How to get rid of a non-shipping item in a store
Grigory Pavlov, Director Of the Association of Retail Stores, talks about how to work with illiquid product balances in a retail store, identifies the main problem points and gives advice on how to overcome them
First, let’s define the concept of illiquid. Illiquid is the part of the product in the store that could not be sold within a certain time frame.
The reasons why there are unsold stocks may be as follows:
An incorrect decision about the purchase
Often illiquid is a direct consequence of making the wrong decision about the purchase. In retail, you may be tempted to grow quickly and try to buy as much as possible, and in the end, a lot of free funds are blocked.
Low level of inventory management
There is no doubt that the lack of proper tracking of turnover and inventory status will lead to the accumulation of inventory and, as a result, increase the illiquid.
Sometimes products are not sold simply because they are defective. For example, a Shoe size may be mistakenly marked as 41 when it is actually the 43rd Shoe size. In such cases, you need to contact the supplier for a replacement or refund and fix the problem.
Lack of proper marketing
When sales staff have little knowledge of a product or its characteristics, it can be difficult to sell it or tell the customer about it. This may again cause the customer to end up not buying the product.
Now let’s look at how to avoid such situations.
1. Install the inventory management system
The inventory that is purchased for a store can be divided into two components: a cyclic inventory and a backup inventory. Cyclical inventory is the part of inventory that is only needed to meet customer demand in the period between orders for additional products from suppliers.
A reserve stock is that part of the inventory that is held as an insurance reserve when demand is uncertain. Of course, both have the potential to become a “dead” stock, but the reserve stock is likely to enter this zone earlier.
The use of an effective inventory management system in such a situation is mandatory. Such a system will show real-time information about the status of stocks, as well as timely warning about a new order when your current stock will come to an end.
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2. Move the illiquid to another location
Sometimes there are cases when some products may turn around faster in one place, but in another they do not go at all. In this case, recognize a specific store and move your illiquid to the store where it will be more in demand. This process is called “inventory balancing”. As a last resort, if you have one store, then find a more profitable place for this particular product.
3. Use effective solutions to forecast demand
It is important to know in advance what and when to buy. Predicting the stock that will be needed in the future will help you get rid of a large amount of illiquid. There are many advanced tools that will help with this. The history of previously generated orders can also be used over time to analyze purchases and plan the next ones.
4. Create urgency
For slow-wrapping items, offer discounts, allocate a percentage of savings, and create urgency by telling customers that there are very few items left in the store.
5. Create a grocery set
If your illiquid consists of several items that are part of a common product category, such as coal, barbecue, disposable tableware, and so on, you can easily link them into one set, creating an interesting combination and putting a good price on it.
Remember that prevention is better than treatment. By knowing and managing your stock flows using the appropriate software, your illiquid level will tend to a minimum.