Retailers are facing a major issue with overstock.
Like a post-holiday hangover that just won’t go away, many retailers are struggling with unsold products even after holding New Year sales.
According to a new survey of 500 U.S. retailers from e-commerce inventory planning software provider Inventory Planner, 50% of respondents still have goods they cannot sell after post-Christmas and January discounting. Close to half (46%) of respondents say this is a “major concern.”
More than half of U.S. retailers (53%) told Inventory Planner there would be ‘dangerous ramifications’ for their business if they failed to sell excess stock.
In addition, more than half of respondents (53%) say there would be “dangerous ramifications” for their business if they failed to sell excess stock. Close to six in 10 (58%) fear they will be left with no choice but to liquidate their excess stock.
Retailers face inventory confusion
Respondents also indicated that in many cases, they have some issues managing and tracking excess inventory:
One in six respondents admitted that they find it practically impossible to know how much stock they will need in coming months.
More than one-quarter (27%) don’t know how to calculate excess stock.
More than half of respondents (53%) are planning to offer even more discounting to try to shift the unwanted products.
Other interesting findings:
The average small retailer respondent ($100,000 to $1 million annual revenue) is sitting on $48,000 of excess stock - equivalent to 22% of their overall inventory.
Half of large retailer respondents ($100 to $500 million annual revenue) said they had excess stock, compared to 45% of small retailer respondents.
The retail sectors most affected by excess inventory are baby and toddler the worst affected (92% of respondents in this category have excess post-holiday inventory), followed by luxury (55%), homeware/DIY & gardening (50 %) and apparel (44%).
“Excess stock is a huge issue for US retailers at this time of year,” said Inventory Planner chief marketing officer Sara Arthrell.“And a tsunami of returns which always comes in January and early February after peak trading is going to make these problems even worse.”
BDO: Retailers reducing overall inventory, taking on more debt
A recent BDO survey of retail CFOs indicates that to prepare for a potential recession, 49% of retailers are focused on reducing their excess inventory. Other top strategies include adjusting the cost structure of SKUs to create liquidity ahead of a potential recession (47%) and increasing promotional sales and discounts (43%).
For more details on the Inventory Planner survey, click here.