associated with overstock and how to harness the power of data to enhance merchandising.
Financial Consequences of Overstock
Excess Inventory is Costly
The impact of surplus inventory revolves around storage and space. You often have to pay for additional storage space or warehousing to store excess inventory, which can be a significant expense. Such costs can add up quickly, especially if you are not quickly moving the overstock. You also have to bear the cost of maintaining and managing this additional space, including rent, utilities, and labor.
Furthermore, overstock results in lost revenue that can be difficult to recoup. It's because the need to expedite the sale of surplus products usually requires more time and energy. Hence, lowering prices and increasing expenses. This puts you in a difficult position because you lose money on the products and the additional costs associated with storing and selling them.
Tying Up Funds and Straining Your Business
Overstock ties up your money and can cause financial strain for your retail business. Your investment in excess inventory is not recovered until the products are sold. And it can become a burden if you don't have the financial muscle to replace the extra merchandise with new products and prevent the release of profitable items.
The situation can become a critical problem for your business, particularly in an ever-changing market. Overstock issues are sometimes caused by factors out of your control, such as an unexpected shift in consumer trends or inaccurate demand predictions. Implementing inventory management solutions has become more critical in this scenario.
Inventory Management as a Solution to Overstock
The benefits of these solutions far outweigh their costs, as they help you to understand consumer buying patterns better and make informed decisions about inventory levels. These include:
- Reducing the amount of overstocked products: Inventory management solutions can help retailers identify which items are not selling as well as expected, allowing them to reduce their inventory levels for those products and avoid overstocking.
- Improving customer engagement: By understanding consumer buying patterns, retailers can tailor their visual merchandising and product offerings better to meet the needs and preferences of their customers, leading to better customer engagement and loyalty.
- Enhancing the buying experience: Having the right products in stock and displaying them attractively and effectively lets retailers create a more enjoyable and efficient buying experience for their customers, encouraging repeat visits and positive word-of-mouth promotion.
- Increase in profit: With a better understanding of consumer buying patterns, retailers can make more informed decisions about inventory levels, which can ultimately reduce the number of unsold products and increase profits.
In short, inventory management solutions can be a game changer for retailers looking to streamline their operations, improve customer engagement and increase their bottom line. A recent report reveals that retailers overstocked going into 2023. Among general merchandise stores, stocks relative to sales have grown far beyond pre-pandemic levels. The truth is that strategies to restock stores and warehouses have gotten out of step with consumer buying patterns, leaving stockpiles of unsold goods.
Maximizing Sales through Effective Visual Merchandising
Visual merchandising creates an appealing and attractive outlook of the products you display in a retail store to entice customers to buy. It's the process of arranging and styling products in a visually pleasing way, making customers want to purchase them. Imagine walking into a store where clothes are displayed on mannequins wearing the latest fashion, with matching accessories and the store's lighting emphasizing the key features of the clothing. This is an example of visual merchandising.
The mannequins are dressed in the latest fashion, the store's illumination accentuates the main clothing details, and the store is inviting and easy to navigate. It results in an exciting shopping experience that makes you want to buy the clothes on display. Visual merchandising effectively allows you to maximize sales and improve your customer's shopping experience.
To manage your inventory well, address your customers' needs without overstocking. You can boost your sales and attract potential buyers by visual merchandising elements based on a particular theme, including point-of-sale systems. Also, to ensure the success of visual merchandising, the elements you put on display should be easily accessible inside your store. Lack of continuity can negatively impact your sales. Merchandising presents products for purchase in your retail environment in ways that influence shoppers' buying decisions.
As a visual merchandiser, you determine the ideal shelf location for various products, creating irresistible displays that attract consumers. While at it, consider using signage to display product prices. A common challenge for small businesses is managing overstocked products and utilizing the inventory. Nearly half of the small companies struggle with good inventory and asset management practices, leading to excess inventory. However, solutions, such as visual merchandising trends, can help manage this problem.
Managing Inventory More Effectively
Managing inventory is crucial for the success of any retail business. Overstock can lead to financial strain, and not having the funds to replace it can prevent the release of profitable products. Implementing inventory management solutions can help you avoid these problems by allowing you to understand consumer buying patterns better and make informed decisions about inventory levels. The benefits of these solutions far outweigh their costs and can lead to a reduction in overstocked products, improved customer engagement, enhanced buying experience, and increased profits.
Let Experts Help You Organize Your
Stock Rooms and Rotate Your Products
Don't let overstock be an issue for your retail business. ThirdChannel offers a customized demo service to help retailers find their store's best visual merchandising directions. We come in, collect data, and give real-time updates to the status of each location to a brand that a retail location is just unable to offer.
We log and track what is in stock and rotate the displays to ensure options each time a buyer is in the location. Additionally, we provide solutions that are not taking a loss by selling it off and take some pressure off retail locations.
Schedule a demo today and learn more about how data can enhance your store's visual merchandising.