Even after post-Christmas and January discounting 44% of ecommerce retailers are stuck with excess stock, according to a survey by Inventory Planner which also stressed that the ‘returns tsunami’ will only make the problem worse.
Last year 25% of excess stock was written off altogether, with UK etailers sitting on an average of £65,000 worth of excess stock which has little value and is costly to store.
These results come from a new poll of 500 ecommerce retailers conducted by Inventory Planner, which provides forecasting and planning software for businesses. The findings provides a stark warning to retailers about the dangers of being caught with excess stock.
Almost six out of ten retailers 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%).
Additionally, 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: “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.
“Made.com’s crash was a wake-up call to everyone in retail about the dangers of excess stock,” Arthrell added.
“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.”