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Excess stock: Surplus to requirements

In the third instalment of our Best Practice series, we talk to retailers about the various strategies they use to deal with excess stock.

When it comes to getting rid of surplus stock, gone are the days when slashing prices by 70% at the end of the season would clear your shop of all unwanted items. Promotions and markdowns throughout the season are now commonplace, and consumers are becoming savvier all the time, with many shopping around to find the best bargains. And online, shoppers are not restricted to store opening hours to satisfy their shopping needs.

Furthermore, dead stock can be a killer for retailers, as each time it is repriced or moved it costs valuable manpower, time and money. Retailers must therefore be smart about how they avoid surplus stock, and when avoidance is - well, unavoidable - they must reduce any excess stock they are left with.

Sourcing closer to home is a potential option for some retailers, particularly those with own-label product, as it means they can cut the risk of ordering long lead time pieces in bulk, and instead, the best-selling garments can be topped up during the season. Multi-branded stores could look to renegotiate contracts with suppliers so stock swaps are available on lesser-selling lines. Short ordering in season is also becoming an increasingly popular option as it means less cash has to be tied up in stock purchased through large
forward orders.

Other options for slashing leftover stock include flash Sales and special targeted promotions to push sales on ailing categories or items. Outlet stores are another avenue for offloading old stock; however, for smaller chains and indies, opening further stores is not economically viable.

Our experts examine the approaches retailers can take without breaking the bank.

Chris Poad

Director, merchant services at Amazon Webstore UK

Chris Poad

Chris Poad

We’ve seen examples in the last few years across Europe and the US of using different buying mechanisms to help with overstock and surplus stock, specifically flash Sale-type mechanics.

Whether hosted by third-party flash Sale companies or actually hosted within the online domain of the retailer, developing a consumer proposition out of what was historically a problem for that category is an interesting area of growth.

What we’ve learnt from the flash Sale phenomenon is that you can create a consumer scene out of scarcity and urgency for a product that was otherwise a problem.

It’s more challenging in an offline environment to control those virtual dials. In an online environment you can [more easily] adjust [the Sales offer] to [meet] customer demand and sales velocity (the speed in which a sale to a consumer is closed), and adjust both your merchandising and your pricing appropriately to reach whatever objective you have, whether it’s to sell through by a particular date or reach a particular margin.

My advice to retailers would be to always take a customer-focused view. There is clearly a balance to be struck between showing customers what they are likely to want and recovering the cost of goods on overstocked products.

The good news is that through technology available on websites such as Amazon Webstore, it is possible to personalise the content to that specific customer.

You are promoting products which are most suitable for that customer. We provide the technology, which runs the retailer’s website, but the retailer makes the stock and the buying decisions up front.

With Sale product or overstocked product, I think there is a different customer journey than for current season, full-price product.

People are most likely to be browsing rather than searching and they want to be able to filter early for variations and know that the products they are looking for are in their size. All that is enabled by data and technology and so it’s important to have an infrastructure in place which enables you to have a different type of customer experience.

Webstore is appropriate for secondary sites, whether they be sub-brands, outlet stores or flash Sale sites.

Our intent is to play to our strengths, which include giving sellers the ability to customise [the ecommerce platform].

Julian Blades

Co-owner of Northeast designer mini-chain Jules B

Julian Blades

Julian Blades

We have worked quite diligently this season to look at surplus stock and have reduced residual stock levels down to the lowest point ever. It makes such a difference, as your money is not tied up in dead stock and you have more available cash flow.

The internet is the most efficient way to get rid of stock as it is open 24 hours a day. For getting rid of old stock it is a necessity, because your online store is always open. But to do this you must photograph every piece of stock which comes in.

The other way we prevent surplus stock is by trying to negotiate a swapping system before we go into buying meetings, so if anything is not selling we can swap it. We have merchandisers that review stock on a weekly basis, so if anything is not selling we contact brands to see if we can swap it for something more relevant. We swap stock between our stores and we have merchandisers that constantly monitor performance of stock between stores. It has become so analytical.

It is about being a bit more scientific when you do your buying. The one tip I would give is to negotiate with the companies before you do your ordering. It’s important to build those relationships with your supplier because it works for both sides of the relationship.

Because we are more efficiently managing our stock there is more scope for in-season buying.

Jo Penny

Merchandising director at lifestyle retailer White Stuff

Jo Penny

Jo Penny

We focus on trading at full price, so in terms of keeping stock levels low we are focused on maintaining sourcing that is as flexible as possible.

A lot of our stuff comes from the Far East, but the issue with this is the lead time, so we look into sourcing closer to home from countries like Turkey and Portugal and getting a good balance.

This is also important in a business like this, as we can be affected by the weather. We are a middle-market brand in market towns and if it’s tipping down with rain then people won’t come to our shops.

In sourcing a percentage of our product closer to home we give ourselves that ultimate flexibility.

If money is a bit tight then instead of buying knitwear our customer may buy a scarf, and so accessories are a bit more weather-resistant.

Spring product can also take a long time to kick in, especially if it’s freezing. In sourcing closer to home you can be more reactive, depending on the weather.

Everything is not a best-seller and in order to manage that we can be flexible with our supply base.

We do hold off on going on Sale and can get rid of the lesser best-sellers at the end of the season.

I have also found that we can generally get away with a lot of light-touch markdowns - around 30%. The harder sellers we slash to 50% and then send to the outlets.

We have four outlets which work really well for us. They are profitable shops and they are a good exit route for us to clear our terminal stock.

Richard Wailes

Director of buying, merchandising and technical at lifestyle retailer Crew Clothing

Richard Wailes

Richard Wailes

Having a multichannel business is great because you can move stock between channels. It allows you to put the right stock in the right place. Our business changes depending on the weather and the season, so the movement of stock is important.

For sourcing and production our European mix is currently around 20%, but we’re now expanding the number of categories we make in Europe and are doing more with footwear, denim, tailoring and accessories. We are well known for casual shirts, which we do repeat orders on in Europe, so we are less committed in the Far East with large orders that we have to make up front.

We are not migrating away from the Far East; yes, we are increasing production in Europe, but our turnover is increasing as well, so we have a wider space for our Far East suppliers and new European ones as well.

We have a promotional calendar, and are buying fewer products that are a terminal risk and are instead focusing on generating products which can create an interesting promotional campaign for the customer. We did a promotion in January, ‘Perfect Partners’, which offered trousers and a shirt for £80.

With regards to other ways of dealing with our stock, we have a full calendar of warehouse Sales and full-price events selling stock at events such as the Burghley Horse Trials and Henley Regatta, which generate enormous turnover.

We do this in addition to having seven outlet stores, which are trading hugely well.

Paul Turner-Mitchell

Director of Rochdale young fashion indie 25 Ten Boutique

Paul Turner-Mitchell

Paul Turner-Mitchell

When we opened five years ago we held an end-of-season Sale with 70% off. We advertised it well and people were queuing down the street at 6am; by 4pm all the stock was gone.

Fast-forward five years, and 70%-off Sales are the norm. Because there’s so much heavy discounting during the season, 70% off at the end of the season doesn’t get customers excited any more. With the economic downturn and the vast majority of brands in the young fashion market wanting to be paid pro forma, you are acutely aware of stock control.

One mistake could cost you your business. We have cut down on forward-order buying and instead do more in-season buying so we can monitor stock levels and order accordingly.

Better ways of buying and monitoring the situation definitely reduce stock levels significantly.

If anything is left at the end of a Sale period we take it off the shop floor and then we occasionally put pieces online into our Sale section and promote one or two pieces on social media via Twitter and Facebook. We drip feed them into different channels and people tend to react.

It’s now about having an active eye on your stock levels and being strict with your buying.

Readers' comments (3)

  • Ship it to T K Maxx, quicker easier, sensible

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  • Thierry BAYLE

    There are really good points above.
    As some have mentioned, it all starts in the buying. I would say : How Much you bought and When you brought it in ( this is what we call the science part of buying ! )
    Working hard on your buying is critical ( do you have an Open to Buy plan ? ).
    As a multilabel shop, make sure you analyse stock and sales by product class first and THEN by brand or supplier.

    I agree that you wish to work a strong relationship with the brands/ suppliers to swap goods when you can. This was one of the key panel discussions at Pure in Feb 2013.

    It is also about buying closer to the season.
    It is also about taking action early. You will reduce the amount of discounts you give away.

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  • Buying more in season is becoming increasingly more difficult because the minimums from many brands don't reflect the real world - i.e they are too high and are actually counter productive.

    Therefore you are often spending £2-3K more than you would like to keep a particular brand - it all adds up, so there is little budget left to buy in season, though in theory, buying closer makes more sense, it's just that the trade as a whole aren't interested in this type of buying.

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